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| 8-K - 8-K - Titan Machinery Inc. | titn8kfy16q1.htm |
Titan Machinery Inc. Announces Results for Fiscal First Quarter Ended April 30, 2015
- 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 -
West Fargo, ND – May 28, 2015 – 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, 2015.
Fiscal 2015 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
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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
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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 |
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) 505-4369 from the U.S. International callers can dial (719) 785-1765. A telephone replay will be available approximately two hours after the call concludes and will be available through Thursday, June 11, 2015, by dialing (877) 870-5176 from the U.S., or (858) 384-5517 from international locations, and entering confirmation code 1050277.
Non-GAAP Financial Measures
Within this announcement, the Company makes reference to certain adjusted financial measures, which have directly comparable GAAP financial measures as identified in this release. These adjusted measures are provided so that investors have the same financial data that management uses with the belief that it will assist the investment community in properly assessing the underlying performance of the Company for the periods being reported. This includes adjusted EBITDA, which the Company defines as net income (loss) including noncontrolling interest, adjusted for net interest (excluding floorplan interest expense), income taxes, depreciation, amortization, and items included in its non-GAAP pre-tax income (loss) reconciliation for each of the respective periods. The presentation of this additional information is not meant to be considered a substitute for measures prepared in accordance with GAAP. Investors are encouraged to review the reconciliations of adjusted financial measures used in this press release to their most directly comparable GAAP financial measures as provided with the financial statements attached to this press release.
About Titan Machinery Inc.
Titan Machinery Inc., founded in 1980 and headquartered in West Fargo, North Dakota, is a multi-unit business with mature locations and newly-acquired locations. The Company owns and operates a network of full service agricultural and construction equipment stores in the United States and Europe. The Titan Machinery network consists of 92 North American dealerships in North Dakota, South Dakota, Iowa,
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Minnesota, Montana, Nebraska, Wyoming, Wisconsin, Colorado, Arizona, and New Mexico, including three outlet stores, and 16 European dealerships in Romania, Bulgaria, Serbia, and Ukraine. The Titan Machinery dealerships represent one or more of the CNH Industrial Brands (CNHI), including CaseIH, 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. 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, and modeling assumptions and expected results of operations for the fiscal year ending January 31, 2016, 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. 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. 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
310-954-1105
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TITAN MACHINERY INC. | |||||||
Consolidated Balance Sheets | |||||||
(in thousands, except per share data) | |||||||
(Unaudited) | |||||||
April 30, 2015 | January 31, 2015 | ||||||
Assets | |||||||
Current Assets | |||||||
Cash | $ | 104,355 | $ | 127,528 | |||
Receivables, net | 64,892 | 76,382 | |||||
Inventories | 880,060 | 879,440 | |||||
Prepaid expenses and other | 5,179 | 10,634 | |||||
Income taxes receivable | 3,003 | 166 | |||||
Deferred income taxes | 18,488 | 19,025 | |||||
Assets held for sale | 14,946 | 15,312 | |||||
Total current assets | 1,090,923 | 1,128,487 | |||||
Intangibles and Other Assets | |||||||
Intangible assets, net of accumulated amortization | 5,360 | 5,458 | |||||
Other | 6,649 | 7,122 | |||||
Total intangibles and other assets | 12,009 | 12,580 | |||||
Property and Equipment, net of accumulated depreciation | 194,788 | 208,680 | |||||
Total Assets | $ | 1,297,720 | $ | 1,349,747 | |||
Liabilities and Stockholders' Equity | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 17,539 | $ | 17,659 | |||
Floorplan payable | 606,673 | 627,249 | |||||
Current maturities of long-term debt | 24,677 | 7,749 | |||||
Customer deposits | 26,247 | 35,090 | |||||
Accrued expenses | 33,362 | 35,496 | |||||
Income taxes payable | — | 3,529 | |||||
Liabilities held for sale | 1,540 | 2,835 | |||||
Total current liabilities | 710,038 | 729,607 | |||||
Long-Term Liabilities | |||||||
Senior convertible notes | 133,245 | 132,350 | |||||
Long-term debt, less current maturities | 45,660 | 67,123 | |||||
Deferred income taxes | 39,244 | 38,996 | |||||
Other long-term liabilities | 3,488 | 3,312 | |||||
Total long-term liabilities | 221,637 | 241,781 | |||||
Stockholders' Equity | |||||||
Common stock | — | — | |||||
Additional paid-in-capital | 240,505 | 240,180 | |||||
Retained earnings | 131,114 | 137,418 | |||||
Accumulated other comprehensive loss | (5,729 | ) | (1,099 | ) | |||
Total Titan Machinery Inc. stockholders' equity | 365,890 | 376,499 | |||||
Noncontrolling interest | 155 | 1,860 | |||||
Total stockholders' equity | 366,045 | 378,359 | |||||
Total Liabilities and Stockholders' Equity | $ | 1,297,720 | $ | 1,349,747 | |||
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TITAN MACHINERY INC. | |||||||
Consolidated Statements of Operations | |||||||
(in thousands, except per share data) | |||||||
(Unaudited) | |||||||
Three Months Ended April 30, | |||||||
2015 | 2014 | ||||||
Revenue | |||||||
Equipment | $ | 244,983 | $ | 345,045 | |||
Parts | 61,520 | 68,379 | |||||
Service | 32,902 | 37,084 | |||||
Rental and other | 13,791 | 14,955 | |||||
Total Revenue | 353,196 | 465,463 | |||||
Cost of Revenue | |||||||
Equipment | 227,033 | 316,282 | |||||
Parts | 43,571 | 48,014 | |||||
Service | 11,360 | 14,403 | |||||
Rental and other | 10,797 | 10,825 | |||||
Total Cost of Revenue | 292,761 | 389,524 | |||||
Gross Profit | 60,435 | 75,939 | |||||
Operating Expenses | 57,110 | 71,152 | |||||
Impairment and Realignment Costs | 1,601 | 2,801 | |||||
Income from Operations | 1,724 | 1,986 | |||||
Other Income (Expense) | |||||||
Interest income and other income (expense) | (2,124 | ) | (2,578 | ) | |||
Floorplan interest expense | (4,599 | ) | (4,593 | ) | |||
Other interest expense | (3,827 | ) | (3,441 | ) | |||
Loss Before Income Taxes | (8,826 | ) | (8,626 | ) | |||
Benefit from Income Taxes | (1,936 | ) | (1,733 | ) | |||
Net Loss Including Noncontrolling Interest | (6,890 | ) | (6,893 | ) | |||
Less: Net Loss Attributable to Noncontrolling Interest | (586 | ) | (344 | ) | |||
Net Loss Attributable to Titan Machinery Inc. | (6,304 | ) | (6,549 | ) | |||
Net Loss Allocated to Participating Securities | 105 | 60 | |||||
Net Loss Attributable to Titan Machinery Inc. Common Stockholders | $ | (6,199 | ) | $ | (6,489 | ) | |
Earnings (Loss) per Share - Diluted | $ | (0.29 | ) | $ | (0.31 | ) | |
Weighted Average Common Shares - Diluted | 21,044 | 20,951 | |||||
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TITAN MACHINERY INC. | |||||||
Consolidated Condensed Statements of Cash Flows | |||||||
(in thousands) | |||||||
(Unaudited) | |||||||
Three Months Ended April 30, | |||||||
2015 | 2014 | ||||||
Operating Activities | |||||||
Net loss including noncontrolling interest | $ | (6,890 | ) | $ | (6,893 | ) | |
Adjustments to reconcile net income including noncontrolling interest to net cash used for operating activities | |||||||
Depreciation and amortization | 6,667 | 6,729 | |||||
Impairment | 152 | — | |||||
Deferred income taxes | 497 | 232 | |||||
Other, net | 2,522 | 978 | |||||
Changes in assets and liabilities | |||||||
Inventories | 522 | (41,963 | ) | ||||
Manufacturer floorplan payable | 12,980 | (17,308 | ) | ||||
Other working capital | (2,144 | ) | 3,623 | ||||
Net Cash Provided by (Used for) Operating Activities | 14,306 | (54,602 | ) | ||||
Investing Activities | |||||||
Property and equipment purchases | (2,282 | ) | (5,707 | ) | |||
Proceeds from sale of property and equipment | 634 | 471 | |||||
Other, net | 198 | (887 | ) | ||||
Net Cash Used for Investing Activities | (1,450 | ) | (6,123 | ) | |||
Financing Activities | |||||||
Net change in non-manufacturer floorplan payable | (30,001 | ) | 65,305 | ||||
Net proceeds from (payments on) long-term debt borrowings | (4,876 | ) | 3,327 | ||||
Other, net | (443 | ) | (207 | ) | |||
Net Cash Provided by (Used for) Financing Activities | (35,320 | ) | 68,425 | ||||
Effect of Exchange Rate Changes on Cash | (709 | ) | 69 | ||||
Net Change in Cash | (23,173 | ) | 7,769 | ||||
Cash at Beginning of Period | 127,528 | 74,242 | |||||
Cash at End of Period | $ | 104,355 | $ | 82,011 | |||
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TITAN MACHINERY INC. | ||||||||||
Segment Results | ||||||||||
(in thousands) | ||||||||||
(Unaudited) | ||||||||||
Three Months Ended April 30, | ||||||||||
2015 | 2014 | % Change | ||||||||
Revenue | ||||||||||
Agriculture | $ | 239,855 | $ | 344,381 | (30.4 | )% | ||||
Construction | 81,171 | 91,765 | (11.5 | )% | ||||||
International | 32,170 | 29,317 | 9.7 | % | ||||||
Total | $ | 353,196 | $ | 465,463 | (24.1 | )% | ||||
Income (Loss) Before Income Taxes | ||||||||||
Agriculture | $ | (1,086 | ) | $ | 3,505 | (131.0 | )% | |||
Construction | (3,565 | ) | (5,993 | ) | 40.5 | % | ||||
International | (4,371 | ) | (5,265 | ) | 17.0 | % | ||||
Segment income (loss) before income taxes | (9,022 | ) | (7,753 | ) | (16.4 | )% | ||||
Shared Resources | 196 | (873 | ) | 122.5 | % | |||||
Loss Before Income Taxes | $ | (8,826 | ) | $ | (8,626 | ) | (2.3 | )% | ||
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TITAN MACHINERY INC. | |||||||
Non-GAAP Reconciliations | |||||||
(in thousands, except per share data) | |||||||
(Unaudited) | |||||||
Three Months Ended April 30, | |||||||
2015 | 2014 | ||||||
Pre-Tax Loss | |||||||
Loss Before Income Taxes | $ | (8,826 | ) | $ | (8,626 | ) | |
Non-GAAP Adjustments | |||||||
Debt Issuance Cost Write-Off | 539 | — | |||||
Realignment / Store Closing Costs | 1,601 | 3,205 | |||||
Ukraine Remeasurement | 2,040 | 3,122 | |||||
Total Non-GAAP Adjustments | 4,180 | 6,327 | |||||
Adjusted Pre-Tax Loss | $ | (4,646 | ) | $ | (2,299 | ) | |
Adjusted EBITDA | |||||||
Net Loss Including Noncontrolling Interest | $ | (6,890 | ) | $ | (6,893 | ) | |
Adjustments | |||||||
Interest Expense, Net of Interest Income | 3,097 | 3,211 | |||||
Benefit from Income Taxes | (1,936 | ) | (1,733 | ) | |||
Depreciation and amortization | 6,667 | 6,729 | |||||
Total Non-GAAP Adjustments to Pre-Tax Income (Loss) | 4,180 | 6,327 | |||||
Total Adjustments | 12,008 | 14,534 | |||||
Adjusted EBITDA | $ | 5,118 | $ | 7,641 | |||
Net Loss Attributable to Titan Machinery Inc. Common Stockholders | |||||||
Net Loss Attributable to Titan Machinery Inc. Common Stockholders | $ | (6,199 | ) | $ | (6,489 | ) | |
Non-GAAP Adjustments (1) | |||||||
Debt Issuance Cost Write-Off | 318 | — | |||||
Realignment / Store Closing Costs | 945 | 1,896 | |||||
Ukraine Remeasurement | 2,006 | 3,078 | |||||
Total Non-GAAP Adjustments | $ | 3,269 | $ | 4,974 | |||
Adjusted Net Loss Attributable to Titan Machinery Inc. Common Stockholders | $ | (2,930 | ) | $ | (1,515 | ) | |
Earnings (Loss) per Share - Diluted | |||||||
Earnings (Loss) per Share - Diluted | $ | (0.29 | ) | $ | (0.31 | ) | |
Non-GAAP Adjustments (1) | |||||||
Debt Issuance Cost Write-Off | 0.02 | — | |||||
Realignment / Store Closing Costs | 0.04 | 0.09 | |||||
Ukraine Remeasurement | 0.10 | 0.15 | |||||
Total Non-GAAP Adjustments | $ | 0.16 | $ | 0.24 | |||
Adjusted Earnings (Loss) per Share - Diluted | $ | (0.13 | ) | $ | (0.07 | ) | |
(1) Adjustments are net of the impact of amounts related to income taxes, attributable to noncontrolling interests, and allocated to participating securities. | |||||||
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