Source: Titan Machinery Press Release

- Revenue for Fiscal First Quarter of 2016 was $353 million -

- Adjusted EBITDA for Fiscal First Quarter was $5.1 million -

- Company Reiterates Annual Fiscal 2016 Modeling Assumptions -

May 28, 2015 06:45 AM Eastern Daylight Time

 

WEST FARGO, N.D. — Titan Machinery Inc., a leading network of full-service agricultural and construction equipment stores, today reported financial results for the fiscal first quarter ended April 30, 2015.

Fiscal 2016 First Quarter Results

For the first quarter of fiscal 2016, revenue was $353.2 million, compared to $465.5 million in the first quarter last year. Equipment sales were $245.0 million for the first quarter of fiscal 2016, compared to $345.0 million in the first quarter last year. Parts sales were $61.5 million for the first quarter of fiscal 2016, compared to $68.4 million in the first quarter last year. Revenue generated from service was $32.9 million for the first quarter of fiscal 2016, compared to $37.1 million in the first quarter last year. Revenue from rental and other decreased to $13.8 million for the first quarter of fiscal 2016 from $15.0 million in the first quarter last year.

Gross profit for the first quarter of fiscal 2016 was $60.4 million, compared to $75.9 million in the first quarter last year, primarily reflecting a decrease in Agriculture equipment revenue. The Company’s gross profit margin was 17.1% in the first quarter of fiscal 2016, compared to 16.3% in the first quarter last year. This increase in gross profit margin primarily reflects a larger portion of gross profit coming from the Company's higher margin parts, service, and rental and other businesses. Gross profit from parts and service for the first quarter of fiscal 2016 was 65.3% of overall gross profit, compared to 56.7% in the first quarter last year.

Operating expenses were 16.2% of revenue or, $57.1 million, for the first quarter of fiscal 2016, compared to 15.3% of revenue or, $71.2 million, for the first quarter of last year. The decrease in operating expenses was primarily due to cost savings associated with the Company's realignment activities implemented in the first quarters of fiscal 2016 and 2015. The increase in operating expenses as a percentage of revenue was primarily due to the deleveraging of fixed expenses as total revenue decreased from the prior year.

In the first quarter of fiscal 2016, the Company recognized impairment and realignment costs of $1.6 million, primarily related to store closings and headcount reductions as part of the Company's realignment plan. In the first quarter of fiscal 2015, the Company recognized impairment and realignment costs of $2.8 million. The Company recognized charges of $2.0 million and $3.1 million from the balance sheet impact of the Ukrainian hryvnia devaluation in the first quarters of 2016 and 2015, respectively.

Floorplan interest expense was $4.6 million for both the first quarter of fiscal 2016 and first quarter of fiscal 2015.

In the first quarter of fiscal 2016, the Company generated $5.1 million in adjusted EBITDA, compared to $7.6 million in the first quarter of last year. The Company includes floorplan interest expense in its EBITDA calculation.

Pre-tax loss for the first quarter of fiscal 2016 was $8.8 million, which is essentially flat compared to pre-tax loss of $8.6 million in the first quarter of last year. Excluding all non-GAAP adjustments, adjusted pre-tax loss for the first quarter of fiscal 2016 was $4.6 million. For the first quarter of 2015, excluding the non-GAAP adjustments, adjusted pre-tax loss was $2.3 million. Adjusted pre-tax Agriculture segment loss was $0.4 million for the first quarter of fiscal 2016, compared to adjusted pre-tax income of $4.2 million in the first quarter last year. Adjusted pre-tax Construction segment loss was $2.9 million for the first quarter of fiscal 2016, compared to adjusted pre-tax loss of $3.7 million in the first quarter last year. Adjusted pre-tax International segment loss was $2.3 million for the first quarter of fiscal 2016, compared to adjusted pre-tax loss of $2.1 million in the first quarter last year.

Net loss attributable to common stockholders for the first quarter of fiscal 2016 was $6.2 million, or loss per diluted share of $0.29, compared to $6.5 million, or $0.31 per diluted share, for the first quarter of fiscal 2015. The net loss for the first quarter of fiscal 2016 includes adjustments totaling $3.3 million, or $0.16 per diluted share, compared to adjustments totaling $5.0 million, or $0.24 per diluted share, for the first quarter of fiscal 2015. Excluding all non-GAAP adjustments, adjusted net loss attributable to common stockholders for the first quarter of fiscal 2016 was $2.9 million, or $0.13 per diluted share, compared to adjusted net loss attributable to common stockholders for the first quarter of fiscal 2015 of $1.5 million, or $0.07 per diluted share.

Balance Sheet

The Company ended the first quarter of fiscal 2016 with cash of $104.4 million. The Company’s inventory level, including amounts classified as held for sale, was $890.0 million as of April 30, 2015, compared to inventory of $1.1 billion as of April 30, 2014. The Company had, including amounts classified as held for sale, $608.0 million outstanding floorplan payables on $1.1 billion total discretionary floorplan lines of credit as of April 30, 2015, reflecting a decrease of $190.5 million from the balance of $798.5 million as of April 30, 2014. The reduced floorplan levels has improved the Company's total liabilities to tangible net worth to 2.6 as of April 30, 2015 from 3.2 as of April 30, 2014.

First Quarter Fiscal 2016 Realignment

In order to better align its business in certain markets, the Company previously announced that during the first quarter of fiscal 2016 it reduced headcount by approximately 14%, which includes headcount reductions at stores in each of its operating segments and its Shared Resource Center. This included the closing of three Agriculture stores and one Construction store. In addition, the Company has reduced discretionary spending levels across all parts of the business and is restructuring certain employee compensation and benefit programs to better align pay for performance. The realignment costs associated with the headcount reductions and store closings are estimated to total approximately $2.0 million. The Company recognized $0.1 million in the fourth quarter of fiscal 2015 and $1.9 million (or $0.05 per diluted share) is expected to be recognized in fiscal 2016. The full-year pro forma benefit to pre-tax earnings of this headcount reduction is estimated to be approximately $21 million (or $0.59 per share), which equates to a pro forma benefit of approximately $20 million (or $0.56 per share) for fiscal 2016.

Management Comments

David Meyer, Titan Machinery’s chairman and chief executive officer, stated, “Our financial results in the first quarter were in-line with our expectations, as ongoing headwinds in the agriculture industry continue to impact our results. In the first quarter, we remained focused on managing the controllable aspects of our business, including implementing a realignment plan that significantly reduces our operating costs and is expected to generate approximately $20 million in cost savings beginning in the current fiscal year. We also continue to diligently manage our inventory levels and expect to achieve meaningful reductions in fiscal 2016."

Mr. Meyer continued, “We believe that we have taken the necessary steps to navigate the challenging macroeconomic conditions by better aligning our cost structure with the current environment. While we continue to face a number of headwinds, we are focused on execution in all three business segments and strengthening our balance sheet. We remain confident that we are on the right track to improve our long-term financial performance and capitalize on future growth opportunities."

Fiscal 2016 Modeling Assumptions

The Company is reiterating the following modeling assumptions for fiscal 2016 that it believes will provide investors with relevant information about expectations regarding financial results and business trends:

  • Agriculture Same Store Sales Down 20.0% to 25.0%
  • Construction Same Store Sales Flat
  • International Same Store Sales Flat
  • Equipment Margins Between 7.7% and 8.3%
  • Expects to be profitable on an adjusted diluted earnings per share basis