Titan Machinery Stock

Titan Machinery Inc. and its subsidiaries (Titan Machinery) own and operate a network of full service agricultural and construction equipment stores in the United States and Europe.

The company is an authorized dealer of CNH Industrial N.V. or its U.S. subsidiaries (collectively referred to as ‘CNH Industrial’). CNH Industrial is a leading manufacturer and supplier of agricultural and construction equipment, which includes the Case IH Agriculture, New Holland Agriculture, Case Construction and New Holland Construction brands. Based upon information provided to the company by CNH Industrial, the company is the largest retail dealer of Case IH Agriculture equipment in the world, one of the largest retail dealers of Case Construction equipment in North America and one of the largest retail dealers of New Holland Agriculture and New Holland Construction equipment in the United States. In addition to the CNH Industrial brands, the company sells and services equipment made by a variety of other manufacturers.

Segments

The company operates through three reportable segments: Agriculture, Construction and International, within which the company 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 company offers its customers a one-stop solution by providing equipment and parts sales, equipment repair and maintenance services, and rental functions in each store. The company’s full service approach provides the company with multiple points of customer contact and cross-selling opportunities. The company’s mix of equipment sales and recurring parts and service sales, as well as the company’s geographic footprint, provide the company with diversification, lowering the company’s overall exposure to adverse economic cycles that affect particular geographic markets or segments.

The company has an extensive network of stores in the United States and in Europe. The company’s Agriculture stores in the U.S. are located in Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota, Washington, Wisconsin, and Wyoming; 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, along the I-80 corridor in Nebraska, which sits on top of the Ogallala Aquifer, and the Snake River Valley in eastern Idaho. The company’s Construction stores are located in Colorado, Iowa, Minnesota, Nebraska, North Dakota, South Dakota, and Wisconsin. The company’s international stores are located in the European countries of Bulgaria, Germany, Romania, and Ukraine.

The company's Agriculture segment sells, services, and rents machinery, and related parts and attachments, for uses ranging from large-scale farming to home and garden use in North America. This segment also includes ancillary sales and services related to agricultural activities and products, such as equipment transportation, Global Positioning System (GPS) signal subscriptions and finance and insurance products.

The company's Construction segment sells, services, and rents machinery, and related parts and attachments, for uses ranging from heavy construction to light industrial machinery use to customers in North America. This segment also includes ancillary sales and services related to construction activities, such as equipment transportation, GPS signal subscriptions and finance and insurance products.

The company’s International segment sells, services, and rents machinery, and related parts and attachments, for uses ranging from large-scale farming and construction to home and garden use to customers in Eastern Europe.

Products and Services

Within each of the company’s segments, the company has four principal sources of revenue: new and used equipment sales, parts sales, equipment repair and maintenance services, and equipment rental and other business activities.

New and Used Equipment Sales

The company sells new agricultural and construction equipment manufactured under the CNH Industrial family of brands, as well as equipment from a variety of other manufacturers. The used equipment the company sells is primarily acquired through trade-ins from the company’s customers. The agricultural equipment the company sells and services includes machinery and attachments for uses ranging from large-scale commercial farming to home and garden purposes. The construction equipment the company sells and services includes heavy construction machinery, light industrial machinery for commercial and residential construction, and road and highway construction machinery. Equipment sales generate cross-selling opportunities by populating the company’s markets with equipment in the need of service and parts.

Parts Sales

The company maintains an extensive in-house parts inventory to provide timely parts and repair and maintenance support to the company’s customers. The company’s parts sales provide a relatively stable revenue stream that is less sensitive to economic cycles than the company’s equipment sales.

Equipment Repair and Maintenance Services

The company provides repair and maintenance services, including warranty repairs, for the company’s customers' equipment. All of the company’s stores have service shops staffed by trained service technicians. In addition, the company’s technicians are able to make off-site repairs at customer locations. The company provides proactive and comprehensive customer service by maintaining service histories for each piece of equipment owned by the company’s customers, maintaining 24/7 service hours in times of peak equipment usage, providing on-site repair services, scheduling off-season maintenance activities with customers, notifying customers of periodic service requirements and providing training programs to customers in order to educate them on standard maintenance requirements.

Equipment Rental and Other Business Activities

The company rents equipment to its customers, primarily in the Construction segment, for periods ranging from a few days to seasonal rentals. The company actively manages the size, quality, age and composition of the company’s rental fleet and closely monitor and analyze customer demand and rate trends. The company services its fleet through its on-site parts and services team and market the company’s rental equipment through its retail sales force. The company’s rental activities create cross-selling opportunities in equipment sales, including rent-to-own purchase options on the company’s non-fleet rentals.

The company provides ancillary equipment support activities, such as equipment transportation, Global Positioning System (‘GPS’) signal subscriptions and other precision farming products, farm data management products, and CNH Industrial finance and insurance products.

Growth Strategy

The company pursues the following growth strategies: increasing same-store sales and market share, and strategic acquisitions. It regularly assesses the acquisition landscape, evaluating potential acquisitions in terms of availability and alignment to its long-term growth strategy.

Suppliers

CNH Industrial—Case IH Agriculture, Case Construction, New Holland Agriculture and New Holland Construction

In the year ended January 31, 2023 (fiscal 2023), CNH Industrial supplied approximately 76% of the new equipment sold in the company’s Agriculture segment, 76% of the new equipment sold in the company’s Construction segment, and 60% of the new equipment sold in the company’s International segment. In addition, CNH Industrial provides financing and insurance products and services to the company’s end-user customers through its affiliate CNH Industrial Capital America, LLC (‘CNH Industrial Capital’).

Dealership Agreements

The company has entered into separate dealership agreements with CNH Industrial to sell and service the Case IH Agriculture, New Holland Agriculture, Case Construction and New Holland Construction brands (collectively the ‘CNH Industrial Dealer Agreements’). Separate CNH Industrial Dealer Agreements exist for each of the company’s North American stores or store complexes, and for each of the European countries in which the company operates.

Other Suppliers

In addition to products supplied by CNH Industrial, the company sells a variety of new equipment and parts supplied by other manufacturers. These products tend to address specialized niche markets and complement the CNH Industrial products the company sells by filling gaps in the CNH Industrial line of products.

Customers

The company’s North America agriculture customers vary from small, single machine owners to large farming operations to large commercial application operations, primarily in the states of Idaho, Iowa, Kansas, Missouri, Minnesota, Montana, Nebraska, North Dakota, South Dakota, Washington, Wisconsin, and Wyoming.

The company’s construction customers include a wide range of construction contractors, public utilities, forestry, energy companies, farmers, municipalities and maintenance contractors, primarily in the states of Colorado, Iowa, Minnesota, Nebraska, North Dakota, South Dakota, and Wisconsin. They vary in size from small, single machine owners to large firms.

The company’s international customers vary from small, single machine owners to large farming operations, primarily in the European countries of Bulgaria, Germany, Romania, and Ukraine. The company also sells Case construction equipment in Bulgaria and Romania.

Sales and Marketing

The company markets its products and services through its sales employees, who operate out of the company’s network of local stores and call on customers in the markets surrounding each store; its area product support managers, and the company’s store parts managers and service managers, who provide the company’s customers with comprehensive after-market support; its website; local and regional advertising efforts, including broadcast, cable, direct mail, print and web-based media, social media channels; and alternative channels, such as auctions, for selling the company’s aged equipment inventories.

Equipment Sales Consultants and Centralized Support

The company’s equipment sales employees (who the company refers to as ‘equipment sales consultants’) perform a variety of functions, such as servicing customers at the company’s stores, calling on existing customers, and soliciting new business at farming, construction and industrial sites. The company develops customized marketing programs for its sales force by analyzing each customer group for profitability, buying behavior and product selection. All members of the company’s sales force are expected to participate in internal and external manufacturer-sponsored training sessions to develop product and application knowledge, sales techniques and financial acumen. The company’s shared resources group provides centralized sales and marketing support for the company’s field operations, and coordinates centralized media buys, strategic planning, sales support, training and files for available cooperative advertising reimbursement from the company’s suppliers. In addition, the company enables its regional and area managers and their sales teams to develop localized sales and marketing strategies.

Parts Managers and Service Managers

The company’s parts sales managers and service managers at its stores are involved in the company’s efforts to market its parts and service offerings, taking advantage of the company’s seasonal marketing campaigns in parts and service sales.

Website

The company has built a large amount of content related to the equipment the company sells and services, the technology used by its customers in conjunction with the equipment, and information about the company and what the company have to offer prospective employees. Used equipment inventories are one of the most highly trafficked sections of the company’s website, www.titanmachinery.com. Parts manufactured by the CNH Industrial brands and other suppliers are marketed and can be purchased directly through the company’s website. Other sales and financing programs are also marketed through the company’s website. Finally, the company’s website provides dealer locator search functions and provides the contact information for the various departments at each of its stores.

Print, Broadcast and Web-Based Advertising Campaigns

Each year the company initiates several targeted direct mail, print and broadcast advertising and marketing campaigns. CNH Industrial and other suppliers periodically provide the company with advertising funds, which the company primarily uses to promote new equipment, parts and financing programs. The company will continue to explore and launch additional sales channels as appropriate, including for example, additional internet-based efforts.

Channels for Selling Aged Equipment Inventory

In certain circumstances, the company sells aged equipment inventories through the use of alternative channels, such as onsite and online auctions.

Intellectual Property

The company has registered trademarks for certain names and designs used in the company’s business and have trademark applications pending for certain others. The company operates each of its stores under the Titan Machinery name. Case IH, Case and New Holland are registered trademarks of CNH Industrial, which the company is authorized to use pursuant to the terms of the CNH Industrial Dealer Agreements. The company also licenses trademarks and trade names from other suppliers of equipment to the company.

Seasonality

The agricultural and construction equipment businesses are highly seasonal, which causes the company’s quarterly results and the company’s cash flow to fluctuate during the year (year ended January 2023). The company’s customers generally purchase and rent equipment in preparation for, or in conjunction with, their busy seasons. For farmers, the busy seasons are spring planting and fall harvesting. For construction customers, the busy season is typically the second and third quarters of the company’s fiscal year for much of its footprint, subject to weather conditions. The company’s parts and service revenues are typically highest during the company’s customers' busy seasons as well, due to the increased use of their equipment during this time, which generates the need for more parts and service work. In addition, the fourth quarter typically is a significant period for equipment sales in the U.S. because of the company’s customers’ year-end tax planning considerations, the timing of dealer incentives and the increase in availability of funds from completed harvests and construction projects.

Environmental and Other Governmental Regulation

The company is subject to the Clean Water Act, analogous state statutes, and their implementing regulations, which among other things, prohibit discharges of pollutants into regulated waters without permits, require containment of potential discharges of oil or hazardous substances, and require preparation of spill contingency plans.

Competition

The company’s competitors range from multi-location, regional operators to single-location dealers and include dealers and distributors of competing equipment brands, including Deere, Caterpillar, Kubota, and the AGCO brands.

The company’s primary regional-scale competitors include RDO Equipment Co., Butler Machinery Company, Ziegler Inc., Brandt Holdings Co., Wagner Equipment Co., 21st Century Equipment, LLC, AKRS Equipment Solutions, Inc., C & B Operations, LLC, and Van Wall Equipment, Inc.

History

Titan Machinery Inc. was founded in 1980. The company was incorporated as a North Dakota corporation in 1980 and reincorporated in Delaware in 2007.