Please stand by. We're about to begin. Good day and welcome to the Titan Machinery Incorporated First Quarter Fiscal Year 2016 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. John Mills of ICR. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen and welcome to the Titan Machinery first quarter fiscal 2016 earnings conference call. On the call today from the company are David Meyer, Chairman and Chief Executive Officer; Peter Christianson, President; and Mark Kalvoda, Chief Financial Officer. By now everyone should have access to the earnings release for the fiscal first quarter ended April 30, 2015, which went out this morning at approximately 6:45 AM Eastern Time. If you've not received the release, it is available on the Investor Relations portion of Titan's website at titanmachinery.com. This call is being webcast and a replay will be available on the company's website as well. In addition, we are providing a presentation to accompany today's prepared remarks. We suggest access the presentation now by going to Titan's website and clicking on the Investor Relations tab. The presentation is located under the Events and Presentations tab under Investor Relations. Before we begin, we'd like to remind everyone that the prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. The statements do not guarantee future performance and, therefore, undue reliance should not be placed upon them. These statements are based on current expectations of management and involve inherent risks and uncertainties, including those identified in the Risk Factors section of Titan's most recently filed Annual Report on Form 10-K. These risk factors contain more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward-looking statements. Titan assumes no obligation to update any forward-looking statements that may be made in today's release or call. Please note that during today's call, we'll discuss non-GAAP financial measures, including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more…

Thanks, Peter. Turning to slide 10, our total revenue for the fiscal 2016 first quarter was $353 million, a decrease of 24.1% compared to last year, which primarily reflects lower same-store sales in Ag and Construction segments. Equipment sales decreased 29% quarter-over-quarter primarily reflecting the Ag headwinds David discussed in his remarks. Our parts revenue decreased 10% in the quarter, and service revenue decreased 11.3% driven by decreases in both our Ag and Construction segments. The lower parts and service revenue in our Ag segment was the result of a decreased amount of customer preventative maintenance, as well as reduced service business associated with the pre-delivery of sold new equipment. The quarter-over-quarter decline in our parts and service Construction revenue was attributed to the dry winter that David spoke to earlier, as well as tougher comps in this period last year as Construction parts revenue was up 16.5%, and service revenue was up 9.3% in the same period last year. Our rental and other revenue decreased 7.8% in the first quarter primarily due to the lower utilization and a reduced rental fleet. Our rental fleet dollar utilization was 19.1% for the current quarter compared to 22.9% in the same period last year. Decreased utilization was partially due to the lower oil prices affecting rental demand in our oil-producing markets. On slide 11, our gross profit for the quarter was $60 million, and our gross profit margin was 17.1%, an increase of 80 basis points compared to the same quarter last year. Improvement in gross margin was due to a change in gross profit mix to our higher margin parts and service business compared to the prior-year period, partially offset by a decrease in equipment margins of 100 basis points. Our operating expenses, as a percentage of revenue in the first…

Thank you. We'll go first to Neil Frohnapple with Longbow Research.

Hi. Good morning, guys. Could you guys provide any more granularity on the equipment margins in the quarter? The guidance implied a sizable step-up for the remainder of the year, so is first quarter the low watermark? And just what gives you guys confidence that margins will accelerate to around 8% on average for the remainder of the year to hit the low end of the guidance?

Yes. This is Mark, Neil. The equipment margin, so as you know, the lower of cost or market, we take on an ongoing basis. When you have a quarter where there's lower revenue, any kind of write-down in that lower of cost or market creates a larger impact on the margins coming out of that equipment business. But, yes, we did reiterate kind of the midpoint there of around 8% for the year. So, we do anticipate those margins to expand throughout the year.

Got it. Thanks. And then just could you provide some more color on – you mentioned partial recovery in oil prices support second-half stability in energy markets – are you guys seeing signs of stabilization already there?

Yeah. I think what we've seen is there was, I think, a little bit of kind of shock and awe out there to begin with, with the rapid decline in the oil prices out in the market out there. And as things have settled down and they kind of reached what kind of appears to be a bottom on oil prices down below $50 and it's rebounded above that now, I think some of that has passed and there's more activity going on. A lot of infrastructure projects are taking place and we're starting to see some renewed activity going on in that market.

Great. I'll pass it on. Thanks, guys.

And we'll go next to Rick Nelson with Stephens.

Thanks. I'd like to follow-up on the margin pressure as well. If you could break that down perhaps between new and used equipment – where the pressures are – and any comments about inventory in the channel. I realize you've made good progress in terms of reducing inventory but any overall comments about the industry inventory?

Yeah. First of all to the margin question again, it's still more pressure on the used. New, we're not anticipating nor have expected any kind of notable compression there. The used is still where we're having some of the lower of cost or market adjustments which is keeping the margins down in that area and the used equipment market out there is – it's a tougher one. As far as overall inventory conditions, yes, we continue to kind of work down the inventory. Seasonally, it's a quarter – first and second quarter, we tend to stock more – we get more of the deliveries in. But I would say we continue to make some progress on the new and used out there. So, still more to go as we're expecting to get down $150 million for the year, but we continue to make progress in that regard.

Great. Thanks a lot for those comments, and good luck.

We'll take our next question from Mig Dobre with Robert Baird. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Good morning, guys. I'm going to stick with margin as well. If I look at margin progression in equipment, we've seen a sequential decline, really, for now four quarters. And I guess, I'm wondering here, if we're going to see a sequential uptick going forward, back to, call it, 8% from 7.3%, doesn't that necessarily imply that you're baking into your outlook some sort of stabilization if not even potentially some kind of a rebound in used equipment pricing?

No. I would say it's not necessarily figuring out some pricing increase there or any kind of – I wouldn't describe it more as less pressure where it would be lower levels of write-downs that we would incur in the used equipment area. And the other thing again I mentioned it earlier but with having a lower level of sales compared to like a fourth quarter for instance. Fourth quarter, if you have the same – if you had the same amount of some of these lower cost or market adjustments, your overall margin wouldn't be as affected near as much because you're taking it over a much larger numerator in that instance. So, no, I don't think it's implying that there's any kind of pricing increase or anything like that in the overall market, but it's – I would say it's more of less pressure. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): And why would you expect less pressure?

Just I think further along in the cycle and combination of that and just overall lower levels of used equipment inventory levels. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Thanks. And last question from me is on SG&A. You guys have done a – really a tremendous job there. And I'm wondering how to think about this number going forward. Is this, call it, below $60 million level sustainable as you look at the rest of the year?

No. I wouldn't indicate that because, again, some of these – some of what we have in the first quarter with commission expense, so again, you get out to like a fourth quarter where you have higher levels of equipment sales, you're going to have higher variable cost such as commissions. Where you did see the bigger year-over-year improvement would be Q1, because you really had both of those realignments helping in Q1. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): I see. Thank you.

We'll go next to Brett Wong with Piper Jaffray. Brett W. S. Wong - Piper Jaffray & Co (Broker): Hey, guys. Thanks for taking my questions. I'm kind of looking at your comment there with the cycle. Just wondering what your expectations for the crop are this year, specifically on yield when you compare it to kind of what the USDA has provided given the current planting progress and expected growing conditions. I mean, you talked about adequate moisture levels in your footprint, so just wondering what you can say there. David Joseph Meyer - Chairman & Chief Executive Officer: First of all, this is probably pretty ideal planting conditions across some of your more productive growing areas in the Upper Midwest. Crops went in early, corn went in early, ideal planting conditions, great weather conditions, so we've got a great jump on things. Then where we weren't – in some or moderate drought situation three weeks, four weeks ago, there's been really nice ample rains in the Dakotas, or Minnesota, Iowa, Nebraska. So my anticipation is as you look around a pretty good piece of United States right now, there's some really ideal growing conditions, good plant, a lot of things are ahead of the game. So, I'm optimistic that there's going to be some excellent yield especially in our footprint. I mean, everything is setting up, you know, we don't – we're still away from harvest, but everything is set up as well – about as well as you can imagine right now for good yields. Brett W. S. Wong - Piper Jaffray & Co (Broker): So then if you have expectations for good yields, I mean, do you think those could be above trend line? And then where do you think that puts ending stocks and how does that impact the cycle and farmer sentiment in terms of equipment purchases? David Joseph Meyer - Chairman & Chief Executive Officer: Well, first of all, it's nice to have the bushels, and once you have the bushels, I think, our growers have some pretty good staying power and they don't have a gun to their head to sell out their combines. So I think they have the bushels, that has been good, but then it does for overall commodity prices, more supply, it's going to put pressure on commodity prices. So that's the offset to that. So – but I think you need the bushels regardless of the price, so that's a positive. But then again, I think, there is – we'll have to wait and see really what that's going to – effect that's going to have on commodity prices as we get into the – our third and fourth quarters. Brett W. S. Wong - Piper Jaffray & Co (Broker): Great. Thanks a lot for the color.

We'll take our next question from Joe Mondillo with Sidoti & Company. Joe L. Mondillo - Sidoti & Co. LLC: Good morning, guys. Regarding – so I have two questions. First, in terms of the Construction segment, it seems like in terms of the organic growth assumptions that you are assuming a fairly – a good rebound in the second half of the year, just is that largely related to smaller pressures on the energy side? Could you just comment on what you're seeing within that segment that's been sort of a challenge over the last couple years?

I think the biggest thing that it just kind of says is for the year, we indicated flat – overall flat on Construction as far as sales growth, and so being down 6% in the first quarter, yes, implies some improvement going forward. But you really have to kind of look at last year's comps to that where we're up nearly 25% and 27% in Q1, Q2. So, we're up against some very tough comps that get much more relaxed in the back half of the year. So, I don't think it's more of kind of – I think, it's more of kind of what we're comping against rather than what we're seeing in the current year. Joe L. Mondillo - Sidoti & Co. LLC: I mean it seems like the revenue base would be above $100 million for the rest of the year in terms of what the guidance implies. Am I looking at that right and if so last year you were sort of consistent on a quarter-to-quarter basis, maybe give or take $5 million or $10 million, but the uptick from the $80 million that you did in the first quarter seems a bit large. So, I'm just wondering where you're going to see the big improvement starting in the second or later in the year.

Well, so the first quarter is generally our lowest quarter, seasonally low quarter, especially up in the upper part of our footprint here with winter going on and the ground frozen and everything like that there's not near the activity that we have later in the year. And similar to the Ag side, there is a year-end buying element too that happens on the equipment side. So, I think some – if I understood your question right, some of it is seasonality here too that happens in that first quarter versus the others. Joe L. Mondillo - Sidoti & Co. LLC: Okay. And then secondly, in terms of the International segment, business continues to lose a lot of money. The currency pressures alone seem like it make the economics of this business pretty tough to take, if for a few – it's going to continue for a few more quarters. Just wondering if you can update us on your thoughts on that sort of venture. Peter J. Christianson - President, Chief Operating Officer & Director: Well, we're committed to the business. And we continue to work through the challenges that face us in certain markets that we're operating in. I made comments on the call about Ukraine and then in Bulgaria we had wet conditions last year. So, we're working through that and selling down our inventory to reduce exposure on inventory. Joe L. Mondillo - Sidoti & Co. LLC: So, I guess what my question really is, is at what point does that commitment sort of do you start to rethink that given the money that you're losing for a long period of time now? Peter J. Christianson - President, Chief Operating Officer & Director: Well, as I said, we're committed to the business and understand that under any…

We'll take our next question from Larry De Maria with William Blair. Larry T. De Maria - William Blair & Co. LLC: Hi. Good morning. A couple of questions. First, as you've said, we're off to a good planning season and ideal growing conditions. I just want to understand specifically how much risk do you guys see in the second half if we have a good harvest and, obviously, you wouldn't play lower prices? In other words, how important is the summer weather to your outlook this year? And is there a risk for another write down in the second half in your guys' view? David Joseph Meyer - Chairman & Chief Executive Officer: Well, weather is always an issue. And I think to really get your maximum yields especially in the corn and soybean areas, it takes some timely July-August rains. So that's still out there. But I feel just a lot more positive right now about the moisture conditions in some of our areas. We have a lot of stores in the Dakotas, Minnesota, Nebraska, Iowa. I mean, there's good subsoil moisture and it's set up, so the amount of risk for crop failure and all in a lot of this area is much less than it was say, three, four weeks ago. Because there's been some really nice, timely rains, but there again, the top and the maximum yields are really going to be dependent on some good July-August rains in these markets. Larry T. De Maria - William Blair & Co. LLC: Right. So assuming that happens, I'm just curious like how worried are you guys that the second half could come in below expectations based on what looks to be a good crop so far? David Joseph Meyer - Chairman & Chief Executive Officer: Well,…

The way we kind of talked about it was more stabilization, call it stabilized environment. So, I wouldn't want to leave the impression that it's really outstanding, a great amount or anything like that. But we are getting new deals done out there. We are seeing some more activity in the rental business that we have up in that area. So, yeah, there is what we would call stabilization going on out there. Larry T. De Maria - William Blair & Co. LLC: Okay. Thanks guys.

We'll go next to Mig Dobre with Robert Baird. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Yeah. Thanks for taking my follow-up. Just a couple of items. And sticking with rental here, can you maybe, Mark, give us some color here on the slight decline in the rental fleet? And I'm also wondering, within your overall outlook, what sort of utilization levels are you baking in, and how does that compare to what you're able to do from a utilization standpoint last year?

Yeah. I think for the quarter, some of the things that we saw there affecting our utilization compared to the prior year, certainly some of that energy related stuff, so it's moving out. We've got some of it moving out of that energy area. And so, just the fact that the stuff that's in the energy area is getting a lower level of utilization, but also moving it out and dispersing it into some of the other areas. It takes a little bit of a ramp-up to happen when we do that. So, that's some of the things affecting the quarter along with the weather factors that we discussed earlier and the snow removal opportunities that didn't present itself this year with the dry weather. Regarding the de-fleeting, some of that was also in this energy area. Rather than disbursing it, we did de-fleet some of that. And I would say somewhat of a planned de-fleet, maybe a little bit more than what we initially expected. But much of that de-fleet was associated with some of that energy area stuff. In regards to the full year, we don't provide that modeling assumption anymore. But I think, based on last year, I think starting out slower. But we do expect that to pick up somewhat probably to a level similar to last year ending result. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): All right. That's helpful. And I guess my final question here is this, with Peter's role changing, especially as we look beyond fiscal 2016, I guess, how should we be thinking about the person that will assume actual executive management of the international business, not on a consulting basis, but call it a full-time basis within the company, especially since from what I understand, you've also made some adjustments to the shared resources that you put out there? David Joseph Meyer - Chairman & Chief Executive Officer: Well, first of all, we have some strong leaders in place in Eastern Europe right now. And we really think that that business over there is just managed by people that have the European background, the European culture and understand the business over there. So, like we say, we've got strong leaders in place, and we'll continue to develop that organization with the group of leaders we have a lot of confidence in right now. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Okay. Thank you.

It appears there are no further questions at this time. I would now like to turn the call back to Mr. Dave Meyer. David Joseph Meyer - Chairman & Chief Executive Officer: Okay. Thank you, everyone, for being on the call and your interest in Titan, and we look forward to updating you on our progress on our next call. Have a good day.

And that concludes today's conference call. Thank you for your participation.