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Titan Machinery Inc. Announces Results for Fiscal Fourth Quarter and Full Year Ended January 31, 2020

/EIN News/ -- - Revenue for Fiscal 2020 Increased 3.5% to $1.3 billion -

- GAAP EPS for Fiscal 2020 was $0.63 and Adjusted EPS was $0.79, an increase of 14.5% and 17.9%, respectively -

- Announces Domestic Acquisition of HorizonWest's Three Store Dealership Complex -

WEST FARGO, N.D., March 26, 2020 (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 full year ended January 31, 2020.

David Meyer, Titan Machinery’s Chairman and Chief Executive Officer, stated, “Full year fiscal 2020 performance demonstrated our ability to drive profitability in challenging industry conditions. Modest growth in equipment revenue was supported by strong double-digit growth from our higher margin parts and service businesses. Our commitment to providing strong customer support in parts and service, combined with an efficient operating model, enabled us to drive adjusted earnings per share growth of 17.9% for the year. As we look to fiscal 2021, we remain focused on providing exceptional uninterrupted customer service, safeguarding our employees and managing the controllable aspects of the business as we carefully navigate the COVID-19 global health crisis. We believe the strength of our balance sheet and business model will enable us to achieve long-term top line growth, both organically as well as through acquisitions. Due to the uncertainty surrounding COVID-19, we believe it is prudent to not provide specific full year fiscal 2021 guidance at this time."

Fiscal 2020 Fourth Quarter Results

Consolidated Results
For the fourth quarter of fiscal 2020, revenue was $351.0 million, compared to revenue of $359.6 million in the fourth quarter last year. Equipment revenue was $262.8 million for the fourth quarter of fiscal 2020, compared to $284.0 million in the fourth quarter last year. Parts revenue was $52.3 million for the fourth quarter of fiscal 2020, compared to $43.9 million in the fourth quarter last year. Revenue generated from service was $22.0 million for the fourth quarter of fiscal 2020, compared to $18.8 million in the fourth quarter last year. Revenue from rental and other was $13.9 million for the fourth quarter of fiscal 2020, compared to $13.0 million in the fourth quarter last year.

Gross profit for the fourth quarter of fiscal 2020 increased to $61.1 million compared to $55.6 million in the fourth quarter last year. The Company's gross profit margin increased to 17.4% in the fourth quarter of fiscal 2020, compared to 15.5% in the fourth quarter last year. Gross profit margin increased primarily due to mix, with a greater proportion of higher margin parts and service revenue compared to equipment revenue, which was further supported by strong equipment margin performance versus the prior year.

Operating expenses were $60.1 million or 17.1% of revenue for the fourth quarter of fiscal 2020, compared to $53.9 million or 15.0% of revenue for the fourth quarter last year. Current quarter expenses were impacted by $2.4 million of ERP transition costs as well as expenses associated with the third quarter addition of the Company’s Northwood store location.

Floorplan and other interest expense was $2.5 million for the fourth quarter of fiscal 2020, compared to $2.8 million for the same period last year. The decrease was due to lower interest expense resulting from the May 1, 2019 retirement of the remaining balance of the Company’s convertible notes.

In the fourth quarter of fiscal 2020, net income was $0.7 million, or earnings per share of $0.03, compared to a net loss of $2.2 million, or loss per diluted share of $0.10 for the fourth quarter of fiscal 2019.

On an adjusted basis, net income for the fourth quarter of fiscal 2020 was $0.5 million, or $0.02 per diluted share, compared to net loss of $0.8 million, or $0.04 per diluted share for the fourth quarter of fiscal 2019. The adjusted fourth quarter fiscal 2020 net income of $0.5 million excludes a $4.6 million benefit related to income tax valuation allowance adjustments.

The Company generated $8.1 million in adjusted EBITDA in the fourth quarter of fiscal 2020, compared to $6.7 million for the fourth quarter of fiscal 2019.

Segment Results
Agriculture Segment - Revenue for the fourth quarter of fiscal 2020 was $215.5 million, compared to $223.3 million in the fourth quarter last year. Pre-tax loss for the fourth quarter of fiscal 2020 was $0.3 million, compared to pre-tax income of $1.1 million in the fourth quarter last year. Adjusted pre-tax income for the fourth quarter of fiscal 2020 was $2.5 million, compared to $1.7 million in the fourth quarter last year.

Construction Segment - Revenue for the fourth quarter of fiscal 2020 was $87.2 million, compared to $86.4 million in the fourth quarter last year. Pre-tax loss for the fourth quarter of fiscal 2020 was $1.8 million, compared to $2.6 million in the fourth quarter last year. Adjusted pre-tax loss for the fourth quarter of fiscal 2020 was $1.0 million, compared to $1.5 million in the fourth quarter last year.

International Segment - Revenue for the fourth quarter of fiscal 2020 was $48.2 million, compared to $50.0 million in the fourth quarter last year. Pre-tax loss for the fourth quarter of fiscal 2020 was $2.3 million, compared to $1.1 million in the fourth quarter last year.

Fiscal 2020 Full Year Results

Revenue increased 3.5% to $1.3 billion for fiscal 2020. Net income for fiscal 2020 was $14.0 million, or $0.63 per diluted share, compared to $12.2 million, or $0.55 per diluted share, for the prior year. Adjusted net income for fiscal 2020 was $17.7 million, or $0.79 per diluted share, compared to an adjusted net income of $14.7 million, or $0.67 per diluted share, for the prior year. The Company generated adjusted EBITDA of $53.1 million in fiscal 2020, representing an increase of 6.7% compared to adjusted EBITDA of $49.8 million in fiscal 2019.

Balance Sheet and Cash Flow

The Company ended the fourth quarter of fiscal 2020 with $43.7 million of cash. The Company’s equipment inventory level increased to $515.9 million as of January 31, 2020, compared to $417.0 million as of January 31, 2019. As of January 31, 2020, the Company had $371.8 million outstanding floorplan payables, on $717.0 million total floorplan lines of credit, compared to $273.8 million in floorplan payables as of January 31, 2019. The increase in the Company's floorplan payable balance is primarily due to increased equipment inventory and the payoff of the Company's convertible notes on May 1, 2019.

For the fiscal year ended January 31, 2020, the Company’s net cash provided by operating activities was $1.0 million, compared to $46.6 million for the fiscal year ended January 31, 2019. 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 provided by operating activities was $17.8 million for the fiscal year ended January 31, 2020, compared to $47.4 million for the fiscal year ended January 31, 2019.

Announcement of HorizonWest Acquisition

On January 31, 2020, the Company entered into a definitive purchase agreement to acquire HorizonWest Inc., which consists of a three store CaseIH agriculture dealership complex in Scottsbluff and Sidney, Nebraska and Torrington, Wyoming. In its most recent fiscal year, HorizonWest generated revenue of approximately $26 million. The Company expects to close the acquisition in May 2020.

Mr. Meyer concluded, "The acquisition of HorizonWest's three store dealership complex in western Nebraska and eastern Wyoming is contiguous to Titan Machinery's footprint and a great fit for our business. We continue to work towards strategic acquisitions in our existing markets and are pleased to bring the HorizonWest team into the Titan Machinery family."

Fiscal 2021 Modeling Assumptions

The company will not be providing its customary annual modeling assumptions for fiscal year 2021 due to the uncertainty surrounding the COVID-19 outbreak. The company will provide additional qualitative statements related to expectations for fiscal year 2021 on its fiscal 2020 fourth-quarter conference call hosted today.

Conference Call 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 (877) 705-6003 from the U.S. International callers can dial (201) 493-6725. A telephone replay will be available approximately two hours after the call concludes and will be available through Thursday, April 9, 2020, by dialing (844) 512-2921 from the U.S., or (412) 317-6671 from international locations, and entering confirmation code 13699318.

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 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 valuation allowances for income tax, restructuring costs, long-lived asset impairment charges, gains and losses recognized on the repurchase of our senior convertible notes, and other gains and losses. The 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 operating activities (all GAAP financial measures) for the periods presented to adjusted net income (loss), adjusted EBITDA (loss), 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, 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 Arizona, Colorado, Iowa, Minnesota, Montana, Nebraska, North Dakota, South Dakota, Wisconsin and Wyoming and its European stores are located in Bulgaria, Germany, Romania, 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, the HorizonWest acquisition and modeling assumptions and expected results of operations for the fiscal year ending January 31, 2021, 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 equipment supplier, the continued availability of organic growth and acquisition opportunities, potential difficulties completing the HorizonWest acquisition or integrating acquired stores (including the stores expected to be acquired in the HorizonWest acquisition), 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 as 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
Managing Partner
646-277-1254

 
TITAN MACHINERY INC.
Consolidated Balance Sheets
(in thousands)
(Unaudited)
         
    January 31, 2020   January 31, 2019
Assets        
Current Assets        
Cash   $ 43,721     $ 56,745  
Receivables, net of allowance for doubtful accounts   72,776     77,500  
Inventories   597,394     491,091  
Prepaid expenses and other   13,655     15,556  
Total current assets   727,546     640,892  
Noncurrent Assets        
Property and equipment, net of accumulated depreciation   145,562     138,950  
Operating lease assets   88,281      
Deferred income taxes   2,147     3,010  
Goodwill   2,327     1,161  
Intangible assets, net of accumulated amortization   8,367     7,247  
Other   1,113     1,178  
Total noncurrent assets   247,797     151,546  
Total Assets   975,343     792,438  
         
Liabilities and Stockholders' Equity        
Current Liabilities        
Accounts payable   16,976     16,607  
Floorplan payable   371,772     273,756  
Senior convertible notes       45,249  
Current maturities of long-term debt   13,779     2,067  
Current maturities of operating leases   12,259      
Deferred revenue   40,968     46,409  
Accrued expenses and other   38,409     36,364  
Total current liabilities   494,163     420,452  
Long-Term Liabilities        
Long-term debt, less current maturities   37,789     20,676  
Operating lease liabilities   88,387      
Deferred income taxes   2,055     4,955  
Other long-term liabilities   7,845     11,044  
Total long-term liabilities   136,076     36,675  
Stockholders' Equity        
Common stock        
Additional paid-in-capital   250,607     248,423  
Retained earnings   97,717     89,228  
Accumulated other comprehensive loss   (3,220 )   (2,340 )
Total stockholders' equity   345,104     335,311  
Total Liabilities and Stockholders' Equity   $ 975,343     $ 792,438  


TITAN MACHINERY INC.
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
                 
    Three Months Ended January 31,   Twelve Months Ended January 31,
    2020   2019   2020   2019
Revenue                
Equipment   $ 262,826     $ 283,990     $ 917,202     $ 909,178  
Parts   52,289     43,873     234,217     210,796  
Service   21,950     18,827     99,165     86,840  
Rental and other   13,899     12,957     54,587     54,691  
Total Revenue   350,964     359,647     1,305,171     1,261,505  
Cost of Revenue                
Equipment   235,362     256,543     818,707     812,467  
Parts   36,810     31,361     165,190     149,615  
Service   8,276     7,118     33,446     29,036  
Rental and other   9,398     9,040     37,010     38,799  
Total Cost of Revenue   289,846     304,062     1,054,353     1,029,917  
Gross Profit   61,118     55,585     250,818     231,588  
Operating Expenses   60,128     53,872     225,722     201,537  
Impairment of Long-Lived Assets   3,578     1,696     3,764     2,156  
Restructuring Costs               414  
Income (Loss) from Operations   (2,588 )   17     21,332     27,481  
Other Income (Expense)                
Interest income and other income (expense)   439     544     3,126     2,547  
Floorplan interest expense   (1,630 )   (1,181 )   (5,354 )   (6,114 )
Other interest expense   (890 )   (1,623 )   (4,452 )   (7,760 )
Income (Loss) Before Income Taxes   (4,669 )   (2,243 )   14,652     16,154  
Provision for (Benefit from) Income Taxes   (5,342 )   (83 )   699     3,972  
Net Income (Loss)   673     (2,160 )   13,953     12,182  
                 
Diluted Earnings (Loss) per Share   $ 0.03     $ (0.10 )   $ 0.63     $ 0.55  
Diluted Weighted Average Common Shares   21,977     21,837     21,953     21,816  


TITAN MACHINERY INC.
Consolidated Condensed Statements of Cash Flows
(in thousands)
(Unaudited)
         
    Year Ended January 31,
    2020   2019
Operating Activities        
Net income   $ 13,953     $ 12,182  
Adjustments to reconcile net income to net cash provided by operating activities        
Depreciation and amortization   28,067     23,605  
Impairment   3,764     2,156  
Other, net   13,284     9,088  
Changes in assets and liabilities        
Inventories   (99,469 )   4,996  
Manufacturer floorplan payable   49,601     (2,635 )
Other working capital   (8,245 )   (2,787 )
Net Cash Provided by Operating Activities   955     46,605  
Investing Activities        
Property and equipment purchases   (25,016 )   (11,951 )
Proceeds from sale of property and equipment   2,415     1,549  
Acquisition consideration, net of cash acquired   (13,887 )   (15,299 )
Other, net   19     (131 )
Net Cash Used for Investing Activities   (36,469 )   (25,832 )
Financing Activities        
Net change in non-manufacturer floorplan payable   50,158     16,818  
Repurchase of senior convertible notes   (45,644 )   (20,025 )
Net proceeds from (payments on) long-term debt   18,864     (12,864 )
Other, net   (509 )   (656 )
Net Cash Provided by (Used for) Financing Activities   22,869     (16,727 )
Effect of Exchange Rate Changes on Cash   (379 )   (697 )
Net Change in Cash   (13,024 )   3,349  
Cash at Beginning of Period   56,745     53,396  
Cash at End of Period   $ 43,721     $ 56,745  


TITAN MACHINERY INC.
Segment Results
(in thousands)
(Unaudited)
                         
    Three Months Ended January 31,   Twelve Months Ended January 31,
    2020   2019   Change   2020   2019   Change
Revenue                        
Agriculture   $ 215,508     $ 223,266     (3.5 )%   $ 749,042     $ 726,793     3.1 %
Construction   87,220     86,429     0.9 %   320,034     301,989     6.0 %
International   48,236     49,952     (3.4 )%   236,095     232,723     1.4 %
Total   $ 350,964     $ 359,647     (2.4 )%   $ 1,305,171     $ 1,261,505     3.5 %
                         
Income (Loss) Before Income Taxes                        
Agriculture   $ (275 )   $ 1,134     n/m     $ 18,036     $ 16,799     7.4 %
Construction   (1,750 )   (2,627 )   33.4 %   (2,290 )   (4,400 )   48.0 %
International   (2,279 )   (1,075 )   (112.0 )%   504     5,160     (90.2 )%
Segment income before income taxes   (4,304 )   (2,568 )   (67.6 )%   16,250     17,559     (7.5 )%
Shared Resources   (365 )   326     n/m     (1,598 )   (1,405 )   (13.7 )%
Total   $ (4,669 )   $ (2,242 )   (108.3 )%   $ 14,652     $ 16,154     (9.3 )%


TITAN MACHINERY INC.
Non-GAAP Reconciliations
(in thousands, except per share data)
(Unaudited)
                 
    Three Months Ended January 31,   Twelve Months Ended January 31,
    2020   2019   2020   2019
Adjusted Net Income (Loss)                
Net Income (Loss)   $ 673     $ (2,160 )   $ 13,953     $ 12,182  
Adjustments                
ERP transition costs   2,397         7,175      
Loss on repurchase of senior convertible notes               615  
Restructuring & impairment charges   3,578     1,696     3,764     2,570  
Total Pre-Tax Adjustments   5,975     1,696     10,939     3,185  
Less: Tax Effect of Adjustments (1)   1,528     356     2,571     636  
Less: Income Tax Valuation Allowance (2)   4,611         4,611      
Total Adjustments   (164 )   1,340     3,757     2,549  
Adjusted Net Income (Loss)   $ 509     $ (820 )   $ 17,710     $ 14,731  
                 
Adjusted Diluted EPS                
Diluted EPS   $ 0.03     $ (0.10 )   $ 0.63     $ 0.55  
Adjustments (3)                
ERP transition costs   0.11         0.32      
Loss on repurchase of senior convertible notes               0.03  
Restructuring & impairment charges   0.16     0.08     0.17     0.12  
Total Pre-Tax Adjustments   0.27     0.08     0.49     0.15  
Less: Tax Effect of Adjustments (1)   0.07     0.02     0.12     0.03  
Less: Income Tax Valuation Allowance (2)   0.21         0.21      
Total Adjustments   (0.01 )   0.06     0.16     0.12  
Adjusted Diluted EPS   $ 0.02     $ (0.04 )   $ 0.79     $ 0.67  
                 
Adjusted Income (Loss) Before Income Taxes                
Income (Loss) Before Income Taxes   $ (4,669 )   $ (2,242 )   $ 14,652     $ 16,154  
Adjustments                
ERP transition costs   2,397         7,175      
Loss on repurchase of senior convertible notes               615  
Restructuring & impairment charges   3,578     1,696     3,764     2,570  
Total Adjustments   5,975     1,696     10,939     3,185  
Adjusted Income (Loss) Before Income Taxes   $ 1,306     $ (546 )   $ 25,591     $ 19,339  
                 
Adjusted Income (Loss) Before Income Taxes - Agriculture                
Income (Loss) Before Income Taxes   $ (275 )   $ 1,134     $ 18,036     $ 16,799  
Restructuring & impairment charges   2,807     582     2,807     1,327  
Adjusted Income Before Income Taxes   $ 2,532     $ 1,716     $ 20,843     $ 18,126  
                 
Adjusted Loss Before Income Taxes - Construction                
Loss Before Income Taxes   $ (1,750 )   $ (2,627 )   $ (2,290 )   $ (4,400 )
Restructuring & impairment charges   771     1,114     957     1,087  
Adjusted Loss Before Income Taxes   $ (979 )   $ (1,513 )   $ (1,333 )   $ (3,313 )
                 
Adjusted Income (Loss) Before Income Taxes - International                
Income (Loss) Before Income Taxes   $ (2,279 )   $ (1,075 )   $ 504     $ 5,160  
Restructuring & impairment charges               156  
Adjusted Income (Loss) Before Income Taxes   $ (2,279 )   $ (1,075 )   $ 504     $ 5,316  
                 
Adjusted EBITDA                
Net Income (Loss)   $ 673     $ (2,160 )   $ 13,953     $ 12,182  
Adjustments                
Interest expense, net of interest income   815     1,579     4,121     6,818  
Provision for income taxes   (5,342 )   (83 )   699     3,972  
Depreciation and amortization   7,006     5,716     28,067     23,605  
EBITDA   3,152     5,052     46,840     46,577  
Adjustments                
ERP transition costs (excluding depreciation)   1,384         2,497      
Loss on repurchase of senior convertible notes               615  
Restructuring & impairment charges   3,578     1,696     3,764     2,570  
Total Adjustments   4,962     1,696     6,261     3,185  
Adjusted EBITDA   $ 8,114     $ 6,748     $ 53,101     $ 49,762  
                 
Net Cash Provided by Operating Activities                
Net Cash Provided by Operating Activities           $ 955     $ 46,605  
Net Change in Non-Manufacturer Floorplan Payable           50,158     16,818  
Adjustment for Constant Equity in Inventory           (33,359 )   (16,030 )
Adjusted Net Cash Provided by Operating Activities           $ 17,754     $ 47,393  
                 
                 
(1) The tax effect of adjustments for all U.S. related items was determined using the federal and state statutory tax rates applicable to the respective period with an impact for state taxes given our valuation allowances against deferred tax assets. The federal statutory tax rate for the fiscal years ended January 31, 2020 and 2019 was 23.5% and 21.0%, respectively.
(2) Amounts reflect the tax benefit recognized from the release of the valuation allowance on our U.S. deferred tax assets.
(3) Adjustments are net of amounts allocated to participating securities where applicable.
 

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