UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 12, 2017
TITAN MACHINERY INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
001-33866 | 45-0357838 | |
(Commission File Number) | (IRS Employer Identification No.) | |
644 East Beaton Drive
West Fargo, North Dakota 58078
(Address of Principal Executive Offices) (Zip Code)
(701) 356-0130
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by a check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 7.01 Regulation FD Disclosure.
As previously announced, Titan Machinery Inc. (the "Company”) will host an Investor Day event on December 12, 2017 in New York City ("Investor Day”). The event is expected to be webcast live starting at 9:30 a.m. Eastern time via a link posted in the Investor Relations section of the Company’s website at www.titanmachinery.com.
A copy of the Investor Day presentation is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The Investor Day presentation materials will also be available on the Investor Relations section of the Company’s website at www.titanmachinery.com.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. | Description | ||
Investor Day Presentation dated December 12, 2017 | |||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
TITAN MACHINERY INC. | |||
Date: | December 12, 2017 | By | /s/ Mark Kalvoda |
Mark Kalvoda | |||
Chief Financial Officer | |||
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
EXHIBIT INDEX
to
FORM 8-K
TITAN MACHINERY INC.
Date of Report: | Commission File No.: |
December 12, 2017 | 001-33866 |
Exhibit No. | ITEM | ||
99.1 | Investor Day Presentation dated December 12, 2017 | ||
Titan Machinery Investor Day
December 12, 2017
Agenda
• Our Growth Journey – David Meyer, CEO
• Our Execution Model – BJ Knutson, COO
• Our CX Advantage – Jeff Bowman, CXO
• Our Financial Foundation – Mark Kalvoda, CFO
2
Legal Disclaimers
Forward-Looking Statements
This presentation contains "forward-looking statements” within the meaning of the federal securities laws. Statements about our beliefs and expectations and
statements containing the words "may,” "could,” "would,” "should,” "believe,” "expect,” "anticipate,” "plan,” "estimate,” "target,” "project,” "intend” and
similar expressions may constitute forward-looking statements. Except for historical information contained herein, the statements in this presentation 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 performance expectations, inventory levels, agricultural and
macro-economic trends, effects of cost-cutting measures and realignment initiatives, rental fleet size, the balance sheet effects of our cash flow from
operations, modeling assumptions, projections regarding agricultural production legislation and changes to tax policy, and income, growth, operating expense,
cash flow, and profitability expectations, and the expected results of operations for the fiscal year ending January 31, 2017, involve known and unknown risks
and uncertainties that may cause Titan Machinery’s actual results in current or future periods to differ materially from forecasted 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 performance improvement initiatives, 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, the success of our inventory efforts 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. Except as required by
applicable 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. Any forward-looking statement made by us in this presentation is based only on
information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any
forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information,
future developments or otherwise.
Non-GAAP Financial Measures
Within this presentation, the Company makes reference to certain adjusted financial measures, which have directly comparable GAAP financial measures.
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.
The presentation of this additional information is not meant to be considered a substitute for, or superior to, measures prepared in accordance
with GAAP. Investors are encouraged to review the reconciliations of adjusted financial measures used in this presentation to their most directly comparable
GAAP financial measures as provided with the Non-GAAP Reconciliation Tables provided in this presentation.
Industry Information
Information regarding market and industry statistics contained in this presentation is based on information available to us that
we believe is accurate.
3
David Meyer
Chairman & CEO
4
Serving Customers Who Feed & Build Our World
• Population growth driven by developing countries
• Continued urbanization and infrastructure build-out
• Growing middle class with demand for improved diet
5
Productivity Imperative
• 2X output by 2050
• Productivity growth/gap
• Mechanize & modernize
• Growing scale of farms
Source: Global Harvest Initiative, 2016 GAP Report
6
The Growing Role of Our Dealership
• Purchase – An expanding set of machine & purchase options
• Operation – Real-time machine control & data-driven optimization
• Support – Increasingly complex components, systems & controls
• Performance – Partnership for farm & jobsite profitability & growth
7
Our Strong Partnership with CNH Industrial
• Product innovation legacy and ongoing focus
• Global manufacturer with local field support
• Strong Ag and Construction brands
• A shared commitment to customer success and growth
8
Key Advantages of Our Public Structure
• Capital – Access & Permanence
• Management – Talent & Continuity
• Succession – Stability & Longevity
9
1980 Today2000 2002-2003 2007 2009 2011 2013
Industry Leadership
1st Construction Stores 1
st International Stores
$1B Revenue $2B RevenueIPO: TITNIncorporated
1989
1st Acquisition
Capitalization
95 Stores
Consolidation Growth Improvement
E&Y Entrepreneur of
Year & VC Awards
Titan Growth Milestones
10
Ongoing Success Built on:
• Commitment to CUSTOMERS
• Strength of OUR TEAM
• Focus on GROWTH
11
BJ Knutson
Chief Operating Officer
12
Our Business Model: Delivering and Capturing Value to
Create Sustainable Growth
• Customer
o Markets
o Solutions
o Experience
• Team
o Process & Resources
o People
o Partners
• Growth
o Profitability
o Market Share
o Stakeholder Returns
13
12%
61%
27%
66%
19%
10%
5%
Equipment
Construction
Agriculture
Parts
Service
Rental
FY17 Revenue
by Segment
FY17 Revenue
by Source
International
Territory Snapshot
• Contiguous network of 75
NA stores:
Highly productive farming
region
Vast construction footprint
from Canada to Mexico
• International footprint of 20
stores in Eastern Europe
• Management depth,
expertise & systems to
support growth
• Expert Team model that
supports scale & customer
focus
14
Agriculture Segment
Growth Drivers
• Long-term economic factors
Long-term growth in net farm
income
Improving diets in developing
markets
• Compelling ROI for equipment
purchases
• Titan’s scale supports market
share growth
New technologies require
sophisticated dealer support
Capacity & capability leveraged
across extensive network of stores
• Dealer consolidation continues Would you consider
selling your dealership
in the next 3-5 years?
Yes
46%
Maybe
28%
No
26%
1825
1522
1100
650573
1132
139 222
0
500
1000
1500
2000
CNH/NH John Deere Kubota AGCO
Total Stores
Stores in Groups > 4
Average Annual Net Farm Income 1980-2020(1)
Large Equipment Dealer Groups by Brand in
North America(2)
Ag Dealer Industry Study(3)
15
Construction Segment
Growth Drivers
• Energy industry in Titan footprint: Oil
(ND 2nd), natural gas, coal
• Construction activity in residential,
commercial and infrastructure
• Equipment used in Ag applications
• Leverage of Rental business
operating within retail stores
• Machine control systems potential to
maximize production
Source: U.S. Energy Information Administration
Crude Oil Production – January 2017
Source: FMI Construction Outlook, Q1 2017.
Figures represent spending in current US Dollars.
Residential Non-Residential Non-building Structures
0
200
400
600
800
1000
1200
1400
1600
U.S. Construction Spending
0
100
200
300
400
500
600
700
800
900
1000
1100
AZ CO IA MN MT NE NM ND SD WI WY
2017 Forecast $3.9B
2018 Forecast $4.1B
Rental Market Forecast
CE & Industrial Equipment
16
Eastern European Growth
Opportunities
Leveraging Our Core Capabilities
• Climate, soils, and crops similar to Titan NA footprint
• Titan can provide NA machine technology to region
• Progressively higher level of product support required
• Customer need for precision technology rapidly increasing
17
"I talk to other
farmers about
the service they
get.”
"…the machines are becoming more complex and
more things that, as a farmer, I’m unable to fix,
because everything is electronic and computer
controlled.”
"Constantly keeping in
touch is the biggest
thing. Make sure you
stay in touch to our
needs and don’t just give
lip service. Be proactive.”
"Every one of these machines today, even the
tractors, have precision ag equipment on it, but
particularly the combines and the sprayers, you
can’t run anything without them.”
"Sooner or later, you're going to
break down or have downtime,
and it's all up to the dealer to get
things going as quick as they can.”
18
Store Consolidation
• Store Consolidation is a long-term trend in our Industry
• Leverage state-of-the-art service facilities, service technicians,
parts availability, precision farming and other expertise across
an area instead of relying on a single store
• Increased field service coverage, added parts drop locations,
and provided other incentives to retain customers
19
Expert Team Operating Structure
• Leveraging more experienced management with functional expertise
across our footprint and industries
• Centralizing key support functions to achieve better efficiency and
consistency
• Freeing up local store team to focus more on customer-facing sales and
support activities and delivering a premium customer experience
• Our team is working together across functions and locations like never
before to serve customers and improve our execution
20
Strong Partners That Perform for Our Customers
21
Jeff Bowman
Chief Experience Officer
22
Powerful and reliable equipment,
with the most productive technology,
supported by our dedicated and expert team,
helping customers simplify their work and grow.
Strong brands, company, equipment, solutions…
Leading technology, precision, productivity…
Unsurpassed commitment, expertise, teamwork…
Best customer experience, simplicity, growth…
23
The Moments Multiplier
Multiplying Our Moments
Better – Connect and Perfect
More – Integrate and Automate
New – Inputs and Outcomes
Customer Moments Customer Experience Brand Loyalty
Understanding Customers*
Priority Initiatives
Success Factors
Perceived Barriers
Buyer’s Journey
Decision Criteria
*Source: Buyer Persona Institute
24
From Dirt to Decisions: Unearthing the Value
Relationship
Supplier
Consultant
Partner
Trigger
Transaction
Interaction
Operation
Detection
React
Monitor
Predict
Action
Report
Prescribe
Decide
25
Creating New Value Beyond the Iron
• B2B eCommerce – Predict & personalize with a 360° view
• Co-Equipment Management – Facilitate end-to-end process
• Expanded Precision Solutions – Optimize across all data streams
• Farm/Jobsite Management – Integrated workflow, insights & tools
26
Title
One Customer One Titan One Moment
Anticipate customer needs
based on a data-driven view
of transactions, interactions
and operations
Deliver proactive solutions
that improve productivity
and profitability and
simplify customer workflow
Leverage scale and
expertise across Titan’s
network to provide
premium support and CX
Titan Moments: Bringing Titan’s power and precision to
customers in each moment to drive business growth
27
Mark Kalvoda
Chief Financial Officer
28
Persistent Market Conditions
Dampening Demand…
• Agriculture – Low commodity
prices following record high
equipment purchases
• Construction – Footprint
impacted by reduced oil
activity and Ag downturn
• International – Geopolitical
challenges in Ukraine
$2.2
$1.9
$1.4
$1.2 $1.2
FY'14 FY'15 FY'16 FY'17 FY'18 E
Revenues FY14 - FY18E
(in billions)
…Requires implementing
structural changes
0
20
40
60
80
100
120
Feb-13 Feb-14 Feb-15 Feb-16 Feb-17
Indexed Commodity Prices
Corn Soybean Oil
29
Operating Expenses Aligned
to Market Conditions
• Reduced by 28% or $80
million from FY14 to FY17
• Restructuring optimizing
store coverage against costs
• All efforts focusing on
customer service
• Absorption rates
demonstrating
consistent improvement
65%
70%
75%
80%
$150
$200
$250
$300
FY14 FY15 FY16 FY17 FY18
(LTM)
Operating Expense
Operating Expenses Absorption Rate
40%
50%
60%
70%
80%
90%
100%
1Q 2Q 3Q 4Q
Quarterly Absorption Rates(1)
FY14 FY15 FY16 FY17 FY18
(1)
30
• Nearly 60% reduction in equipment inventory*
• Freeing up cash for alternative use
• Driving margin expansion and reduced carrying costs
• Near-term goal of ~2x turns with a path toward ~3x
*Includes amounts classified
as Held for Sale as of 1/31/15
Inventory Reduction Resulting in Greater
Balance Sheet Efficiency
31
Utilizing Cash to Strengthen Our Balance Sheet
• $750M debt/liability reduction since FY14 driving significant
balance sheet improvement
• Positioned well to fund future capital needs
32
• Improved Inventory Position
o Resulting in improved
equipment margins
o Lower floorplan/interest
expense
• Expense reductions
o Structural reductions
allow for operating
leverage when revenues
recover
• Path toward improved EPS
exclusive of acquisitions
TODAY FUTURE
*
*Exclusive of the charges associated with our restructuring activities in fiscal 2018.
*
Current
Modeling
Assumptions
Historical Equip
Margins & Current
Expense Structure
Normal Market
Conditions
$(0.15-0.25) $0.50 $2.00
(0.5)%
1.5%
5.0%
$1.2 Billion $1.2 Billion $1.5 Billion
Foundation in Place for Improved Profitability
33
Early Signs of Earnings Recovery
• Stabilizing revenues
• Improving equipment margins
• Reduction in operating and interest expense
(in millions of dollars, except per share)
Q3
FY2018
Q3
FY2017
Change
Total Revenue $330.3 $332.3 -0.6%
Gross Profit Margin 18.6% 17.6% +100 bps
Operating Expense Margin 15.2% 16.0% +80 bps
Floorplan & Other Interest Expense Margin 1.2% 1.6% +40bps
Adjusted Diluted EPS(2) $0.20 $(0.01) $+0.21
34
Capital Allocation
Debt
Retirement
Continue de-levering
convertible debt and
floorplan payables
CAPEX and Working
Capital Flexibility
New & Existing
Dealerships
Opportunistic increases
in working capital needs
Strategic
M&A
Availability for selective
acquisitions and new
store openings
35
Titan Machinery is Well Positioned
for Future Growth
• Structural improvements drive greater
profitability at all levels of demand
• Continuous improvement efforts
enable future operating leverage as
revenues recover
• Balance sheet strength positions us
for smart selective acquisitions, new
store openings, and current footprint
investments
36
Our Next Ten Years
• New Frontiers in Innovation
• Further Consolidation
• Expanded Service Opportunities
Q&A
Appendix
Presentation Footnotes
_______________________________________
(1) Absorption is calculated in a given period by dividing our gross profit from sales of parts, service and rental fleet activity (described as "Gross
Profit on Recurring Revenue" when used in reference to absorption discussions) for the period by the difference between (i) our operating expenses
(including interest on floorplan payable and rental fleet debt balances) and (ii) our variable expense of sales commissions on equipment sales and
incentive compensation in the same period (such difference described as "Fixed Operating Expenses" when used in reference to Absorption
discussions).
(2) Adjusted Diluted EPS is a non-GAAP financial measure which has a directly comparable GAAP financial measure. The following slide provides
a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure. This non-GAAP financial measure is
not meant to be considered a substitute for, or superior to, measures prepared in accordance with GAAP.
Non-GAAP Reconciliation Tables (continued)
42