Titan Machinery Inc. Announces Results for Fiscal Fourth Quarter and Fiscal Year Ended January 31, 2017

- Revenue for Fiscal 2017 was $1.21 billion -

- Equipment Inventory Declined by $196 million or 33% Compared to End of Fiscal 2016 -

- Generated $141 million of Cash Flow from Operations and
$89 Million of Adjusted Cash Flow from Operations for Fiscal 2017 -

- Company Announces Modeling Assumptions for Fiscal 2018 -

WEST FARGO, N.D., March 30, 2017 (GLOBE NEWSWIRE) -- Titan Machinery Inc. (Nasdaq:TITN), a leading network of full-service agricultural and construction equipment stores, today reported financial results for the fiscal fourth quarter and fiscal year ended January 31, 2017.

Fiscal 2017 Fourth Quarter Results

Consolidated Results
For the fourth quarter of fiscal 2017, revenue was $317.6 million, compared to $335.5 million in the fourth quarter last year. Equipment sales were $226.9 million for the fourth quarter of fiscal 2017, compared to $243.8 million in the fourth quarter last year. Parts sales were $48.7 million for the fourth quarter of fiscal 2017, compared to $47.9 million in the fourth quarter last year. Revenue generated from service was $28.0 million for the fourth quarter of fiscal 2017, compared to $27.6 million in the fourth quarter last year. Revenue from rental and other was $14.0 million for the fourth quarter of fiscal 2017, compared to $16.1 million in the fourth quarter last year.

Gross profit for the fourth quarter of fiscal 2017 increased to $48.4 million compared to $16.3 million in the fourth quarter last year.  The gross profit for the fourth quarter of fiscal 2016 was affected by an inventory impairment charge of $27.5 million and the Company's intensified efforts to sell aged equipment inventory. The Company’s gross profit margin was 15.4% in the fourth quarter of fiscal 2017, compared to 4.8% in the fourth quarter last year.

Operating expenses were $52.2 million or 16.4% of revenue for the fourth quarter of fiscal 2017, compared to $54.5 million or 16.3% of revenue for the fourth quarter last year. 

Floorplan interest expense decreased to $2.7 million for the fourth quarter of fiscal 2017, compared to $4.4 million for the same period last year, primarily due to a decrease in our average interest-bearing inventory in fiscal 2017.

Impairment and realignment costs were $4.2 million for the fourth quarter of fiscal 2017, primarily related to the impairment of long-lived assets resulting from the dealership restructuring plan announced on February 9, 2017 to consolidate certain dealership locations and to implement a reorganization of our operating structure. The Company closed one Construction location during the fourth quarter ended January 31, 2017 and expects to close 14 Agriculture locations during the first half of fiscal 2018. The restructuring plan is expected to result in a significant reduction in expenses while allowing the Company to continue to provide a leading level of service to its customers. The non-recurring pre-tax costs associated with this restructuring plan, consisting primarily of lease termination costs and termination benefits, are estimated to be approximately $9.5 million for fiscal 2018.

In the fourth quarter of fiscal 2016, impairment and realignment costs consisted of a non-cash charge of $7.0 million primarily related to impairment of long-lived assets within the Agriculture and Construction segments.

In the fourth quarter of fiscal 2017, net loss including noncontrolling interest was $8.2 million, or $0.38 per diluted share, compared to a net loss including noncontrolling interest of $35.0 million, or $1.62 per diluted share for the fourth quarter of fiscal 2016.

On a non-GAAP basis, adjusted net loss including noncontrolling interest for the fourth quarter of fiscal 2017 was $6.6 million, or $0.31 per diluted share, compared to adjusted net loss including noncontrolling interest of $30.6 million, or $1.31 per diluted share, for the fourth quarter of fiscal 2016. The Company generated adjusted EBITDA loss of $4.1 million for the fourth quarter of fiscal 2017, compared to $35.5 million for the same period of the prior year. For further information related to the Company's use of Non-GAAP Financial Measures, see the discussion under "Non-GAAP Financial Measures" below.

Segment Results
Agriculture Segment - Revenue for the fourth quarter of fiscal 2017 was $201.1 million, compared to $204.2 million in the fourth quarter last year. Pre-tax loss for the fourth quarter of fiscal 2017 was $5.9 million, compared to pre-tax loss of $30.4 million in the fourth quarter last year.  The fourth quarter of fiscal 2016 was affected by an inventory impairment charge of $11.4 million and the Company's intensified efforts to sell aged equipment inventory.

Construction Segment - Revenue for the fourth quarter of fiscal 2017 was $81.7 million, compared to $91.3 million in the fourth quarter last year. Pre-tax loss for the fourth quarter of fiscal 2017 was $4.4 million, compared to a pre-tax loss of $23.3 million in the fourth quarter last year.  The fourth quarter of fiscal 2016 was affected by an inventory impairment charge of $15.9 million and the Company's intensified efforts to sell aged equipment inventory.

International Segment - Revenue for the fourth quarter of fiscal 2017 was $34.8 million, compared to $39.9 million in the fourth quarter last year. Pre-tax loss for the fourth quarter of fiscal 2017 was $0.4 million, compared to pre-tax income of $0.1 million in the fourth quarter last year.

Fiscal 2017 Full Year Results

Revenue was $1.21 billion for fiscal 2017, compared to $1.37 billion for the prior year. Net loss including non-controlling interest for fiscal 2017 was $14.5 million, or $0.65 per diluted share, compared to net loss including non-controlling interest of $38.2 million, or $1.76 per diluted share, for the prior year. Adjusted net loss including non-controlling interest for fiscal 2017 was $14.2 million, or $0.65 per diluted share, compared to adjusted net loss including non-controlling interest of $29.7 million, or $1.25 per diluted share, for the prior year. The Company generated an adjusted EBITDA of $11.7 million in fiscal 2017, compared to adjusted EBITDA loss of $3.0 million in fiscal 2016.

Balance Sheet and Cash Flow

The Company ended fiscal 2017 with cash of $53.2 million, compared to $89.5 million at the end of fiscal 2016. The Company’s inventory level decreased to $478.3 million as of January 31, 2017, compared to inventory of $680.5 million, as of January 31, 2016. This includes a $195.6 million reduction in equipment inventory.  The Company had $233.2 million outstanding floorplan payables on $842.5 million total discretionary floorplan lines of credit as of January 31, 2017. Floorplan payables decreased by $211.6 million from the balance of $444.8 million as of January 31, 2016. The Company had other indebtedness consisting of total long-term debt and senior convertible notes of $128.1 million as of January 31, 2017, which was a decrease of $46.0 million compared to the balance of $174.1 million as of January 31, 2016. The reduced levels of floorplan payable and other indebtedness have improved the Company's ratio of total liabilities to tangible net worth to 1.4 as of January 31, 2017 from 2.1 as of January 31, 2016.

In fiscal 2017, the Company repurchased $54.3 million face value of its senior convertible notes with $46.0 million in cash.  In addition, the Company repurchased $15.4 million face value of senior convertible notes with $14.6 million in cash in the first quarter of fiscal 2018.  The Company has now retired $69.7 million of face value of its senior convertible notes during the past twelve months with $60.6 million in cash. 

In fiscal 2017, the Company’s net cash provided by operating activities was $141.0 million compared to $231.9 million for fiscal 2016. The Company evaluates its cash flow from operating activities net of all floorplan payable activity and maintaining a constant level of equity in its equipment inventory. Taking these adjustments into account, the Company generated adjusted net cash provided by operating activities of $88.8 million in fiscal 2017, compared to adjusted net cash provided by operating activities of $44.3 million in fiscal 2016.

Management Comments

David Meyer, Titan Machinery’s Chairman and Chief Executive Officer, stated, “For fiscal 2017, we exceeded our inventory reduction plans and began implementing a restructuring plan that is consolidating certain dealership locations and reorganizing our operating structure.  Throughout fiscal 2017, we took the necessary steps to manage through difficult operating conditions, including reducing our operating expenses and reducing our equipment inventory levels by $197 million, which enabled us to continue to generate solid adjusted cash flow from operations."

Mr. Meyer continued, "Even though fiscal 2018 is expected to be a challenging operating environment we are well positioned to generate positive diluted earnings per share, exclusive of the anticipated charges associated with our restructuring activities. We have reduced our equipment inventory by $543.6 million, or 58%, during the past 3 years and we expect to reduce equipment inventory by another $50 million in fiscal 2018.  We have also reduced our floorplan payables and long-term debt by $610.0 million, or 63%, during the past 3 years.  In addition, we believe our recently announced restructuring plan will increase our operating efficiency and result in approximately $25 million in annual structural expense reduction, while not causing any reduction in customer service.  These improvements better align our cost structure and balance sheet with current market conditions and provide us with improved profitability, the ability to continue generating strong operating cash flow and better position our business for future profitable growth opportunities."

Fiscal 2018 Modeling Assumptions

The Company's fiscal 2018 modeling assumptions are as follows:

• Agriculture Segment Sales Down 10-15% (includes impact of closed stores)
• Construction Segment Sales Down 5-10% (includes impact of closed store)
• International Segment Sales Up 3-8%.
• Equipment Margins Between 6.3-6.8%
• Expect diluted earnings per share to be slightly positive, exclusive of the anticipated charges associated with our restructuring activities

Conference Call and Presentation Information

The Company will host a conference call and audio webcast today at 7:30 a.m. Central time (8:30 a.m. Eastern time). A copy of the presentation that will accompany the prepared remarks from the conference call is available on the Company’s website under Investor Relations at www.titanmachinery.com. An archive of the audio webcast will be available on the Company’s website under Investor Relations at www.titanmachinery.com for 30 days following the audio webcast.

Investors interested in participating in the live call can dial (888) 587-0611 from the U.S. International callers can dial (719) 785-9448. A telephone replay will be available approximately two hours after the call concludes and will be available through Thursday, April 13, 2017, by dialing (844) 512-2921 from the U.S., or (412) 317-6671 from international locations, and entering confirmation code 9943535.

Non-GAAP Financial Measures

Within this release, the Company refers to several adjusted financial measures, which have directly comparable GAAP financial measures as identified in this release. The Company believes that non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide more information to assist investors in evaluating historical performance and in assessing future performance. For these reasons, internal management reporting also includes non-GAAP measures. Generally, the non-GAAP measures include adjustments for items such as realignment charges, long-lived asset impairments, gains on the repurchase of senior convertible notes, gains on insurance recoveries, foreign currency remeasurement losses in Ukraine resulting from a devaluation of the UAH and other gains and losses. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for the GAAP financial measures presented in this earnings release and the Company’s financial statements and other publicly filed reports. Non-GAAP measures as presented herein may not be comparable to similarly titled measures used by other companies. Investors are encouraged to review the reconciliations of adjusted financial measures used in this press release to their most directly comparable GAAP financial measures, which reconciliations are provided with the financial statements attached to this release. The tables included in the Non-GAAP Reconciliations reconcile net income (loss) including noncontrolling interest, earnings (loss) per share – diluted, and net cash provided by operating activities (GAAP financial measures) for the periods presented to adjusted net income (loss) including noncontrolling interest, adjusted EBITDA (loss), adjusted earnings (loss) per share – diluted, and adjusted net cash provided by operating activities (non-GAAP financial measures) for the periods presented.

About Titan Machinery Inc.

Titan Machinery Inc., founded in 1980 and headquartered in West Fargo, North Dakota, owns and operates a network of full-service agricultural and construction equipment dealer locations in North America and Europe. The network consists of US locations in North Dakota, South Dakota, Iowa, Minnesota, Montana, Nebraska, Wyoming, Wisconsin, Colorado, Arizona, and New Mexico, and European locations in Romania, Bulgaria, Serbia, and Ukraine. The Titan Machinery locations represent one or more of the CNH Industrial Brands, 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.

Forward Looking Statements

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “potential,” “believe,” “estimate,” “expect,” “intend,” “may,” “could,” “will,” “plan,” “anticipate,” and similar words and expressions are intended to identify forward-looking statements. Such statements are based upon the current beliefs and expectations of our management. Forward-looking statements made herein, which include statements regarding Agriculture, Construction, and International segment initiatives and improvements, segment revenue realization, growth and profitability expectations, inventory expectations, leverage expectations, agricultural and construction equipment industry conditions and trends, and modeling assumptions and expected results of operations for the fiscal year ending January 31, 2018, involve known and unknown risks and uncertainties that may cause Titan Machinery’s actual results in current or future periods to differ materially from the forecasted assumptions and expected results. The Company’s risks and uncertainties include, among other things, a substantial dependence on a single distributor, the continued availability of organic growth and acquisition opportunities, potential difficulties integrating acquired stores, industry supply levels, fluctuating agriculture and construction industry economic conditions, the success of recently implemented initiatives within the Company’s operating segments, the uncertainty and fluctuating conditions in the capital and credit markets, difficulties in conducting international operations, foreign currency risks, governmental agriculture policies, seasonal fluctuations, the ability of the Company to reduce inventory levels, climate conditions, disruption in receiving ample inventory financing, and increased competition in the geographic areas served. These and other risks are more fully described in Titan Machinery’s filings with the Securities and Exchange Commission, including the Company’s most recently filed Annual Report on Form 10-K, as updated in subsequently filed Quarterly Reports on Form 10-Q, as applicable. Titan Machinery conducts its business in a highly competitive and rapidly changing environment. Accordingly, new risk factors may arise. It is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on Titan Machinery’s business or the extent to which any individual risk factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Other than required by law, Titan Machinery disclaims any obligation to update such factors or to publicly announce results of revisions to any of the forward-looking statements contained herein to reflect future events or developments.

Investor Relations Contact:
ICR, Inc.
John Mills, John.Mills@icrinc.com
Partner
646-277-1254