-Third Quarter Revenue Increased to $588 Million-

-Company Updates Annual Fiscal 2014 Guidance-

WEST FARGO, N.D. — (BUSINESS WIRE) — December 5, 2013 — Titan Machinery Inc. (Nasdaq: TITN), a leading network of full-service agricultural and construction equipment stores, today reported financial results for the fiscal third quarter and nine months ended October 31, 2013.

Fiscal 2014 Third Quarter Results

For the third quarter of fiscal 2014, revenue increased to $588.0 million from revenue of $582.1 million in the third quarter last year. Equipment sales were $441.8 million for the third quarter of fiscal 2014, compared to $456.2 million in the third quarter last year. Parts sales were $80.9 million for the third quarter of fiscal 2014, compared to $72.1 million in the third quarter last year. Revenue generated from service was $40.6 million for the third quarter of fiscal 2014, compared to $33.4 million in the third quarter last year. Revenue from rental and other increased to $24.7 million for the third quarter of fiscal 2014 from $20.5 million in the third quarter last year.

Gross profit for the third quarter of fiscal 2014 was $93.6 million, compared to $94.1 million in the third quarter last year. The Company’s gross profit margin was 15.9% in the third quarter of fiscal 2014, compared to 16.2% in the third quarter last year. Gross profit from parts and service for the third quarter of fiscal 2014 was 55% of overall gross profit and increased to $51.7 million from $44.6 million in the third quarter last year. Solid performance from parts and service was offset by lower equipment sales and margins.

Operating expenses were 12.7% of revenue or $75.0 million for the third quarter of fiscal 2014, compared to 11.0% of revenue or $64.0 million for the third quarter of last year. The increase in operating expenses as a percentage of revenue reflects negative same store sales in the Company’s Agriculture segment of 6.5% as well as higher operating expenses as a percent of revenue in the expanded Construction and International footprints.

Floorplan interest expense increased to $4.8 million for the third quarter of 2014 compared to $3.7 million for the same period last year due to increased levels of interest-bearing equipment inventory.

Pre-tax income for the third quarter of fiscal 2014 was $10.1 million, for a pre-tax margin of 1.7%, compared to $23.8 million, for a pre-tax margin of 4.1%, in the third quarter last year. Pre-tax Agriculture segment income was $16.7 million for the third quarter of fiscal 2014, compared to pre-tax income of $24.9 million in the third quarter last year. Pre-tax Construction segment loss was $3.4 million for the third quarter of fiscal 2014, compared to pre-tax income of $0.5 million in the third quarter last year. In the third quarter of fiscal 2014, pre-tax International segment loss was $1.0 million, compared to pre-tax income of $1.4 million in the third quarter last year.

Net income attributable to common stockholders for the third quarter of fiscal 2014 was $5.7 million, compared to net income attributable to common stockholders of $13.9 million in the third quarter last year. Earnings per diluted share for the third quarter of fiscal 2014 was $0.27, compared to $0.66 in the third quarter last year.

Fiscal 2014 First Nine Months Results

For the nine months ended October 31, 2013, revenue increased 7.3% to $1.52 billion from $1.41 billion for the same period last year. Gross profit margin for the first nine months of fiscal 2014 was 16.5%, compared to 16.6% in the same period last year. Pre-tax income for the first nine months of fiscal 2014 was $15.6 million for a pre-tax margin of 1.0%, compared to $44.9 million, or a pre-tax margin of 3.2%, for the same period last year. Net income attributable to common stockholders for the first nine months of fiscal 2014 was $9.1 million, or $0.43 per diluted share, compared to $26.6 million, or $1.27 per diluted share, for the same period last year.

Balance Sheet

The Company ended the third quarter of fiscal 2014 with cash of $113.4 million. The Company’s inventory level was $1.2 billion as of October 31, 2013, compared to $929 million at January 31, 2013. This inventory level primarily reflected an increase in new equipment, which increased to $758.0 million at October 31, 2013, from $542.2 million at January 31, 2013, while used equipment increased to $283.6 million at October 31, 2013 from $275.6 million at January 31, 2013. The increase in new inventory is in-line with the company’s previous expectations and is higher than January levels due to planned seasonal inventory stocking for the expected highest equipment sales quarter of the fiscal year. The Company had available $160.1 million of its $1.05 billion total discretionary floorplan lines of credit as of October 31, 2013.

Management Comments

David Meyer, Titan Machinery’s Chairman and Chief Executive Officer, stated, “Our third quarter financial results reflect the continuation of challenges in both the agriculture and construction industries that we have previously discussed. In the third quarter, our higher margin parts and services business performed well but was offset by lower agriculture equipment sales and lower equipment margins due to pricing pressure in both industries. We are making progress with our construction initiatives and are optimistic about the long-term potential of this segment, but it is taking longer than we expected for this to translate into improved financial results given the current challenges in this industry.”

Mr. Meyer continued, “Based on our year to date results and the various headwinds we are facing, we are reducing our revenue, net income, and earnings per share expectations for fiscal 2014. While we are not satisfied with the recent performance of our business, we remain confident in our long-term success given our proven operating model including our higher margin parts and service business. We expect to generate positive cash flow from operations as our inventory levels decline. Looking ahead, we will continue to focus on managing the controllable aspects of our business, including taking steps to reduce our inventory levels, which will help drive strong cash flow in coming quarters and enable us to navigate macroeconomic and industry headwinds and better position us for future opportunities.”

Fiscal 2014 Outlook

The Company evaluates its financial performance based on its customers’ annual production cycles as opposed to a quarterly basis, due to weather fluctuations and the seasonal nature of each customer's business. The Company is adjusting its annual guidance based on increased visibility of market conditions. For the full year ending January 31, 2014, the Company now expects revenue to be in the range of $2.15 billion to $2.35 billion compared to the previous range of $2.25 billion to $2.45 billion. The Company expects net income attributable to common stockholders to be in the range of $11.6 million to $15.8 million, and earnings per diluted share to be in the range of $0.55 to $0.75 based on estimated weighted average diluted common shares outstanding of 21.1 million, primarily reflecting the lower expected equipment sales and margins. This compares to previous net income attributable to common stockholders guidance in the range of $25.4 million to $31.8 million, and earnings per diluted share in the range of $1.20 to $1.50 based on estimated weighted average diluted common shares outstanding of 21.2 million.