Titan Machinery Inc. plans to close 14 agricultural locations by the end of July 2017. The company closed one construction location during the fourth quarter ended January 31, 2017.
Titan Machinery owns a network of full-service agricultural and construction equipment dealerships.
"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, said David Meyer, Titan chairman and CEO. "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," Meyer said. "Employees displaced by the restructuring plan will be offered positions in nearby locations where possible or will be offered severance benefits."
The restructuring plan is expected to reduce revenue by about $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, 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.
"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," Meyer said. "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."
Related: Stores to close in Minnesota, North Dakota, South Dakota, Nebraska and Iowa - West Central Tribune
Source: Titan Machinery Inc.