• Titan Machinery Inc. Announces Results for Fiscal First Quarter Ended April 30, 2018

    Source: Nasdaq GlobeNewswire / 31 May 2018 06:45:15   America/New_York

    - Revenue for First Quarter of Fiscal 2019 was $246 million -

    - Gross Profit Margin for First Quarter of Fiscal 2019 Increased 90 Basis Points to 19.4% -

    - Company Updates Fiscal 2019 Modeling Assumptions -

    WEST FARGO, N.D., May 31, 2018 (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 first quarter ended April 30, 2018.

    David Meyer, Titan Machinery’s Chairman and Chief Executive Officer, stated, "During the first quarter, we experienced improvements in gross and pre-tax margins driven by higher equipment margins, lower interest expense and our better-positioned expense structure. These results were partially offset by the late start to the spring planting season, which affected certain areas of our business including parts and service revenue.  Overall, our first quarter margin improvements highlight the enhancements we've made to our operating model, and we believe this is setting the foundation for stronger top and bottom line results in fiscal 2019."

    Fiscal 2019 First Quarter Results

    Consolidated Results
    For the first quarter of fiscal 2019, revenue was $245.7 million, compared to $264.1 million in the first quarter last year. Equipment sales were $156.9 million for the first quarter of fiscal 2019, compared to $167.9 million in the first quarter last year. Parts sales were $51.5 million for the first quarter of fiscal 2019, compared to $56.6 million in the first quarter last year. Revenue generated from service was $27.4 million for the first quarter of fiscal 2019, compared to $28.8 million in the first quarter last year. Revenue from rental and other was $9.9 million for the first quarter of fiscal 2019, compared to $10.9 million in the first quarter last year.

    Gross profit for the first quarter of fiscal 2019 was $47.6 million, compared to $48.9 million in the first quarter last year. The Company’s gross profit margin was 19.4% in the first quarter of fiscal 2019, compared to 18.5% in the first quarter last year primarily due to improved equipment margins.

    Operating expenses decreased by $5.3 million to $46.7 million, or 19.1% of revenue, for the first quarter of fiscal 2019, compared to $52.0 million, or 19.6% of revenue, for the first quarter of last year.  These decreases are primarily the result of cost savings arising from the Company's fiscal 2018 restructuring efforts that were completed early in the third quarter of fiscal 2018, partially offset by an increase in International segment operating expenses resulting from the continued build-out of the Company's footprint and presence in European markets.

    Floorplan interest expense was $1.4 million for the first quarter of fiscal 2019, compared to $2.7 million in the first quarter of last year. The decrease in floorplan interest expense is primarily due to a decrease in the level of interest-bearing inventory in the first quarter of fiscal 2019 as well as a $0.6 million expense recognized in the first quarter of fiscal 2018 related to the unwinding of the Company's interest rate swap instrument.

    In the first quarter of fiscal 2019, net loss was $1.6 million, or a loss per diluted share of $0.07, compared to a net loss of $5.9 million, or a loss per diluted share of $0.27 for the first quarter of last year.

    On an adjusted basis, net loss for the first quarter of fiscal 2019 was $1.6 million, or an adjusted loss per diluted share of $0.07, compared to an adjusted net loss of $4.2 million, or an adjusted loss per diluted share of $0.19, for the first quarter of last year.

    The Company generated $5.3 million in adjusted EBITDA in the first quarter of fiscal 2019, compared to $1.6 million in the first quarter of last year.

    Segment Results
    Agriculture Segment - Revenue for the first quarter of fiscal 2019 was $142.9 million, compared to $163.6 million in the first quarter last year. A portion of the decrease was due to a lower store count resulting from the Company's fiscal 2018 restructuring plan.  Pre-tax income for the first quarter of fiscal 2019 was $1.3 million, compared to pre-tax loss of $3.9 million in the first quarter last year. Adjusted pre-tax income for the first quarter of fiscal 2019 was $1.3 million, compared to an adjusted pre-tax loss of $2.4 million in the first quarter last year.

    Construction Segment - Revenue for the first quarter of fiscal 2019 was $62.1 million, compared to $63.4 million in the first quarter last year. Pre-tax loss for the first quarter of fiscal 2019 was $2.9 million, compared to a pre-tax loss of $2.6 million in the first quarter last year. Adjusted pre-tax loss for the first quarter of fiscal 2019 was $2.9 million, compared to an adjusted pre-tax loss of $2.5 million in the first quarter last year.

    International Segment - Revenue for the first quarter of fiscal 2019 was $40.7 million, compared to $37.1 million in the first quarter last year. The increase in revenue is primarily due to increased equipment revenue as the result of the build out of the Company's footprint in its European markets, partially offset by a slow start to the planting season in certain of the Company's European markets, which impacted the Company's parts and service business. Pre-tax loss for the first quarter of fiscal 2019 was $0.1 million, compared to pre-tax income of $0.6 million in the first quarter last year. The decrease in pre-tax results for the first quarter of fiscal 2019 was primarily due to increased operating expenses resulting from the build out of the Company's footprint and presence in its European markets.

    Balance Sheet and Cash Flow

    The Company ended the first quarter of fiscal 2019 with $57.3 million of cash. The Company’s inventory level increased to $518.2 million as of April 30, 2018, compared to $472.5 million as of January 31, 2018. This inventory increase includes a $44.4 million increase in equipment inventory, which reflects an increase in new equipment inventory of $48.7 million, partially offset by a $4.2 million decrease in used equipment inventory. The increase in new equipment reflects seasonal stocking, purchasing certain core equipment earlier than normal due to longer manufacturer lead times and purchasing equipment ahead of potential steel surcharges later in the year. The Company had $320.9 million outstanding floorplan payables on $629.4 million total discretionary floorplan lines of credit as of April 30, 2018, compared to $247.4 million outstanding floorplan payables as of January 31, 2018. 

    In the first quarter of fiscal 2019, the Company’s net cash used for operating activities was $27.0 million, compared to net cash provided by operating activities of $40.9 million in the first quarter of fiscal 2018. 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, adjusted net cash used for operating activities was $25.6 million in the first quarter of fiscal 2019, compared to adjusted net cash used for operating activities of $6.8 million in the first quarter of fiscal 2018.

    Acquisition of German Dealership Group, AGRAM

    As previously announced on April 30, 2018, the Company entered into a definitive purchase agreement to acquire all of the interests of two companies, AGRAM Landtechnikvertrieb GmbH and AGRAM Landtechnik Rollwitz GmbH (collectively, "AGRAM"), which consists of four CaseIH agriculture dealership locations in the following cities of Germany: Altranft, Burkau, Gutzkow and Rollwitz. In its most recent fiscal year, AGRAM generated revenue of approximately $30 million.  The acquisition is expected to close in July 2018.

    Mr. Meyer concluded, "We are extremely excited about bringing AGRAM into the Titan Machinery family and leveraging their expertise in one of the most developed agricultural markets in Europe. As a result of AGRAM's expected contributions to our consolidated financials, we are raising our International segment revenue growth assumption to a new range of 10% to 15% for fiscal 2019. We are also raising our equipment margin range for fiscal 2019, which gives us increased confidence in our previously announced EPS range for the year."

    Updating Fiscal 2019 Modeling Assumptions

    The Company's fiscal 2019 modeling assumptions are as follows:

        
     Current Assumptions Previous Assumptions
    Segment Revenue   
    AgricultureUp 0-5% Up 0-5%
    ConstructionUp 3-8% Up 3-8%
    International*Up 10-15% Up 0-5%
        
    Equipment Margin8.2 - 8.7% 7.8 - 8.3%
        
    Diluted EPS$0.35 - $0.55 $0.35 - $0.55
        
    *International segment revenue includes pro-rata contribution from AGRAM acquisition; assumes closing in July 2018.
     

    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).  Investors interested in participating in the live call can dial (866) 548-4713 from the U.S. International callers can dial (323) 794-2093.  A telephone replay will be available approximately two hours after the call concludes and will be available through Thursday, June 14, 2018, by dialing (844) 512-2921 from the U.S., or (412) 317-6671 from international locations, and entering confirmation code 7293506.

    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.

    Non-GAAP Financial Measures

    Within this release, the Company refers to certain adjusted financial measures, which have directly comparable GAAP financial measures as identified in this release. The Company believes that these non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide more information to assist investors in evaluating current period 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 gains on the repurchase of senior convertible notes, costs associated with our restructuring activities and the reclassification of accumulated loss on our interest rate swap instrument. 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 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 release to their most directly comparable GAAP financial measures. These reconciliations are attached to this release. The tables included in the Non-GAAP Reconciliations section reconcile net income (loss), diluted earnings (loss) per share, income (loss) before income taxes, and net cash provided by (used for) operating activities (all GAAP financial measures) for the periods presented to adjusted net income (loss), adjusted EBITDA, adjusted diluted earnings (loss) per share, adjusted income (loss) before income taxes, and adjusted net cash provided by (used for) operating activities (all 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, is a leading global dealership with a network of full-service agriculture and construction stores.  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 Industrial 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, 2019, 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, jmills@icrinc.com
    Partner
    646-277-1254


     
    TITAN MACHINERY INC.
    Consolidated Balance Sheets
    (in thousands, except per share data)
    (Unaudited)
        
     April 30, 2018 January 31, 2018
    Assets   
    Current Assets   
    Cash$57,254  $53,396 
    Receivables, net66,172  60,672 
    Inventories518,173  472,467 
    Prepaid expenses and other11,651  12,440 
    Income taxes receivable96  171 
    Total current assets653,346  599,146 
    Noncurrent Assets   
    Intangible assets, net of accumulated amortization5,369  5,193 
    Property and equipment, net of accumulated depreciation146,113  151,047 
    Deferred income taxes3,145  3,472 
    Other1,442  1,450 
    Total noncurrent assets156,069  161,162 
    Total Assets$809,415  $760,308 
        
    Liabilities and Stockholders' Equity   
    Current Liabilities   
    Accounts payable$16,288  $15,136 
    Floorplan payable320,862  247,392 
    Current maturities of long-term debt1,644  1,574 
    Deferred revenue32,874  32,324 
    Accrued expenses and other22,375  31,863 
    Total current liabilities394,043  328,289 
    Long-Term Liabilities   
    Senior convertible notes63,351  62,819 
    Long-term debt, less current maturities21,395  34,578 
    Deferred income taxes1,131  2,275 
    Other long-term liabilities8,011  10,492 
    Total long-term liabilities93,888  110,164 
    Stockholders' Equity   
    Common stock   
    Additional paid-in-capital246,451  246,509 
    Retained earnings75,432  77,046 
    Accumulated other comprehensive loss(399) (1,700)
    Total stockholders' equity321,484  321,855 
    Total Liabilities and Stockholders' Equity$809,415  $760,308 
            


     
    TITAN MACHINERY INC.
    Consolidated Statements of Operations
    (in thousands, except per share data)
    (Unaudited)
        
     Three Months Ended April 30,
     2018 2017
    Revenue   
    Equipment$156,904  $167,915 
    Parts51,535  56,583 
    Service27,356  28,766 
    Rental and other9,883  10,854 
    Total Revenue245,678  264,118 
    Cost of Revenue   
    Equipment141,767  155,517 
    Parts36,658  40,357 
    Service11,201  10,794 
    Rental and other8,494  8,531 
    Total Cost of Revenue198,120  215,199 
    Gross Profit47,558  48,919 
    Operating Expenses46,727  51,987 
    Restructuring Costs  2,344 
    Income (Loss) from Operations831  (5,412)
    Other Income (Expense)   
    Interest income and other income385  778 
    Floorplan interest expense(1,350) (2,656)
    Other interest expense(2,031) (2,120)
    Loss Before Income Taxes(2,165) (9,410)
    Benefit from Income Taxes(551) (3,478)
    Net Loss(1,614) (5,932)
    Net Income Allocated to Participating Securities26  114 
    Net Loss Attributable to Titan Machinery Inc. Common Stockholders$(1,588) $(5,818)
        
    Diluted Loss per Share$(0.07) $(0.27)
    Diluted Weighted Average Common Shares21,734  21,373 
          


     
    TITAN MACHINERY INC.
    Consolidated Condensed Statements of Cash Flows
    (in thousands)
    (Unaudited)
        
     Three Months Ended April 30,
     2018 2017
    Operating Activities   
    Net loss$(1,614) $(5,932)
    Adjustments to reconcile net loss to net cash provided by (used for) operating activities   
    Depreciation and amortization5,526  6,095 
    Other, net807  (1,175)
    Changes in assets and liabilities   
    Inventories(42,351) (3,814)
    Manufacturer floorplan payable24,653  51,139 
    Other working capital(14,047) (5,381)
    Net Cash Provided by (Used for) Operating Activities(27,026) 40,932 
    Investing Activities   
    Property and equipment purchases(2,813) (10,187)
    Proceeds from sale of property and equipment411  417 
    Other, net(184) 21 
    Net Cash Used for Investing Activities(2,586) (9,749)
    Financing Activities   
    Net change in non-manufacturer floorplan payable47,376  (25,484)
    Repurchase of senior convertible notes  (19,340)
    Net proceeds from (payments on) long-term debt borrowings(13,419) 17,780 
    Other, net(607) (1,123)
    Net Cash Provided by (Used for) Financing Activities33,350  (28,167)
    Effect of Exchange Rate Changes on Cash120  74 
    Net Change in Cash3,858  3,090 
    Cash at Beginning of Period53,396  53,151 
    Cash at End of Period$57,254  $56,241 
            


     
    TITAN MACHINERY INC.
    Segment Results
    (in thousands)
    (Unaudited)
      
     Three Months Ended April 30,
     2018 2017 % Change
    Revenue     
    Agriculture$142,870  $163,625  (12.7)%
    Construction62,091  63,420  (2.1)%
    International40,717  37,073  9.8%
    Total$245,678  $264,118  (7.0)%
          
    Income (Loss) Before Income Taxes     
    Agriculture$1,323  $(3,897) 133.9%
    Construction(2,897) (2,633) (10.0)%
    International(87) 595  (114.6)%
    Segment income (loss) before income taxes(1,661) (5,935) 72.0%
    Shared Resources(504) (3,475) 85.5%
    Total$(2,165) $(9,410) 77.0%
               


     
    TITAN MACHINERY INC.
    Non-GAAP Reconciliations
    (in thousands, except per share data)
    (Unaudited)
        
     Three Months Ended April 30,
     2018 2017
    Net Loss   
    Net Loss$(1,614) $(5,932)
    Adjustments   
    Gain on Repurchase of Senior Convertible Notes  (40)
    Restructuring Costs  2,344 
    Interest Rate Swap Termination & Reclassification  631 
    Total Pre-Tax Adjustments  2,935 
    Less: Tax Effect of Adjustments (1)  1,174 
    Total Adjustments  1,761 
    Adjusted Net Loss$(1,614) $(4,171)
        
    Diluted EPS   
    Diluted EPS$(0.07) $(0.27)
    Adjustments (2)   
    Gain on Repurchase of Senior Convertible Notes   
    Restructuring Costs  0.11 
    Interest Rate Swap Termination & Reclassification  0.03 
    Total Pre-Tax Adjustments  0.14 
    Less: Tax Effect of Adjustments (1)  0.06 
    Total Adjustments  0.08 
    Adjusted Diluted EPS$(0.07) $(0.19)
        
    Loss Before Income Taxes   
    Loss Before Income Taxes$(2,165) $(9,410)
    Adjustments   
    Gain on Repurchase of Senior Convertible Notes  (40)
    Restructuring Costs  2,344 
    Interest Rate Swap Termination & Reclassification  631 
    Total Adjustments  2,935 
    Adjusted Loss Before Income Taxes$(2,165) $(6,475)
        
    Income (Loss) Before Income Taxes - Agriculture   
    Income (Loss) Before Income Taxes$1,323  $(3,897)
    Restructuring Costs  1,478 
    Adjusted Income (Loss) Before Income Taxes$1,323  $(2,419)
        
    Income (Loss) Before Income Taxes - Construction   
    Loss Before Income Taxes$(2,897) $(2,633)
    Restructuring Costs  86 
    Adjusted Income (Loss) Before Income Taxes$(2,897) $(2,547)
            


      
     Three Months Ended April 30,
     2018 2017
    Adjusted EBITDA   
    Net Loss$(1,614) $(5,932)
    Adjustments   
    Interest Expense, Net of Interest Income1,900  1,958 
    Benefit from Income Taxes(551) (3,478)
    Depreciation and amortization5,526  6,095 
    EBITDA5,261  (1,357)
    Adjustments   
    (Gain) Loss on Repurchase of Senior Convertible Notes  (40)
    Restructuring Costs  2,344 
    Interest Rate Swap Termination & Reclassification  631 
    Total Adjustments  2,935 
    Adjusted EBITDA$5,261  $1,578 
        
    Net Cash Provided By (Used for) Operating Activities   
    Net Cash Provided by (Used for) Operating Activities$(27,026) $40,932 
    Net Change in Non-Manufacturer Floorplan Payable47,376  (25,484)
    Adjustment for Constant Equity in Inventory(45,998) (22,226)
    Adjusted Net Cash Provided By (Used for) Operating Activities$(25,648) $(6,778)
        
    (1) As all adjustments relate to the three month period ended April 30, 2017 and to our U.S. operations, the tax effect of adjustments was calculated using a 40% tax rate for all U.S. related items that was determined based on a 35% federal statutory rate and a blended state statutory rate of 5%.
    (2) Adjustments are net of amounts allocated to participating securities.
     

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