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First Quarter Results - Fiscal 2014

-First Quarter Revenue Increased 4.7% to $442 Million-

-First Quarter Results Impacted by Abnormally Delayed Spring Weather-

WEST FARGO, N.D.--(BUSINESS WIRE)--Jun. 6, 2013-- Titan Machinery Inc. (Nasdaq: TITN), a leading network of full-service agricultural and construction equipment stores, today reported financial results for the fiscal first quarter ended April 30, 2013.

Fiscal 2014 First Quarter Results

For the first quarter of fiscal 2014, revenue increased 4.7% to $441.7 million from revenue of $421.7 million in the first 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 $334.7 million for the first quarter of fiscal 2014, compared to $322.5 million in the first quarter last year. Parts sales were $62.8 million for the first quarter of fiscal 2014, compared to $58.8 million in the first quarter last year. Revenue generated from service was $32.0 million for the first quarter of fiscal 2014, compared to $29.8 million in the first quarter last year. Revenue from rental and other increased to $12.1 million from $10.6 million in the first quarter last year. First quarter of fiscal 2014 revenue was approximately $50 million less than the Company previously anticipated due to abnormally delayed spring weather combined with cautionary agriculture customer sentiment and the continued challenging industry conditions in the Construction segment.

Gross profit for the first quarter of fiscal 2014 was $73.9 million, compared to $70.4 million in the first quarter last year. The Company’s gross profit margin was 16.7% in the first quarter of fiscal 2014, flat compared to the first quarter last year.

Operating expenses were 15.6% of revenue or $68.9 million for the first quarter of fiscal 2014, compared to 13.0% of revenue or $54.9 million for the first quarter of last year. The increase in operating expenses as a percentage of revenue reflects the impact of lower first quarter revenue and the higher operating expenses as a percent of revenue in the expanded Construction footprint. The Company expects operating expenses as a percentage of sales to improve in coming quarters as it expects sales growth to improve.

Floorplan interest expense increased to $3.4 million for the first quarter of 2014 compared to $2.9 million for the same period last year due to increased levels of interest-bearing equipment inventory. Other interest expense increased to $3.2 million for the first quarter of fiscal 2014 compared to $0.8 million for the same period last year due to the Company’s April 2012 convertible debt offering.

Pre-tax loss for the first quarter of fiscal 2014 was $1.0 million, compared to pre-tax income of $12.4 million in the first quarter last year. Pre-tax Agriculture segment income was $8.0 million for the first quarter of fiscal 2014, compared to pre-tax income of $14.7 million in the first quarter last year. Pre-tax Construction segment loss was $6.5 million for the first quarter of fiscal 2014, compared to pre-tax loss of $0.4 million in the first quarter last year. The Agriculture and Construction segments were both affected by an abnormally late spring which lasted through the end of the first fiscal quarter of 2014. Beginning with the first quarter of fiscal 2014, the Company is segmenting its International results. In the first quarter of fiscal 2014, pre-tax International segment loss was $0.5 million, which was in-line with this seasonally soft quarter, compared to a pre-tax loss of $0.4 million in the first quarter last year.

Net loss attributable to common stockholders for the first quarter of fiscal 2014 was $0.4 million, compared to net income attributable to common stockholders of $7.5 million in the first quarter last year. Loss per diluted share for the first quarter of fiscal 2014 was $0.02 compared to earnings per diluted share of $0.36 in the first quarter last year.

Balance Sheet

The Company ended the first quarter of fiscal 2014 with cash of $114.3 million. The Company’s inventory level was $1.0 billion as of April 30, 2013, compared to $929.2 million at January 31, 2013. This inventory level primarily reflected an increase in new equipment, which increased to $608.3 million at April 30, 2013, from $542.2 million at January 31, 2013, while used equipment decreased to $273.4 million at April 30, 2013 from $275.6 million at January 31, 2013. The increase in new inventory is due to lower than anticipated equipment sales in the first quarter of fiscal 2014 and planned seasonal inventory stocking. The Company had available $204.7 million of its $975 million total discretionary floorplan lines of credit as of April 30, 2013.

Acquisitions & New Store Openings

In the first quarter of fiscal 2014, the Company completed two acquisitions, consisting of two construction equipment dealership locations in the United States, including the Company’s first location in New Mexico. The Company also opened its initial Ukrainian dealer facilities in Kiev in April 2013.

Management Comments

David Meyer, Titan Machinery’s Chairman and Chief Executive Officer, stated, “As we previously reported, our first quarter results were impacted by abnormally delayed spring weather. For our Agriculture segment, weather conditions in the second quarter have begun to normalize and the planting progress has significantly improved. We expect the Agriculture revenue that was delayed in the first quarter reflected primarily a timing issue and will be realized in the coming quarters. As a result, we continue to anticipate top line sales growth and are reiterating our annual 2014 sales guidance that we issued on our fiscal 2013 year-end release.”

Mr. Meyer continued, “Our Construction business was also impacted by the late spring weather, as well as the challenging conditions in this industry and the cost of expanding our distribution network. As we discussed on our last conference call, we are focused on a number of key initiatives to drive top and bottom line improvements in our Construction segment and expect to see improvements in the second quarter and the remainder of the year. We believe that our Construction segment is an integral part of our long-term growth strategy and remain confident it will be a structural component of our top and bottom line growth.”

Fiscal 2014 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 recently updated annual guidance. For the full year ending January 31, 2014, the Company anticipates revenue in the range of $2.35 billion to $2.55 billion, net income attributable to common stockholders in the range of $36.4 million to $42.8 million, and earnings per diluted share in the range of $1.70 to $2.00 based on estimated weighted average diluted common shares outstanding of 21.4 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 for 30 days following the audio webcast.

Investors interested in participating in the live call can dial (888) 359-3624 from the U.S. International callers can dial (719) 325-2455. A telephone replay will be available approximately two hours after the call concludes and will be available through Thursday, June 20, 2013, by dialing dial (877) 870-5176 from the U.S., or dial (858) 384-5517 from international locations, and entering confirmation code 9805771.

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 106 North American dealerships in North Dakota, South Dakota, Iowa, Minnesota, Montana, Nebraska, Wyoming, Wisconsin, Colorado, Arizona, and New Mexico, including two outlet stores, and 14 European dealerships in Romania, Bulgaria, Serbia, and Ukraine. The Titan Machinery dealerships represent one or more of the CNH Brands (NYSE: CNH), a majority-owned subsidiary of Fiat Industrial (Milan: FI.MI), including CaseIH, New Holland Agriculture, Case Construction, New Holland Construction 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 Construction segment initiatives, Agriculture segment revenue realization, growth and profitability expectations, and the expected results of operations for upcoming quarters and the fiscal year ending January 31, 2014 including 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)

   
   



April 30,

January 31,



  2013  

  2013  
ASSETS

(Unaudited)








 
CURRENT ASSETS





Cash

$ 114,252


$ 124,360
Receivables, net


86,019



121,786
Inventories


1,001,227



929,216
Prepaid expenses and other


9,786



8,178
Income taxes receivable


7,384



503
Deferred income taxes

  8,170  

  8,357  






 
Total current assets

  1,226,838  

  1,192,400  






 
INTANGIBLES AND OTHER ASSETS





Noncurrent parts inventories


3,900



3,507
Goodwill


30,944



30,903
Intangible assets, net of accumulated amortization


14,200



14,089
Other

  8,545  

  8,534  






 
Total intangibles and other assets

  57,589  

  57,033  






 
PROPERTY AND EQUIPMENT, net of accumulated depreciation

  230,049  

  194,641  






 
TOTAL ASSETS

$ 1,514,476  

$ 1,444,074  






 
LIABILITIES AND STOCKHOLDERS' EQUITY











 
CURRENT LIABILITIES





Accounts payable

$ 33,867


$ 28,282
Floorplan notes payable


761,978



689,410
Current maturities of long-term debt


10,151



10,568
Customer deposits


31,260



46,775
Accrued expenses


35,869



29,590
Income taxes payable

  -  

  310  






 
Total current liabilities

  873,125  

  804,935  






 
LONG-TERM LIABILITIES





Senior convertible notes


126,446



125,666
Long-term debt, less current maturities


58,480



56,592
Deferred income taxes


47,723



47,411
Other long-term liabilities

  8,970  

  9,551  






 

Total long-term liabilities



  241,619  

  239,220  






 
STOCKHOLDERS' EQUITY





 







 







Common stock, par value $.00001 per share, 45,000 shares authorized; 21,103 shares issued and outstanding at April 30, 2013; 21,092 shares issued and outstanding at January 31, 2013




-



-
Additional paid-in-capital


237,263



236,521
Retained earnings


160,310



160,724
Accumulated other comprehensive loss

  (926 )

  (735 )
Total Titan Machinery Inc. stockholders' equity

  396,647  

  396,510  
Noncontrolling interest

  3,085  

  3,409  
Total stockholders' equity

  399,732  

  399,919  






 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$ 1,514,476  

$ 1,444,074  

   
   

TITAN MACHINERY INC.

Consolidated Statements of Operations

(in thousands, except per share data)




 



Three Months Ended April 30,




  2013  

  2012  



(Unaudited)

(Unaudited)
REVENUE





Equipment

$ 334,745


$ 322,528
Parts


62,837



58,844
Service


31,998



29,752
Rental and other

  12,094  

  10,599  
TOTAL REVENUE

  441,674  

  421,723  






 
COST OF REVENUE





Equipment


303,823



292,085
Parts


44,711



40,653
Service


11,363



10,363
Rental and other

  7,829  

  8,213  
TOTAL COST OF REVENUE

  367,726  

  351,314  






 
GROSS PROFIT


73,948



70,409






 
OPERATING EXPENSES

  68,933  

  54,856  






 
INCOME FROM OPERATIONS


5,015



15,553






 
OTHER INCOME (EXPENSE)





Interest and other income


597



488
Floorplan interest expense


(3,442 )


(2,898 )
Other interest expense

  (3,167 )

  (793 )






 
INCOME (LOSS) BEFORE INCOME TAXES


(997 )


12,350






 
BENEFIT FROM (PROVISION FOR) INCOME TAXES

  394  

  (4,891 )






 
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST


(603 )


7,459






 
LESS: NET INCOME (LOSS) ATTRIBUTABLE TO





NONCONTROLLING INTEREST

  (189 )

  (138 )






 
NET INCOME (LOSS) ATTRIBUTABLE TO TITAN MACHINERY INC.

$ (414 )

$ 7,597  






 
NET (INCOME) LOSS ALLOCATED TO PARTICIPATING SECURITIES


5



(70 )
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS

$ (409 )

$ 7,527  






 






 
EARNINGS (LOSS) PER SHARE - DILUTED

$ (0.02 )

$ 0.36  
WEIGHTED AVERAGE COMMON SHARES - DILUTED

  20,854  

  20,962  
 
TITAN MACHINERY INC.
Fourth Quarter & Full Year Segment Results
(in thousands)

   
   
   



Three Months Ended April 30,



  2013  

  2012  

% Change  
Revenues

(Unaudited)

(Unaudited)


Agriculture

$ 360,344


$ 353,580


1.9 %
Construction


82,841



81,608


1.5 %
International

  27,730  

  5,930  

367.6 %
Segment revenues


470,915



441,118


6.8 %
Eliminations

  (29,241 )

  (19,395 )

(50.8 %)
Total

$ 441,674  

$ 421,723  

4.7 %









 
Income (Loss) Before Income Taxes








Agriculture

$ 7,999


$ 14,722


(45.7 %)
Construction


(6,538 )


(380 )

(1620.5 %)
International

  (526 )

  (403 )

(30.5 %)
Segment income (loss) before income taxes


935



13,939


(93.3 %)
Shared Resources


(1,238 )


(752 )

(64.6 %)
Eliminations

  (694 )

  (837 )

17.1 %
Total

$ (997 )

$ 12,350  

(108.1 %)









 

Note: The Company reports its revenues 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
Senior Managing Director
310-954-1105
jmills@icrinc.com

Case IHNew Holland AgricultureCase ConstructionNew Holland Construction

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