EX-99.1 2 a13-20159_1ex99d1.htm EX-99.1

Exhibit 99.1

 

Titan Machinery Inc. Announces Fiscal Second Quarter Ended July 31, 2013 Results

 

-Second Quarter Revenue Increased 19.0% to $488 Million-

 

-Company Updates Annual Fiscal 2014 Guidance-

 

West Fargo, ND — September 5, 2013 — Titan Machinery Inc. (Nasdaq: 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, 2013.

 

Fiscal 2014 Second Quarter Results

 

For the second quarter of fiscal 2014, revenue increased 19.0% to $488.2 million from revenue of $410.1 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 $358.4 million for the second quarter of fiscal 2014, compared to $306.2 million in the second quarter last year.  Parts sales were $70.6 million for the second quarter of fiscal 2014, compared to $57.9 million in the second quarter last year.  Revenue generated from service was $39.9 million for the second quarter of fiscal 2014, compared to $30.5 million in the second quarter last year.  Revenue from rental and other increased to $19.3 million for the second quarter of fiscal 2014 from $15.5 million in the second quarter last year.

 

Gross profit for the second quarter of fiscal 2014 was $83.5 million, compared to $70.4 million in the second quarter last year. The Company’s gross profit margin was 17.1% in the second quarter of fiscal 2014, compared to 17.2% in the second quarter last year.  Gross profit from parts, service, and rental and other for the second quarter of fiscal 2014 was 65% of overall gross profit and increased to $54.2 million from $43.5 million in the second quarter last year.  Solid performance from our parts, service, rental and other was offset by softer equipment margins.

 

Operating expenses were 14.4% of revenue or $70.1 million for the second quarter of fiscal 2014, compared to 13.8% of revenue or $56.5 million for the second quarter of last year.  The increase in operating expenses as a percentage of revenue reflects the higher operating expenses as a percent of revenue in the expanded Construction and International footprints.

 

Floorplan interest expense increased to $3.7 million for the second quarter of 2014 compared to $2.4 million for the same period last year due to increased levels of interest-bearing equipment inventory.

 

Pre-tax income for the second quarter of fiscal 2014 was $6.6 million, for a pre-tax margin of 1.3%, compared to $8.8 million, for a pre-tax margin of 2.1%, in the second quarter last year.  Pre-tax Agriculture segment income was $9.8 million for the second quarter of fiscal 2014, compared to pre-tax income of $10.0 million in the second quarter last year.  Pre-tax Construction segment loss was $1.7 million for the second quarter of fiscal 2014, compared to pre-tax income of $0.6 million in the second quarter last year.  In the second quarter of fiscal 2014, pre-tax International segment income was $0.1 million, compared to pre-tax income of $0.4 million in the second quarter last year.

 

Net income attributable to common stockholders for the second quarter of fiscal 2014 was $3.8 million, compared to net income attributable to common stockholders of $5.2 million in the second quarter last year.  Earnings per diluted share for the second quarter of fiscal 2014 was $0.18, compared to $0.25 in the second quarter last year.

 

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Fiscal 2014 First Six Months Results

 

For the six months ended July 31, 2013, revenue increased 11.8% to $929.9 million from $831.8 million for the same period last year. Gross profit margin for the first six months of fiscal 2014 was 16.9%, flat compared to the same period last year. Pre-tax income for the first six months of fiscal 2014 was $5.6 million for a pre-tax margin of 0.6%, compared to $21.1 million, or a pre-tax margin of 2.5%, for the same period last year. Net income attributable to common stockholders for the first six months of fiscal 2014 was $3.4 million, or $0.16 per diluted share, compared to $12.7 million, or $0.60 per diluted share, for the same period last year.

 

Balance Sheet

 

The Company ended the second quarter of fiscal 2014 with cash of $102.4 million.  The Company’s inventory level was $1.1 billion as of July 31, 2013, compared to $929.2 million at January 31, 2013. This inventory level primarily reflected an increase in new equipment, which increased to $705.4 million at July 31, 2013, from $542.2 million at January 31, 2013, while used equipment decreased to $270.5 million at July 31, 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, planned seasonal inventory stocking, and the building of inventory to support the Company’s expanded International footprint.  The Company had available $130.4 million of its $975 million total discretionary floorplan lines of credit as of July 31, 2013.

 

Management Comments

 

David Meyer, Titan Machinery’s Chairman and Chief Executive Officer, stated, “In the second quarter of fiscal 2014, we generated solid sales for our Agriculture segment. Our higher margin parts and service sales performed well during the quarter; however, they were partially offset by lower than expected equipment margins.  As we look toward the back half of the year for our Agriculture business, we anticipate a challenging environment given lower commodity prices combined with anticipated reduced crop production in our Agriculture footprint.  We believe these factors will affect our customers’ sentiment, resulting in lower equipment revenues and pricing pressure on equipment margins.”

 

Mr. Meyer continued, “Regarding our Construction segment, we continue to focus on implementing and executing on key initiatives to drive top and bottom line improvements for this segment of our business. Overall industry conditions remain challenging, but we are confident that we are on the right track to improve this segment of our business and continue to believe that it will be a key structural component of our top and bottom line growth long-term.”

 

Mr. Meyer concluded, “Given the challenges we are facing in both agriculture and construction industries, we are reducing our revenue, net income, and earnings per share expectations for fiscal 2014. This year we have slowed our acquisition pace and are focused on integrating our recent acquisitions into our distribution network and positioning our business to achieve better leverage going forward.  We remain confident in the long-term profitable growth potential for Titan Machinery due to our proven operating model and healthy balance sheet.”

 

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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 adjusting its annual guidance based on increased visibility of market conditions. For the full year ending January 31, 2014, the Company now expects revenue to be in the range of $2.25 billion to $2.45 billion compared to the previous range of $2.35 billion to $2.55 billion.   The Company expects net income attributable to common stockholders to be in the range of $25.4 million to $31.8 million, and earnings per diluted share to be in the range of $1.20 to $1.50 based on estimated weighted average diluted common shares outstanding of 21.2 million, primarily reflecting the lower expected equipment margins.  This compares to previous net income attributable to common stockholders guidance 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) 539-3678 from the U.S.  International callers can dial (719) 325-2484.  A telephone replay will be available approximately two hours after the call concludes and will be available through Thursday, September 19, 2013, by dialing (877) 870-5176 from the U.S., or (858) 384-5517 from international locations, and entering confirmation code 7561817.

 

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 105 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 and improvements, Agriculture segment revenue realization, growth and profitability expectations, acquisition expectations, leverage 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

 

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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.

 

Investor Relations Contact:

 

ICR, Inc.

John Mills, jmills@icrinc.com

Senior Managing Director

310-954-1105

 

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TITAN MACHINERY INC.

Consolidated Balance Sheets

(in thousands, except per share data)

 

 

 

July 31,

 

January 31,

 

 

 

2013

 

2013

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

Cash

 

$

102,407

 

$

124,360

 

Receivables, net

 

94,432

 

121,786

 

Inventories

 

1,105,819

 

929,216

 

Prepaid expenses and other

 

27,113

 

8,178

 

Income taxes receivable

 

5,767

 

503

 

Deferred income taxes

 

8,411

 

8,357

 

 

 

 

 

 

 

Total current assets

 

1,343,949

 

1,192,400

 

 

 

 

 

 

 

INTANGIBLES AND OTHER ASSETS

 

 

 

 

 

Noncurrent inventories

 

4,865

 

3,507

 

Goodwill

 

30,959

 

30,903

 

Intangible assets, net of accumulated amortization

 

14,019

 

14,089

 

Other

 

7,894

 

8,534

 

 

 

 

 

 

 

Total intangibles and other assets

 

57,737

 

57,033

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT, net of accumulated depreciation

 

235,125

 

194,641

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

1,636,811

 

$

1,444,074

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

Accounts payable

 

$

39,724

 

$

28,282

 

Floorplan notes payable

 

851,185

 

689,410

 

Current maturities of long-term debt

 

16,518

 

10,568

 

Customer deposits

 

26,721

 

46,775

 

Accrued expenses

 

34,854

 

29,590

 

Income taxes payable

 

32

 

310

 

 

 

 

 

 

 

Total current liabilities

 

969,034

 

804,935

 

 

 

 

 

 

 

LONG-TERM LIABILITIES

 

 

 

 

 

Senior convertible notes

 

127,252

 

125,666

 

Long-term debt, less current maturities

 

82,657

 

56,592

 

Deferred income taxes

 

47,603

 

47,411

 

Other long-term liabilities

 

6,608

 

9,551

 

 

 

 

 

 

 

Total long-term liabilities

 

264,120

 

239,220

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

Common stock, par value $.00001 per share, 45,000 shares authorized; 21,239 shares issued and outstanding at July 31, 2013; 21,092 shares issued and outstanding at January 31, 2013

 

 

 

Additional paid-in-capital

 

237,772

 

236,521

 

Retained earnings

 

164,143

 

160,724

 

Accumulated other comprehensive loss

 

(1,075

)

(735

)

Total Titan Machinery Inc. stockholders’ equity

 

400,840

 

396,510

 

Noncontrolling interest

 

2,817

 

3,409

 

Total stockholders’ equity

 

403,657

 

399,919

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

1,636,811

 

$

1,444,074

 

 

 

5



 

TITAN MACHINERY INC.

Consolidated Statements of Operations

(in thousands, except per share data)

 

 

 

Three Months Ended July 31,

 

Six Months Ended July 31,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

REVENUE

 

 

 

 

 

 

 

 

 

Equipment

 

$

358,388

 

$

306,170

 

$

693,133

 

$

628,698

 

Parts

 

70,633

 

57,895

 

133,470

 

116,739

 

Service

 

39,872

 

30,466

 

71,870

 

60,218

 

Rental and other

 

19,287

 

15,540

 

31,381

 

26,139

 

TOTAL REVENUE

 

488,180

 

410,071

 

929,854

 

831,794

 

 

 

 

 

 

 

 

 

 

 

COST OF REVENUE

 

 

 

 

 

 

 

 

 

Equipment

 

329,083

 

279,284

 

632,906

 

571,369

 

Parts

 

48,022

 

40,357

 

92,733

 

81,010

 

Service

 

14,383

 

10,474

 

25,746

 

20,837

 

Rental and other

 

13,150

 

9,592

 

20,979

 

17,805

 

TOTAL COST OF REVENUE

 

404,638

 

339,707

 

772,364

 

691,021

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

83,542

 

70,364

 

157,490

 

140,773

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

70,145

 

56,507

 

139,078

 

111,363

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

13,397

 

13,857

 

18,412

 

29,410

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

Interest and other income

 

337

 

119

 

934

 

607

 

Floorplan interest expense

 

(3,723

)

(2,420

)

(7,165

)

(5,318

)

Other interest expense

 

(3,455

)

(2,774

)

(6,622

)

(3,567

)

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

6,556

 

8,782

 

5,559

 

21,132

 

 

 

 

 

 

 

 

 

 

 

PROVISION FOR INCOME TAXES

 

(2,589

)

(3,477

)

(2,195

)

(8,368

)

 

 

 

 

 

 

 

 

 

 

NET INCOME INCLUDING NONCONTROLLING INTEREST

 

3,967

 

5,305

 

3,364

 

12,764

 

 

 

 

 

 

 

 

 

 

 

LESS: NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

134

 

96

 

(55

)

(42

)

 

 

 

 

 

 

 

 

 

 

NET INCOME ATTRIBUTABLE TO TITAN MACHINERY INC.

 

$

3,833

 

$

5,209

 

$

3,419

 

$

12,806

 

 

 

 

 

 

 

 

 

 

 

LESS: NET INCOME ALLOCATED TO PARTICIPATING SECURITIES

 

(56

)

(54

)

(45

)

(125

)

NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

 

$

3,777

 

$

5,155

 

$

3,374

 

$

12,681

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE - DILUTED

 

$

0.18

 

$

0.25

 

$

0.16

 

$

0.60

 

WEIGHTED AVERAGE COMMON SHARES - DILUTED

 

21,029

 

21,000

 

21,027

 

20,981

 

 

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TITAN MACHINERY INC.

Segment Results

(in thousands)

 

 

 

Three Months Ended July 31,

 

Six Months Ended July 31,

 

 

 

2013

 

2012

 

% Change

 

2013

 

2012

 

% Change

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Agriculture

 

$

367,544

 

$

314,091

 

17.0

%

$

727,888

 

$

667,671

 

9.0

%

Construction

 

97,946

 

95,268

 

2.8

%

180,787

 

176,876

 

2.2

%

International

 

39,870

 

19,609

 

103.3

%

67,600

 

25,539

 

164.7

%

Segment revenue

 

505,360

 

428,968

 

17.8

%

976,275

 

870,086

 

12.2

%

Eliminations

 

(17,180

)

(18,897

)

9.1

%

(46,421

)

(38,292

)

(21.2

)%

Total

 

$

488,180

 

$

410,071

 

19.0

%

$

929,854

 

$

831,794

 

11.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) Before Income Taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

Agriculture

 

$

9,775

 

$

9,990

 

(2.2

)%

$

17,774

 

$

24,712

 

(28.1

)%

Construction

 

(1,697

)

628

 

(370.2

)%

(8,235

)

248

 

(3420.6

)%

International

 

107

 

410

 

(73.9

)%

(419

)

7

 

(6085.7

)%

Segment income (loss) before income taxes

 

8,185

 

11,028

 

(25.8

)%

9,120

 

24,967

 

(63.5

)%

Shared Resources

 

(1,113

)

(1,751

)

36.4

%

(2,351

)

(2,503

)

6.1

%

Eliminations

 

(516

)

(495

)

(4.2

)%

(1,210

)

(1,332

)

9.2

%

Total

 

$

6,556

 

$

8,782

 

(25.3

)%

$

5,559

 

$

21,132

 

(73.7

)%

 

Note: The Company reports its revenues and income (loss) before income taxes at the segment level before inter-company eliminations.

 

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