Titan Machinery Reduces Inventory as Revenue Drops in Fiscal 2016
Equipment distributor Titan Machinery posted $335.5 million in the fourth quarter of fiscal 2016, compared to $490.7 million in the fourth quarter of fiscal 2015, a 31.7-percent decline. Revenue from rental and other was $16.1 million for the fourth quarter of fiscal 2016, compared to $21.0 million in the fourth quarter last year, a 23.3-percent slide. Equipment sales plunged from $389.6 million a year ago, to $243.8 million, a 37.4-percent drop.
The company generated an adjusted EBITDA loss of $35.5 million for the fourth quarter of fiscal 2016, compared to adjusted EBITDA of $6.0 million for the same period of the prior year.
For the full fiscal year, total revenue was $1.37 billion, compared to $1.9 billion for the previous year, a 27.9-percent drop. Rental and other declined from $84.4 million in fiscal 2015 to $69.5 million, a 17.6-percent decline.
"As we stated in our pre-release, our financial performance for the fourth quarter and full year fiscal 2016 was impacted by prolonged headwinds in the agriculture and construction industries,” said Titan Machinery chairman and CEO David Meyer. “Throughout fiscal 2016, we took the necessary steps to manage through this challenging operating environment, including reducing our operating expenses by over $50 million and achieving our initiative to reduce equipment inventory levels by $150 million, which enabled us to continue to generate solid adjusted cash flow from operations. However, the continued headwinds in our Agriculture and Construction segments and overall global macro-economic concerns further impacted our customers' spending patterns, resulting in top and bottom line softness in our results in the fourth quarter of fiscal 2016."
Meyer expressed confidence in the company’s inventory-reduction efforts. "We remain committed to our inventory reduction plan throughout fiscal 2017 and will continually manage our business to ensure we are taking the necessary steps to navigate the current headwinds,” he said. “We plan to reduce equipment inventory by another $100 million in fiscal 2017, which would amount to a total reduction of approximately $450 million, or 48 percent, over a three-year period. The deleveraging that we've accomplished in the past couple years and our continued operating cash flow has enabled us to buy back $30.1 million of our senior convertible notes ahead of the maturity date and at a meaningful discount. This transaction further strengthened our balance sheet while providing a positive financial gain to our shareholders. As we look towards the future, global trends indicate solid long-term demand for agriculture commodities and we believe we are taking the necessary actions to be well positioned to capitalize on this long-term trend."
