• Revenue for Fiscal Second Quarter of 2016 was $334 million
• Adjusted EBITDA for Fiscal Second Quarter was $9.8 million
• Operating Expenses Decreased $12.4 million or 18.3% for Fiscal Second Quarter of 2016
• Equipment Inventory Decreased $222 million or 22.3% Compared to Second Quarter of Fiscal 2015

Titan Machinery Inc., a network of full-service agricultural and construction equipment stores, today reported financial results for the fiscal second quarter ended July 31, 2015.

Fiscal 2016 Second Quarter Results

For the second quarter of fiscal 2016, revenue was $334.2 million, compared to $451.0 million in the second quarter last year. Equipment sales were $221.0 million for the second quarter of fiscal 2016, compared to $320.1 million in the second quarter last year. Parts sales were $62.1 million for the second quarter of fiscal 2016, compared to $70.5 million in the second quarter last year. Revenue generated from service was $32.8 million for the second quarter of fiscal 2016, compared to $38.4 million in the second quarter last year. Revenue from rental and other decreased to $18.3 million for the second quarter of fiscal 2016 from $21.9 million in the second quarter last year.

Gross profit for the second quarter of fiscal 2016 was $62.1 million, compared to $79.7 million in the second quarter last year, primarily reflecting a decrease in Agriculture equipment revenue. The Company's gross profit margin was 18.6% in the second quarter of fiscal 2016, compared to 17.7% in the second 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 and service businesses. Gross profit from parts and service for the second quarter of fiscal 2016 was 63.2% of overall gross profit, compared to 57.4% in the second quarter last year.

Operating expenses were 16.6% of revenue or, $55.4 million, for the second quarter of fiscal 2016, compared to 15.1% of revenue or, $67.8 million, for the second quarter of last year. The decrease in operating expenses of $12.4 million was primarily due to cost savings associated with the Company's realignment activities implemented in the first quarters of fiscal 2016 and 2015 in addition to other cost saving initiatives. 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.

The Company recognized charges of $0.1 million and $1.3 million from the balance sheet impact of the Ukrainian hryvnia devaluation in the second quarters of fiscal 2016 and 2015, respectively.

Floorplan interest expense was $4.7 million for the second quarter of fiscal 2016, compared to $5.3 million in the second quarter of fiscal 2015. The decrease in floorplan interest expense is due to lower average interest-bearing inventory in the second quarter of fiscal 2016.

In the second quarter of fiscal 2016, the Company generated $9.8 million in adjusted EBITDA, compared to $14.9 million in the second quarter of last year. The Company includes floorplan interest expense in its EBITDA calculation.

Pre-tax loss for the second quarter of fiscal 2016 was $0.5 million, compared to pre-tax income of $1.8 million in the second quarter of last year. Excluding all non-GAAP adjustments, adjusted pre-tax loss for the second quarter of fiscal 2016 was $0.5 million. For the second quarter of 2015, excluding non-GAAP adjustments, adjusted pre-tax income was $3.3 million. Adjusted pre-tax Agriculture segment loss was $2.5 million for the second quarter of fiscal 2016, compared to adjusted pre-tax income of $6.6 million in the second quarter last year. Adjusted pre-tax Construction segment loss was $1.0 million for the second quarter of fiscal 2016, compared to adjusted pre-tax loss of $0.4 million in the second quarter last year. Adjusted pre-tax International segment income was $1.0 million for the second quarter of fiscal 2016, compared to adjusted pre-tax loss of $3.7 million in the second quarter last year.

Net income attributable to common stockholders for the second quarter of fiscal 2016 was $0.0 million, or earnings per diluted share of $0.00, compared to net loss attributable to common stockholders of $0.6 million, or $0.03 per diluted share, for the second quarter of fiscal 2015. Excluding all non-GAAP adjustments, adjusted net income attributable to common stockholders for the second quarter of fiscal 2016 was $0.0 million, or $0.00 per diluted share, compared to adjusted net income attributable to common stockholders for the second quarter of fiscal 2015 of $0.8 million, or $0.04 per diluted share.

Fiscal 2016 First Six Months Results

Revenue was $687.4 million for the first six months of fiscal 2016, compared to $916.5 million for the same period last year. Gross profit margin was 17.8% for the first six months of fiscal 2016, compared to 17.0% for the same period last year. The Company generated $14.9 million in adjusted EBITDA in the first six months of fiscal 2016, compared to $22.5 million in the same period last year. Pre-tax loss was $9.3 million for the first six months of fiscal 2016, compared to pre-tax loss of $6.8 million for the same period last year. Excluding certain non-GAAP adjustments, adjusted pre-tax loss was $5.2 million for the first six months of fiscal 2016, compared to pre-tax income of $1.0 million for the same period last year. Net loss attributable to common stock for the first six months of fiscal 2016 was $6.2 million, or $0.29 per diluted share, compared to a loss of $7.0 million, or $0.34 per diluted share, for the same period last year. Excluding non-GAAP items, adjusted net loss attributable to common stock for the first six months of fiscal 2016 was $2.9 million, or $0.14 per diluted share, compared to a loss of $0.7 million, or $0.03 per diluted share, for the same period last year.

Balance Sheet
The Company ended the second quarter of fiscal 2016 with cash of $95.4 million. The Company's inventory level, including amounts classified as held for sale, was $884.0 million as of July 31, 2015, compared to inventory of $1.1 billion as of July 31, 2014, primarily reflecting a $222.0 million reduction in equipment inventory. The Company had, including amounts classified as held for sale, $622.1 million outstanding floorplan payables on $1.0 billion total discretionary floorplan lines of credit as of July 31, 2015, reflecting a decrease of $228.2 million from the floorplan payable balance of $850.3 million as of July 31, 2014. The reduced floorplan levels has improved the Company's total liabilities to tangible net worth to 2.5 as of July 31, 2015 from 3.3 as of July 31, 2014.

Management Comments
David Meyer, Titan Machinery's chairman and CEO, stated, "Our financial performance in the second quarter was in-line with our expectations. Our Agriculture segment continues to be impacted by ongoing industry headwinds, and our Construction business, which faced strong year-over-year comparisons in the second quarter of fiscal 2016, was impacted by lower oil prices as well as reduced sales of construction equipment to agricultural customers. We are pleased to report second quarter pre-tax income for our International segment reflecting the previously announced initiatives as well as slightly improved market conditions in some of the regions in which we operate."

Mr. Meyer continued, "While Agriculture headwinds continue to persist, we believe we are taking the necessary steps to manage the challenging environment and position our business for long-term, profitable growth. We have substantially completed our previously outlined realignment plan, which is expected to generate approximately $20 million in cost savings, and contributed to the $12.4 million reduction in operating expenses during the second quarter of this year compared to the second quarter last year. In addition, we remain on track to achieve our $150 million equipment inventory reduction goal in fiscal 2016. Based on our year-to-date results and outlook for the back half of the year, we are updating our annual revenue modeling assumptions and continue to anticipate achieving positive adjusted net income/earnings per share."

Fiscal 2016 Modeling Assumptions
The Company is updating 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% to 25%
Construction Same Store Sales Flat to Down 5%
International Same Store Sales Flat to Down 5%
Equipment Margins Between 7.7% and 8.3%
Expects to be profitable on an adjusted diluted earnings per share basis

You can read the whole earnings report and view tables from Titan here.