Titan Machinery Inc. Announces Dealership Restructuring Plan
February 09 2017 - 4:01PM
- Company Expects $25 million in Annual Cost
Savings from Restructuring Plan -
Titan Machinery Inc. (Nasdaq:TITN), a leading network of
full-service agricultural and construction equipment dealerships,
today announced the implementation of a restructuring plan to
consolidate certain dealership locations and a reorganization of
its operating structure. The restructuring plan is expected to
result in a significant reduction of expenses while allowing the
Company to continue to provide a leading level of service to its
customers. The Company closed one construction location
during the fourth quarter ended January 31, 2017 and expects to
close 14 agriculture locations during the first half of the current
fiscal year.
Expected Financial Results of Restructuring
Plan
The restructuring plan announced today is
expected to be completed by the end of July 2017, the end of the
Company’s second fiscal quarter. The Company is focused on
retaining the majority of the revenue from the locations being
closed by leveraging its footprint density and scale of the
locations in a geographic proximity. The reduction in revenue
is expected to be approximately $40 million, or less than 4% of
overall Company revenue, on an annual basis and $30 million for the
current fiscal year (fiscal 2018). The restructuring plan is
expected to generate an annual expense reduction of approximately
$25 million. For fiscal 2018, the expense reduction is
expected to be approximately $20 million. The restructuring plan,
excluding non-recurring costs described below, is expected to
increase adjusted pre-tax income by approximately $16 million (or
$0.44 per diluted share) on an annual basis and $13 million (or
$0.37 per diluted share) for fiscal 2018.
The non-recurring pre-tax costs associated with
this restructuring plan, consisting primarily of lease termination
costs, asset impairment, and termination benefits are estimated to
be approximately $13 million, of which approximately $3.5 million
(or $0.10 per diluted share) is expected to be recognized in the
fourth quarter of fiscal 2017 and approximately $9.5 million (or
$0.26 per diluted share) is expected to be recognized in fiscal
2018. The restructuring costs to be recognized during the fourth
quarter ended January 31, 2017 will not impact the previously
announced adjusted earnings per share estimates or modeling
assumptions for fiscal year 2017. The Company expects to
achieve its previously announced modeling assumptions for its
adjusted diluted loss for fiscal year 2017.
Management Comments
David Meyer, Titan Machinery’s Chairman and
Chief Executive Officer, stated, “As we built one of the largest
equipment dealership networks in North America, we made a number of
acquisitions, including smaller ones, in close proximity to other
locations in our network. Although it’s a difficult decision
to close a Titan location, by consolidating these adjacent
locations, we will be able to achieve increased scale and
efficiency to support our customers in those markets. We are
committed to and focused on retaining the majority of our customers
and many specialty trained employees from locations that will be
consolidated. Employees displaced by the restructuring plan
will be offered positions in nearby locations where possible or
will be offered severance benefits. The Company is committed
to transparency and to treating employees affected by the
restructuring plan with respect and fairness.”
Mr. Meyer continued, “In addition to location
consolidation, we have reorganized our operating structure to
increase our operating efficiency and provide additional focus on
parts and service support.”
Mr. Meyer concluded, “We believe the expected
$25 million in annual expense reduction from this restructuring
plan, combined with our reduced inventory levels, better aligns our
cost structure and balance sheet with current market
conditions. As we begin fiscal 2018, we remain focused on
managing the controllable aspects of our business and will continue
to take the steps necessary to improve operational results, drive
strong cash flow and better position our business for future
profitable growth opportunities.”
About Titan Machinery Inc.
Titan Machinery Inc., founded in 1980 and
headquartered in West Fargo, North Dakota, is a multi-unit business
with dealership locations. The Company owns and operates a network
of full service agricultural and construction equipment locations
in the United States and Europe. The Titan Machinery network
consists of 89 North American locations in North Dakota, South
Dakota, Iowa, Minnesota, Montana, Nebraska, Wyoming, Wisconsin,
Colorado, Arizona, and New Mexico, including one outlet store, and
20 European locations in Romania, Bulgaria, Serbia, and Ukraine.
The Titan Machinery locations 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 the number of locations
expected to be closed as part of the restructuring plan, the timing
for completion of the restructuring plan, the expected impact of
the restructuring plan on our financial results and the operating
structure reorganization involve known and unknown risks and
uncertainties that may cause the Company’s actual results in
current or future periods to differ materially from forecasted
results. The Company’s risks and uncertainties include, among other
things, the Company’s ability to implement the restructuring plan
efficiently and consistent with the current scope and plan, the
impact of the restructuring plan on the Company’s financial
results, 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 Construction segment, the
uncertainty and fluctuating conditions in the capital and credit
markets, difficulties in conducting international operations,
governmental agriculture policies, seasonal fluctuations, 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 the Company’s filings with
the Securities and Exchange Commission, including the Company’s
most recently filed Annual Report on Form 10-K. The Company
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 the Company’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. The Company
disclaims, except as required by law, 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, John.Mills@icrinc.com
Partner
646-277-1254
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