• Preliminary Full Year Fiscal 2016 Revenue of $1.37 Billion 
  • Generates Approximately $44 Million Adjusted Cash Flow from Operations in Full Year Fiscal 2016 
  • Equipment Inventory Decreased $180 Million or 23% Compared to End of Fiscal 2015 
  • Company Incurred $27 Million Inventory Impairment Charge in Fourth Quarter of Fiscal 2016 

WEST FARGO, N.D. — Titan Machinery Inc. (Nasdaq: TITN), a network of full-service agricultural and construction equipment stores, today reported preliminary financial results for the fiscal fourth quarter and full year ended Jan. 31, 2016.

Preliminary Fiscal 2016 Fourth Quarter Results

For the fourth quarter of fiscal 2016, revenue is expected to be approximately $335 million compared to revenue of $490.7 million in the fourth quarter last year.

Based on prolonged headwinds in the agriculture and construction industries, management continued executing on its equipment inventory reduction plan during the fourth quarter of fiscal 2016, which was expanded to include the marketing of certain aged equipment inventory through alternative channels rather than its normal retail channels. As a result, in the fourth quarter, the company recorded an inventory impairment charge of approximately $27 million, or $0.77 per diluted share, related to the expanded equipment inventory reduction plan. In addition to this inventory impairment charge, equipment gross profit margins were compressed due to intensified efforts to sell aged equipment inventory in a challenging market during the fourth quarter of fiscal 2016.

Pre-tax loss for the fourth quarter of fiscal 2016 is expected to be approximately $53 million, compared to loss of $37.2 million in the fourth quarter last year. Pre-tax loss for the fourth quarter of fiscal 2016 included the $27 million impact from the equipment inventory impairment charges as well as a $6.7 million impairment charge related to long-lived assets. Pre-tax loss for the fourth quarter of fiscal 2015 included non-cash impairment charges of $31 million primarily related to goodwill and other intangible assets within the agriculture segment. Our adjusted pre-tax results for the fourth quarter of fiscal 2016, which exclude all non-GAAP adjustments, are expected to be as follows:

  • Total company: Loss of $45 million, which includes equipment inventory impairment charges of approximately $27 million, compared to loss of $5 million for the fourth quarter last year.
  • Agriculture segment: Loss of $26 million, which includes equipment inventory impairment charges of approximately $11 million, compared to income of $2.4 million in the fourth quarter last year.
  • Construction segment: Loss of $20 million, which includes equipment inventory impairment charges of approximately $16 million, compared to loss of $5.1 million in the fourth quarter last year. The equipment inventory impairment charges include $4.6 million related to exiting the Terex haul truck product line.
  • International segment: Break-even, compared to loss of $3.6 million in the fourth quarter last year.

Net loss attributable to common stockholders for the fourth quarter of fiscal 2016 is expected to be approximately $34 million, or $1.62 per diluted share, compared to net loss of $27.0 million or $1.28 per diluted share for the fourth quarter last year. Excluding all non-GAAP adjustments, adjusted net loss attributable to common stockholders for the fourth quarter of fiscal 2016 is expected to be approximately $28 million, or $1.31 per diluted share, compared to adjusted net loss of $4.1 million or $0.20 per diluted share for the fourth quarter last year.

Preliminary Balance Sheet and Cash Flow

The company ended the fourth quarter of fiscal 2016 with cash of approximately $89 million. The company’s inventory level decreased to approximately $689 million as of Jan. 31, 2016, compared to $890.7 million, including amounts classified as held for sale, as of Jan. 31, 2015. This includes a $180 million reduction in equipment inventory, of which approximately $27 million resulted from the impairment charges and the remaining $153 million resulted from the execution of the equipment inventory reduction plan during fiscal 2016. The company had approximately $445 million outstanding floorplan payables on $1.0 billion total discretionary floorplan lines of credit as of Jan. 31, 2016. Floorplan payables, including amounts classified as held for sale, decreased by approximately $182 million over the balance of $626.9 million as of Jan. 31, 2015. The company had other indebtedness consisting of total long-term debt and senior convertible notes of approximately $174 million as of Jan. 31, 2016, which was a decrease of approximately $30 million compared to the balance of $204.2 million as of January 31, 2015. The reduced levels of floorplan payable, long-term debt and senior convertible notes have improved the company's ratio of total liabilities to tangible net worth to 2.1 as of Jan. 31, 2016 from 2.6 as of Jan. 31, 2015.

For the fiscal year ended Jan. 31, 2016, the company’s net cash provided by operating activities is expected to be approximately $232 million on a GAAP basis. The company evaluates its cash flow from operating activities net of all floorplan payable activity and maintaining a constant level of equity in our equipment inventory. Taking these adjustments into account, adjusted net cash provided by operating activities is expected to be approximately $44 million for the fiscal year ended Jan. 31, 2016.

Preliminary Fiscal 2016 Full Year Results

For the full year ended Jan. 31, 2016, revenue is expected to be approximately $1.37 billion compared to $1.90 billion last year. GAAP net loss attributable to common stockholders for fiscal 2016 is expected to be approximately $37 million, or $1.76 per diluted share, compared to net loss of $31.6 million or $1.51 per diluted share last year. Adjusted net loss attributable to common stockholders for fiscal 2016 is expected to be approximately $26.5 million, or $1.25 to per diluted share, compared to adjusted net loss of $1.9 million, or $0.09 per diluted share, last year.

Management Comments

David Meyer, Titan Machinery’s chairman and CEO, stated, "Throughout fiscal 2016, we focused on taking the necessary steps to manage through this challenging operating environment, including reducing our operating expenses by over $50 million and achieving our initiative to reduce equipment inventory levels by $150 million. This enabled us to continue to generate solid adjusted cashflow from operations of $44 million in fiscal 2016. However, in the fourth quarter of fiscal 2016, we continued to face significant headwinds in our agriculture and construction segments and believe that overall global macro-economic concerns further impacted our customers' spending patterns, resulting in top and bottom line softness in our results."

Meyer continued, "The headwinds we continue to face in the agriculture and construction industries have resulted in our decision to take prudent steps in reducing our aged equipment inventory, which we began to implement in the fourth quarter. As a result of this new plan, we incurred a $27 million impairment charge in the fourth quarter of fiscal 2016. We will continue to manage our equipment inventories and plan to reduce it by another $100 million in fiscal 2017, which would amount to a total reduction of approximately $450 million, or 48%, over a 3-year period."

Meyer concluded, "As we begin fiscal 2017, we will benefit from reduced costs following the implementation of the realignment plan and other cost saving initiatives last year, and decreased interest costs as a result of lower inventory levels, which, we believe, will enable us to continue to achieve positive adjusted operating cashflow. We continually manage our business to ensure we are taking the necessary steps to navigate the current headwinds. Long-term, we remain confident in the outlook for our business. The global trends indicate solid long-term demand for agriculture commodities and farmers continue to carry strong balance sheets due to record years before we entered the downturn of the current cycle."

Fiscal 2017 Modeling Assumptions

The following are the company’s current expectations for certain fiscal 2017 modeling assumptions:

  • Agriculture Same-Store Sales Down 13-18%
  • Construction Same-Store Sales Flat
  • International Same-Store Sales Flat
  • Equipment Margins Between 7.7-8.3%
  • Expect adjusted diluted earnings per share to range from a slight loss to break-even

The company will release its complete financial results for the fourth quarter and full year ended Jan. 31, 2016, on April 13, 2016, followed by an investor conference call at 7:30 a.m. Central time (8:30 a.m. Eastern time).

About Titan Machinery Inc.

Titan Machinery Inc., founded in 1980 and headquartered in West Fargo, N.D., is a multi-unit business with mature locations and newly-acquired locations. The company owns and operates a network of full service agricultural and construction equipment stores in the U.S. and Europe. The Titan Machinery network consists of 91 North American dealerships in North Dakota, South Dakota, Iowa, Minnesota, Montana, Nebraska, Wyoming, Wisconsin, Colorado, Arizona and New Mexico, including one outlet store, and 17 European dealerships in Romania, Bulgaria, Serbia and Ukraine. The Titan Machinery dealerships represent one or more of the CNH Industrial Brands (CNHI), including Case IH, New Holland Agriculture, Case Construction, New Holland Construction and CNH Capital. Additional information about Titan Machinery Inc. can be found at www.TitanMachinery.com.