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---Company Reiterates Revenue Outlook Range; Lowers Earnings Per Share Outlook Range-
---Equipment Margin Compression Impacted from Regional Drought Conditions-
---Company Continues Acquisition Strategy in Upper Midwest and Expands International Distribution Network-
Titan Machinery Inc. (TITN), a leading network of full-service
agricultural and construction equipment stores, today reported financial
results for the fiscal second quarter and first six months ended July
31, 2012.
Fiscal 2013 Second Quarter Results
For the second quarter of fiscal 2013, revenue increased 31.9% to $410.1
million from revenue of $310.8 million in the second quarter last year.
All four of the Company’s revenue sources--equipment, parts, service, and
rental and other--contributed to this period-over-period revenue growth.
Equipment sales were $306.2 million for the second quarter of fiscal
2013, compared to $225.3 million in the second quarter last year. Parts
sales were $57.9 million for the second quarter of fiscal 2013, compared
to $49.3 million in the second quarter last year. Revenue generated from
service was $30.5 million for the second quarter of fiscal 2013,
compared to $25.4 million in the second quarter last year. Revenue from
rental and other increased to $15.5 million from $10.9 million in the
second quarter last year.
Gross profit for the second quarter of fiscal 2013 was $70.4 million,
compared to $55.9 million in the second quarter last year. The Company’s
gross profit margin was 17.2% in the second quarter of fiscal 2013,
compared to 18.0% in the second quarter last year. The decrease in gross
profit margin was primarily due to lower used equipment margins as a
result of a more competitive pricing environment and the change in sales
mix, in which the higher margin parts and service businesses generated a
smaller percentage of sales compared to the same quarter last year.
Operating expenses were 13.8% of revenue or $56.5 million for the second
quarter of fiscal 2013, compared to 14.2% or $44.1 million for the
second quarter of last year.
Pre-tax income for the second quarter of fiscal 2013 was $8.8 million,
compared to $10.4 million in the second quarter last year. Pre-tax
margin was 2.1% for the second quarter of fiscal 2013, compared to 3.3%
in the second quarter last year. Pre-tax Agriculture segment income was
$10.6 million for the second quarter of fiscal 2013, compared to $10.9
million in the second quarter last year. Pre-tax Construction segment
income was $628,000 for the second quarter of fiscal 2013, compared to
pre-tax Construction segment income of $576,000 in the second quarter
last year. The year over year decline in Company pre-tax income
reflected lower equipment margins, increased floorplan expenses due to
higher inventory levels, and higher interest expense due to the
Company’s April 2012 private offering of convertible debt.
Net income attributable to common stockholders for the second quarter of
fiscal 2013 was $5.2 million, compared to $6.2 million in the second
quarter last year. Earnings per diluted share for the second quarter of
fiscal 2013 were $0.25 on approximately 21.0 million weighted average
diluted common shares outstanding, compared to $0.30 on approximately
20.6 million weighted average diluted common shares outstanding in the
second quarter last year.
Fiscal 2013 First Six Months Results
For the six months ended July 31, 2012, revenue increased 32.2% to
$831.8 million from $629.0 million for the same period last year. Gross
margin for the first six months of fiscal 2013 was 16.9%, compared to
17.3% in the same period last year. Pre-tax income for the first six
months of fiscal 2013 was $21.1 million for a pre-tax margin of 2.5%,
compared to $22.6 million, or a pre-tax margin of 3.6%, for the same
period last year. Net income attributable to common stockholders for the
first six months of fiscal 2013 was $12.7 million, or $0.60 per diluted
share, compared to $13.4 million, or $0.69 per diluted share, for the
same period last year. The six-month weighted average diluted common
shares outstanding for the first six months of fiscal 2013 was 21.0
million, compared to 19.4 million weighted average diluted common shares
outstanding in the same period last year.
Balance Sheet
The Company ended the second quarter of fiscal 2013 with cash and cash
equivalents of $126.5 million. The Company’s inventory level was $938.3
million as of July 31, 2012, compared to $748.0 million at the end of
fiscal 2012. This inventory level primarily reflected an increase in new
equipment, which increased to $626.4 million at July 31, 2012 from
$445.5 million at January 31, 2012, while used equipment decreased
slightly to $211.9 million at July 31, 2012 from $219.8 million at
January 31, 2012. Given the increased new equipment supply in the
Agriculture industry, the Company has adjusted its strategy for new
equipment inventory and expects this strategy will result in a decrease
of new equipment inventory, excluding acquisitions, during the back half
of fiscal 2013 after peaking in the third quarter of fiscal 2013. The
Company will continue to manage used equipment levels and valuations
regularly but due to seasonally higher new equipment demand in the back
half of the year the used equipment inventory level is anticipated to
increase by the end of fiscal 2013. The Company had available $162.0
million of its $800.0 million total discretionary floorplan lines of
credit as of July 31, 2012.
Acquisitions & New Store Openings
In fiscal 2013 to date, the Company completed five acquisitions,
consisting of three agriculture equipment dealership locations in the
United States, three construction equipment dealership locations in the
United States, one independent rental yard location in the United
States, and seven agriculture equipment dealership locations in Europe.
The Company also opened a new construction dealership in Windsor,
Colorado and three new agriculture dealership locations in Romania. In
addition, the Company recently contracted with CNH to distribute Case
Construction equipment in Romania and Bulgaria.
Management Comments
David Meyer, Titan Machinery’s Chairman and Chief Executive Officer,
stated, "In the second quarter, we continued to make progress with our
business, as we generated organic and acquired growth for both our
Agriculture and Construction segments. Even though our agriculture
customers experienced strengthening commodity prices midway through our
second quarter, severe drought conditions in the Midwest negatively
impacted customer sentiment and associated equipment margins.
Construction equipment margins were also pressured by competitive
conditions particularly in some of the larger metro areas of recent
acquisitions. These factors generated a competitive retail equipment
market where we were able to maintain sales activity but experienced a
compression in our overall equipment margins and in particular our used
equipment margins. As a result, we are reiterating our annual revenue
guidance but lowering annual net income and earnings per share outlook."
Mr. Meyer continued, "As we enter the second half of fiscal 2013, we are
confident in our revenue forecasts due to strong agriculture balance
sheets, crop insurance and record high commodity prices. Based on the
increased inventory availability due to the widespread drought, we have
adjusted our inventory management strategy. With the combination of
expected strong revenue and conservative stocking, we expect our new
inventory levels to decrease by the end of our fiscal 2013 year after
peaking in the current third quarter. We continue to execute our growth
strategy with strategic acquisitions and store openings across all of
our Agriculture, Construction, Rental, and International growth
platforms and are excited that our acquisition growth opportunities as
well as our strong organic growth have us well-positioned for the
future."
Updating Fiscal 2013 Outlook
The Company evaluates its financial performance based on its customers’
annual production cycles as opposed to a quarterly basis, due to weather
fluctuations and the seasonal nature of each customer’s business. The
Company is reiterating its previous revenue guidance and continues to
expect revenue for the full year ending January 31, 2013 in a range of
$1.95 billion to $2.1 billion. The Company is lowering its net income
attributable to common stockholders and earnings per diluted share
guidance. Net income attributable to common stockholders is now expected
to be in the range of $44.3 million to $48.5 million, compared to the
previous range of $53.8 million to $58.0 million. Earnings per diluted
share is now expected to be in the range of $2.10 to $2.30 based on
estimated weighted average diluted common shares outstanding of 21.1
million, compared to the previous range of $2.55 to $2.75 based on
estimated weighted average diluted common shares outstanding of 21.1
million. For comparative purposes, the Company generated revenue of
$1.66 billion in fiscal year 2012 and net income attributable to common
stockholders for fiscal 2012 was $43.8 million, or $2.18 per diluted
share, based on weighted average diluted common shares outstanding of
20.1 million.
Conference Call and Presentation Information
The Company will host a conference call and audio webcast today at 7:30
a.m. Central time (8:30 a.m. Eastern time). A copy of the presentation
that will accompany the prepared remarks from the conference call is
available on the Company’s website under Investor Relations at www.titanmachinery.com.
An archive of the audio webcast will be available on the Company’s
website under Investor Relations at www.titanmachinery.com
30 days following the audio webcast.
Investors interested in participating in the live call can dial (888)
417-8519 from the U.S. International callers can dial (719) 325-2214. A
telephone replay will be available approximately two hours after the
call concludes and will be available through Monday, September 24, 2012,
by dialing (877) 870-5176 from the U.S., or (858) 384-5517 from
international locations, and entering confirmation code 4737015.
About Titan Machinery Inc.
Titan Machinery Inc., founded in 1980 and headquartered in West Fargo,
North Dakota, is a multi-unit business with mature locations and
newly-acquired locations. The Company owns and operates a network of
full service agricultural and construction equipment stores in the
United States and Europe. The Titan Machinery network consists of 99
North American dealerships in North Dakota, South Dakota, Iowa,
Minnesota, Montana, Nebraska, Wyoming, Wisconsin, and Colorado,
including two outlet stores, as well as 12 European dealerships in
Romania and Bulgaria. The Titan Machinery dealerships represent one or
more of the CNH Brands (CNH), a majority-owned subsidiary of Fiat
Industrial (Milan: FI.MI), including Case IH, New Holland Agriculture,
Case Construction, New Holland Construction, Kobelco and CNH Capital.
Additional information about Titan Machinery Inc. can be found at www.titanmachinery.com.
Forward Looking Statements
Except for historical information contained herein, the statements in
this release 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 new and used equipment inventory levels, additional growth and
domestic and international acquisition opportunities and the Company’s
ability to capitalize on such opportunities, growth and profitability
expectations, and the expected results of operations for the fiscal year
ending January 31, 2013 and the components of such expected results of
operations, 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
initiatives within the Company’s Construction segment, 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, 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. 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.
TITAN MACHINERY INC.
Consolidated Balance Sheets
(in thousands, except per share data)
July 31, January 31,
2012 2012
------------------ ------------------
ASSETS (Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 126,509 $ 79,842
Receivables, net 66,203 82,518
Inventories 938,267 748,047
Prepaid expenses and other 2,972 2,108
Income taxes receivable - 3,140
Deferred income taxes 5,147 5,370
--------- ---------
Total current assets 1,139,098 921,025
--------- ---------
INTANGIBLES AND OTHER ASSETS
Noncurrent parts inventories 3,469 2,792
Goodwill 29,529 24,404
Intangible assets, net of accumulated amortization 12,631 10,793
Other 7,545 2,776
--------- ---------
Total intangibles and other assets 53,174 40,765
--------- ---------
PROPERTY AND EQUIPMENT, net of accumulated depreciation 182,534 126,282
--------- ---------
TOTAL ASSETS $ 1,374,806 $ 1,088,072
=== ========= === =========
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable $ 31,024 $ 28,424
Floorplan notes payable 707,459 552,428
Current maturities of long-term debt 4,600 4,755
Customer deposits 12,163 49,540
Accrued expenses 23,263 26,735
Income taxes payable 1,381 -
--------- ---------
Total current liabilities 779,890 661,882
--------- ---------
LONG-TERM LIABILITIES
Senior convertible notes 124,132 -
Long-term debt, less current maturities 61,102 57,405
Deferred income taxes 38,721 28,592
Other long-term liabilities 2,150 2,854
--------- ---------
Total long-term liabilities 226,105 88,851
--------- ---------
STOCKHOLDERS’ EQUITY
- -
Common stock, par value $.00001 per share; authorized - 45,000
shares,
issued and outstanding - 21,031 at July 31, 2012 and authorized
-
25,000 shares, issued and outstanding - 20,911 at January 31, 2012
Additional paid-in-capital 235,336 218,156
Retained earnings 131,057 118,251
Accumulated other comprehensive loss (894 ) (70 )
--------- --- --------- ---
Total Titan Machinery Inc. stockholders’ equity 365,499 336,337
Noncontrolling interest 3,312 1,002
--------- ---------
Total stockholders’ equity 368,811 337,339
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,374,806 $ 1,088,072
=== ========= === =========
TITAN MACHINERY INC.
Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended July 31, Six Months Ended July 31,
----------------------------------- -----------------------------------
2012 2011 2012 2011
---------------- ---------------- ---------------- ----------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
REVENUE
Equipment $ 306,170 $ 225,283 $ 628,698 $ 474,512
Parts 57,895 49,292 116,739 91,202
Service 30,466 25,395 60,218 46,359
Rental and other 15,540 10,879 26,139 16,941
------- ------- ------- -------
TOTAL REVENUE 410,071 310,849 831,794 629,014
------- ------- ------- -------
COST OF REVENUE
Equipment 279,284 204,430 571,369 427,731
Parts 40,357 34,426 81,010 64,146
Service 10,474 8,963 20,837 16,871
Rental and other 9,592 7,179 17,805 11,612
------- ------- ------- -------
TOTAL COST OF REVENUE 339,707 254,998 691,021 520,360
------- ------- ------- -------
GROSS PROFIT 70,364 55,851 140,773 108,654
OPERATING EXPENSES 56,507 44,060 111,363 83,496
------- ------- ------- -------
INCOME FROM OPERATIONS 13,857 11,791 29,410 25,158
OTHER INCOME (EXPENSE)
Interest and other income 119 267 607 552
Floorplan interest expense (2,420 ) (1,334 ) (5,318 ) (2,496 )
Interest expense other (2,774 ) (341 ) (3,567 ) (616 )
------- --- ------- --- ------- --- ------- ---
INCOME BEFORE INCOME TAXES 8,782 10,383 21,132 22,598
PROVISION FOR INCOME TAXES (3,477 ) (4,092 ) (8,368 ) (9,039 )
------- --- ------- --- ------- --- ------- ---
NET INCOME INCLUDING
NONCONTROLLING INTEREST 5,305 6,291 12,764 13,559
LESS: NET INCOME (LOSS) ATTRIBUTABLE
TO NONCONTROLLING INTEREST 96 - (42 ) -
NET INCOME ATTRIBUTABLE TO
TITAN MACHINERY INC. $ 5,209 $ 6,291 $ 12,806 $ 13,559
=== ======= === ======= === ======= === =======
NET INCOME ALLOCATED TO
PARTICIPATING SECURITIES (54 ) (56 ) (125 ) (124 )
NET INCOME ATTRIBUTABLE TO
COMMON STOCKHOLDERS $ 5,155 $ 6,235 $ 12,681 $ 13,435
=== ======= === ======= === ======= === =======
EARNINGS PER SHARE - DILUTED $ 0.25 $ 0.30 $ 0.60 $ 0.69
=== ======= === ======= === ======= === =======
WEIGHTED AVERAGE COMMON SHARES - DILUTED 21,000 20,617 20,981 19,392
======= ======= ======= =======
TITAN MACHINERY INC.
Segment Results
(in thousands)
Three Months Ended July 31, Six Months Ended July 31,
-------------------------------------------------- --------------------------------------------------
2012 2011 % Change 2012 2011 % Change
---------------- ---------------- ------------ ---------------- ---------------- ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue
Agriculture $ 336,495 $ 266,353 26.3 % $ 696,630 $ 553,331 25.9 %
Construction 95,268 59,821 59.3 % 176,876 103,960 70.1 %
------- ------- ------- -------
Segment revenue 431,763 326,174 32.4 % 873,506 657,291 32.9 %
Eliminations (21,692 ) (15,325 ) (41.5 %) (41,712 ) (28,277 ) (47.5 %)
------- --- ------- --- ------- --- ------- ---
Total $ 410,071 $ 310,849 31.9 % $ 831,794 $ 629,014 32.2 %
=== ======= === ======= === ======= === =======
Income (Loss) Before Income Taxes
Agriculture $ 10,573 $ 10,937 (3.3 %) $ 24,911 $ 23,896 4.2 %
Construction 628 576 9.0 % 248 1,228 (79.8 %)
------- ------- ------- -------
Segment income (loss) before income taxes 11,201 11,513 (2.7 %) 25,159 25,124 0.1 %
Shared Resources (1,751 ) (887 ) (97.4 %) (2,503 ) (2,014 ) (24.3 %)
Eliminations (668 ) (243 ) (174.9 %) (1,524 ) (512 ) (197.7 %)
------- --- ------- --- ------- --- ------- ---
Total $ 8,782 $ 10,383 (15.4 %) $ 21,132 $ 22,598 (6.5 %)
=== ======= === ======= === ======= === =======
Note: The Company reports its revenue and income (loss) before
income taxes at the segment level before inter-company eliminations.
SOURCE: Titan Machinery Inc.
Investor Relations Contact:
ICR, Inc.
John Mills, 310-954-1105
Senior Managing Director
jmills@icrinc.com
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