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

  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-

Business Wire

WEST FARGO, N.D. -- 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.

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.”

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 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,
                                                 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              14,019          14,089
amortization
Other                                             7,894         8,534     
                                                                 
Total intangibles and other assets                57,737        57,033    
                                                                 
PROPERTY AND EQUIPMENT, net of accumulated        235,125       194,641   
depreciation
                                                                 
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'          400,840       396,510   
equity
Noncontrolling interest                           2,817         3,409     
Total stockholders' equity                        403,657       399,919   
                                                                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $ 1,636,811    $ 1,444,074 
                                                 


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            404,638      339,707     772,364     691,021 
REVENUE
                                                                   
GROSS PROFIT              83,542         70,364        157,490       140,773
                                                                   
OPERATING EXPENSES       70,145       56,507      139,078     111,363 
                                                                   
INCOME FROM               13,397         13,857        18,412        29,410
OPERATIONS
                                                                   
OTHER INCOME
(EXPENSE)
Interest and other        337            119           934           607
income
Floorplan interest        (3,723   )     (2,420  )     (7,165  )     (5,318  )
expense
Other interest           (3,455   )    (2,774  )    (6,622  )    (3,567  )
expense
                                                                   
INCOME BEFORE INCOME      6,556          8,782         5,559         21,132
TAXES
                                                                   
PROVISION FOR INCOME     (2,589   )    (3,477  )    (2,195  )    (8,368  )
TAXES
                                                                   
NET INCOME INCLUDING
NONCONTROLLING            3,967          5,305         3,364         12,764
INTEREST
                                                                   
LESS: NET INCOME
(LOSS) ATTRIBUTABLE       134            96            (55     )     (42     )
TO NONCONTROLLING
INTEREST
                                                                   
NET INCOME
ATTRIBUTABLE TO        $  3,833       $ 5,209      $ 3,419      $ 12,806  
TITAN MACHINERY INC.
                                                                   
LESS: NET INCOME
ALLOCATED TO              (56      )     (54     )     (45     )     (125    )
PARTICIPATING
SECURITIES
NET INCOME
ATTRIBUTABLE TO        $  3,777       $ 5,155      $ 3,374      $ 12,681  
COMMON STOCKHOLDERS
                                                                   
                                                                   
EARNINGS PER SHARE -   $  0.18        $ 0.25       $ 0.16       $ 0.60    
DILUTED
WEIGHTED AVERAGE
COMMON SHARES -          21,029       21,000      21,027      20,981  
DILUTED



TITAN MACHINERY INC.
Segment Results
(in thousands)

               Three Months Ended July 31,            Six Months Ended July 31,
                2013         2012         % Change    2013         2012         % Change
Revenue         (Unaudited)   (Unaudited)               (Unaudited)   (Unaudited)
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           505,360       428,968     17.8   %      976,275       870,086     12.2    %
revenue
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)     8,185         11,028      (25.8  %)     9,120         24,967      (63.5   %)
before income
taxes
Shared            (1,113  )     (1,751  )   36.4   %      (2,351  )     (2,503  )   6.1     %
Resources
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.


Contact:

Investor Relations Contact:
ICR, Inc.
John Mills, 310-954-1105
Senior Managing Director
jmills@icrinc.com
 
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