Titan Machinery Inc
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Titan Machinery Inc. Annual Report 2017 Form 10-K (NASDAQ:TITN) Published: April 7th, 2017 PDF generated by stocklight.com UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ___________________________________________ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 31, 2017 Commission File No. 001-33866 ___________________________________________ TITAN MACHINERY INC. (Exact name of registrant as specified in its charter) Delaware No. 45-0357838 (State or Other Jurisdiction of (IRS Employer Incorporation or Organization) Identification No.) 644 East Beaton Drive West Fargo, ND 58078-2648 (Address of Principal Executive Offices) (701) 356-0130 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class: Common Stock, $0.00001 Par Value Name of each exchange on which registered: The NASDAQ Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: None ___________________________________________ Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer o Accelerated filer x Non-accelerated filer o Smaller reporting company o (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x The aggregate market value of our common stock held by non-affiliates as of July 31, 2016 was approximately $205.4 million (based on the last sale price of $11.21 per share on such date as reported on the NASDAQ Global Select Market). The number of shares outstanding of the registrant's common stock as of March 31, 2017 was 21,833,294 shares. DOCUMENTS INCORPORATED BY REFERENCE Portions of the proxy statement for the registrant's 2017 Annual Meeting of Stockholders are incorporated by reference into Items 10, 11, 12, 13 and 14 of Part III of this report. Table of Contents Page No. PART I Item 1. Business 1 Item 1A. Risk Factors 11 Item 1B. Unresolved Staff Comments 18 Item 2. Properties 19 Item 3. Legal Proceedings 20 Item 4. Mine Safety Disclosures 20 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 21 Item 6. Selected Financial Data 22 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 25 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 50 Item 8. Financial Statements and Supplementary Data 51 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 89 Item 9A. Controls and Procedures 89 Item 9B. Other Information 89 PART III Item 10. Directors, Executive Officers and Corporate Governance 89 Item 11. Executive Compensation 89 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 89 Item 13. Certain Relationships and Related Transactions, and Director Independence 89 Item 14. Principal Accounting Fees and Services 90 PART IV Item 15. Exhibits, Financial Statement Schedules 90 Item 16. Form 10-K Summary 90 We make available, free of charge, copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 on our website, http://www.titanmachinery.com, as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC. We are not including the information on our website as a part of, or incorporating it by reference into, this Form 10-K. ITEM 1. BUSINESS Our Company Overview We own and operate a network of full service agricultural and construction equipment stores in the United States and Europe. Based upon information provided to us by CNH Industrial N.V. or its U.S. subsidiary CNH Industrial America, LLC, collectively referred to in this Form 10-K as CNH Industrial, we are the largest retail dealer of Case IH Agriculture equipment in the world, the largest retail dealer of Case Construction equipment in North America and a major retail dealer of New Holland Agriculture and New Holland Construction equipment in the U.S. CNH Industrial is a leading manufacturer and supplier of agricultural and construction equipment, primarily through the Case IH Agriculture, New Holland Agriculture, Case Construction and New Holland Construction brands. We have three primary business segments, Agriculture, Construction and International, within which we engage in four principal business activities: • new and used equipment sales; • parts sales; • equipment repair and maintenance services; and • equipment rental and other activities. The agricultural equipment we sell and service includes machinery and attachments for uses ranging from large-scale farming to home and garden purposes. The construction equipment we sell and service includes heavy construction machinery, light industrial machinery for commercial and residential construction, road and highway construction machinery, and mining operations equipment. The new equipment and parts we sell are supplied primarily by CNH Industrial. The used equipment for resale is acquired through trade-ins from our customers and selective purchases. We sell parts and provide in-store and on- site equipment repair and maintenance services. We also rent equipment and provide ancillary services such as equipment transportation, Global Positioning System ("GPS") signal subscriptions, farm data management products, and finance and insurance products. We offer our customers a one-stop solution by providing equipment and parts sales, equipment repair and maintenance services, and rental functions in each store. Our full service approach provides us with multiple points of customer contact and cross-selling opportunities. We believe our mix of equipment sales and recurring parts and service sales, as well as our diverse geographic footprint, enables us to operate effectively throughout economic cycles. We also believe our significant scale, superior customer service, diverse and stable customer base, management reporting system and experienced management team provide us with a competitive advantage in many of our local markets. Throughout our 37-year operating history, we have built an extensive, geographically contiguous network of 89 stores in the U.S., including one outlet store, and 20 stores in Europe. Our Agriculture stores in the U.S. are located in Iowa, Minnesota, Nebraska, North Dakota and South Dakota and include several highly productive farming regions, such as the Red River Valley in eastern North Dakota and northwestern Minnesota, portions of the corn belt in Iowa, eastern South Dakota and southern Minnesota, and along the I-80 corridor in Nebraska, which sits on top of the Ogallala Aquifer. Our Construction stores are located in Arizona, Colorado, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, South Dakota, Wisconsin and Wyoming. Our International stores are located in the European countries of Bulgaria, Romania, Serbia and Ukraine. We have a history of growth through acquisitions. Since January 1, 2003, we have completed 52 acquisitions consisting of 110 stores operating in 11 states and three European countries, including 37 acquisitions consisting of 79 stores completed since our initial public offering on December 11, 2007. We believe that there will continue to be opportunities for dealership consolidation in the future, and we expect that acquisitions will continue to be an important component of our long-term growth strategy. Industry Overview Agricultural Equipment Industry Agricultural equipment is purchased primarily by commercial farmers for the production of crops used for food, fiber, feed grain and feedstock for renewable energy. Certain equipment is also purchased for home and garden applications, and maintenance of commercial, residential and government properties. Deere & Company ("Deere"), CNH Industrial and Agco Corporation ("AGCO") are the largest global manufacturers of agricultural equipment and supply a full line of equipment and parts that supply the primary machinery requirements of farmers. In addition to the major manufacturers, several short-line manufacturers produce specialized equipment that satisfy regional and niche requirements of farmers. Agricultural equipment manufacturers typically grant dealers in the U.S. non-exclusive sales and marketing areas with designated store locations to distribute their products.