Titan Machinery Inc. Announces Results for Fiscal Second Quarter Ended July 31, 2019

Loading...
Loading...

- Revenue for Second Quarter of Fiscal 2020 Increased 6.0% to $315 million -

- Company Updates Fiscal 2020 Modeling Assumptions -

WEST FARGO, N.D., Aug. 29, 2019 (GLOBE NEWSWIRE) -- Titan Machinery Inc. TITN, a leading network of full-service agricultural and construction equipment stores, today reported financial results for the fiscal second quarter ended July 31, 2019.

David Meyer, Titan Machinery's Chairman and Chief Executive Officer, stated, "In the fiscal second quarter, we achieved better than expected growth in our Agriculture segment and our Construction segment achieved its fourth consecutive quarter of increased quarter-over-quarter top and bottom line results. These positives were met with lower results from our International segment, which was impacted by unfavorable conditions and a tough comparison to the prior year. Given the better than expected performance of our Agriculture segment during the first six months, we are increasing our fiscal year 2020 Agriculture revenue expectations."

Fiscal 2020 Second Quarter Results

Consolidated Results
For the second quarter of fiscal 2020, revenue was $315.0 million, compared to $297.2 million in the second quarter last year. Equipment sales were $214.4 million for the second quarter of fiscal 2020, compared to $203.6 million in the second quarter last year. Parts sales were $59.2 million for the second quarter of fiscal 2020, compared to $55.5 million in the second quarter last year. Revenue generated from service was $26.8 million for the second quarter of fiscal 2020, compared to $23.2 million in the second quarter last year. Revenue from rental and other was $14.5 million for the second quarter of fiscal 2020, compared to $15.0 million in the second quarter last year.

Gross profit for the second quarter of fiscal 2020 was $64.0 million, compared to $58.9 million in the second quarter last year. The increase in gross profit was primarily driven by higher revenue. Gross profit margins increased 50 basis points to 20.3% versus the comparable period last year largely due to a shift in gross profit mix.

Operating expenses increased by $7.2 million to $54.9 million, or 17.4% of revenue, for the second quarter of fiscal 2020, compared to $47.6 million, or 16.0% of revenue, for the second quarter of last year. Current quarter expenses were impacted by higher International segment operating expenses resulting from our AGRAM acquisition, ERP transition costs incurred in the quarter, and increased costs associated with supporting increased activity levels in our Agriculture and Construction segments.  

Floorplan and other interest expense, which totaled $2.4 million in the second quarter of fiscal 2020, decreased a combined $1.9 million, or 43.9%, compared to the second quarter of last year. Most of the decrease was due to lower interest expense resulting from the May 1, 2019 retirement of the remaining balance of the Company's convertible notes.

Net income in the second quarter of fiscal 2020 was $5.5 million, or earnings per diluted share of $0.25, compared to net income of $5.2 million, or earnings per diluted share of $0.23, for the second quarter of last year.

On an adjusted basis, net income for the second quarter of fiscal 2020 was $6.9 million, or adjusted earnings per diluted share of $0.31, compared to adjusted net income of $6.3 million, or adjusted earnings per diluted share of $0.28, for the second quarter of last year.

Adjusted EBITDA was $15.8 million in the second quarter of fiscal 2020, compared to $16.8 million in the second quarter of last year.

Segment Results
Agriculture Segment - Revenue for the second quarter of fiscal 2020 was $165.7 million, compared to $151.9 million in the second quarter last year. The increase in revenue was driven primarily by increased equipment revenue and increases in parts and service revenues. Income before income taxes for the second quarter of fiscal 2020 was $6.2 million, compared to $5.0 million of income before income taxes and $5.2 million of adjusted income before income taxes, in the second quarter last year.

Construction Segment - Revenue for the second quarter of fiscal 2020 was $84.0 million, compared to $77.5 million in the second quarter last year. The increase in revenue was the result of increased equipment, parts and service revenues. Income before income taxes for the second quarter of fiscal 2020 was $1.3 million, compared to break even income before income taxes and $0.3 million of adjusted income before income taxes, in the second quarter last year.

International Segment - Revenue for the second quarter of fiscal 2020 was $65.3 million, compared to $67.8 million in the second quarter last year. The decrease in revenue was the result of lower equipment sales, partially offset by the revenue contribution from our AGRAM business following our acquisition in the third quarter of fiscal 2019. Income before income taxes for the second quarter of fiscal 2020 was $0.5 million, compared to $3.7 million of income before income taxes and $3.9 million of adjusted income before income taxes, in the second quarter last year.

Fiscal 2020 First Six Months Results

Revenue was $593.3 million for the first six months of fiscal 2020, compared to $540.9 million for the same period last year. Net income for the first six months of fiscal 2020 was $5.1 million, or $0.23 per diluted share, compared to a net income of $3.6 million, or $0.16 per diluted share, for the same period last year. On an adjusted basis, net income for the first six months of fiscal 2020 was $7.3 million, or $0.33 per diluted share, compared to an adjusted net income of $4.7 million, or $0.21 per diluted share, in the same period last year. Adjusted EBITDA was $23.2 million in the first six months of fiscal 2020, compared to $22.1 million in the same period last year.

Balance Sheet and Cash Flow

The Company ended the second quarter of fiscal 2020 with $49.5 million of cash. The Company's inventory level increased to $629.2 million as of July 31, 2019, compared to $491.1 million as of January 31, 2019. This inventory increase includes a $130.2 million increase in equipment inventory, which reflects an increase in new equipment inventory of $151.9 million, partially offset by a $21.8 million decrease in used equipment inventory. The Company had $451.9 million outstanding floorplan payables on $640.0 million total floorplan lines of credit as of July 31, 2019, compared to $273.8 million outstanding floorplan payables as of January 31, 2019. The increase in our floorplan payable balance is primarily due to increased equipment inventory levels and the payoff of the Company's convertible notes in the quarter ended July 31, 2019. 

In the first six months of fiscal 2020, the Company's net cash used for operating activities was $6.3 million, compared to $14.1 million in the first six months of fiscal 2019. The Company evaluates its cash flow from operating activities net of all floorplan payable activity and maintaining a constant level of equity in its equipment inventory. Taking these adjustments into account, adjusted net cash used for operating activities was $49.3 million in the first six months of fiscal 2020, compared to $36.5 million in the first six months of fiscal 2019.

Mr. Meyer concluded, "We continue to prudently manage our overall business through this prolonged challenging agriculture cycle with an emphasis on customer support. This focus is driving continued overall growth in our higher margin parts and service businesses, particularly in service where we grew nearly 16% in the second quarter. The improved performance of this higher margin business, along with the strength of our balance sheet, has us well positioned to capitalize on future strategic opportunities."

Loading...
Loading...

Updated Fiscal 2020 Modeling Assumptions

The following are the Company's current expectations for fiscal 2020 modeling assumptions:

 Current Assumptions Previous Assumptions
Segment Revenue   
AgricultureUp 2-7% Flat
ConstructionUp 5-10% Up 5-10%
International(1)Up 2-7% Up 10-15%
    
Diluted EPS$0.50 - $0.70 $0.50 - $0.70
Adjusted Diluted EPS(2)$0.75 - $0.95 $0.75 - $0.95
    
(1)Includes the full year impact of our AGRAM acquisition completed on July 2, 2018. 
(2)Excludes approximately $0.25 per diluted share impact of anticipated ERP-related expenses to be incurred with external consultants/vendors as well as the incremental impact of accelerated amortization of our existing ERP platform such that the assets are fully amortized when replaced, which is anticipated to occur in the first half of fiscal 2021.

Three and Six Months Ended July 31, 2018 Revenue and Cost of Revenue Amounts

The revenue and cost of revenue amounts reported for the three and six month periods ended July 31, 2018 are presented on an as corrected basis following the correction of an immaterial error as previously reported in our Annual Report on Form 10-K for the fiscal year ended January 31, 2019. See this Annual Report on Form 10-K and the to-be-filed quarterly report on Form 10-Q for the three and six months ended July 31, 2019 for additional information.

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).  Investors interested in participating in the live call can dial (877) 705-6003 from the U.S. International callers can dial (201) 493-6725.  A telephone replay will be available approximately two hours after the call concludes and will be available through Thursday, September 12, 2019, by dialing (844) 512-2921 from the U.S., or (412) 317-6671 from international locations, and entering confirmation code 13693558.

A copy of the presentation that will accompany the prepared remarks on 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.

Non-GAAP Financial Measures

Within this release, the Company refers to certain adjusted financial measures, which have directly comparable GAAP financial measures as identified in this release. The Company believes that these non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide more information to assist investors in evaluating current period performance and in assessing future performance. For these reasons, internal management reporting also includes non-GAAP measures. Generally, the non-GAAP measures include adjustments for items such as costs associated with our restructuring activities, impairment charges, and the charges associated with our ERP transition. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for the GAAP financial measures presented in this release and the Company's financial statements and other publicly filed reports. Non-GAAP measures presented in this release may not be comparable to similarly titled measures used by other companies. Investors are encouraged to review the reconciliations of adjusted financial measures used in this release to their most directly comparable GAAP financial measures. These reconciliations are attached to this release. The tables included in the Non-GAAP Reconciliations section reconcile net income (loss), diluted earnings (loss) per share, income (loss) before income taxes, and net cash provided by (used for) operating activities (all GAAP financial measures) for the periods presented to adjusted net income (loss), adjusted EBITDA, adjusted diluted earnings (loss) per share, adjusted income (loss) before income taxes, and adjusted net cash provided by (used for) operating activities (all non-GAAP financial measures) for the periods presented.

About Titan Machinery Inc.

Titan Machinery Inc., founded in 1980 and headquartered in West Fargo, North Dakota, owns and operates a network of full service agricultural and construction equipment dealer locations in North America and Europe. The network consists of US locations in Arizona, Colorado, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, South Dakota, Wisconsin and Wyoming and its European stores are located in Bulgaria, Germany, Romania, Serbia and Ukraine. The Titan Machinery locations represent one or more of the CNH Industrial Brands, including Case IH, New Holland Agriculture, Case Construction, New Holland Construction, and CNH Industrial 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. The words "potential," "believe," "estimate," "expect," "intend," "may," "could," "will," "plan," "anticipate," and similar words and expressions are intended to identify forward-looking statements. Such statements are based upon the current beliefs and expectations of our management. Forward-looking statements made in this release, which may include statements regarding Agriculture, Construction, and International segment initiatives and improvements, segment revenue realization, growth and profitability expectations, inventory expectations, leverage expectations, agricultural and construction equipment industry conditions and trends, and modeling assumptions and expected results of operations for the fiscal year ending January 31, 2020, involve known and unknown risks and uncertainties that may cause Titan Machinery's actual results in current or future periods to differ materially from the forecasted assumptions and expected 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 operating segments, the uncertainty and fluctuating conditions in the capital and credit markets, difficulties in conducting international operations, foreign currency risks, governmental agriculture policies, seasonal fluctuations, the ability of the Company to reduce inventory levels, 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, as updated in subsequently filed Quarterly Reports on Form 10-Q, as applicable. 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. Other than required by law, Titan Machinery disclaims any obligation to update such factors or to publicly announce results of revisions to any of the forward-looking statements contained in this release to reflect future events or developments.

Investor Relations Contact:
ICR, Inc.
John Mills, jmills@icrinc.com
Partner
646-277-1254


TITAN MACHINERY INC. 
Consolidated Balance Sheets 
(in thousands, except per share data) 
(Unaudited) 
     
 July 31, 2019 January 31, 2019 
Assets    
Current Assets    
Cash$49,517  $56,745  
Receivables, net of allowance for doubtful accounts86,486  77,500  
Inventories629,246  491,091  
Prepaid expenses and other8,270  15,556  
Total current assets773,519  640,892  
Noncurrent Assets    
Property and equipment, net of accumulated depreciation146,908  138,950  
Operating lease assets95,432    
Deferred income taxes3,173  3,010  
Goodwill1,649  1,161  
Intangible assets, net of accumulated amortization7,351  7,247  
Other1,164  1,178  
Total noncurrent assets255,677  151,546  
Total Assets$1,029,196  $792,438  
     
Liabilities and Stockholders' Equity    
Current Liabilities    
Accounts payable$18,928  $16,607  
Floorplan payable451,934  273,756  
Senior convertible notes  45,249  
Current maturities of long-term debt3,306  2,067  
Current operating lease liabilities12,184    
Deferred revenue30,540  46,409  
Accrued expenses and other36,964  36,364  
Total current liabilities553,856  420,452  
Long-Term Liabilities    
Long-term debt, less current maturities34,581  20,676  
Operating lease liabilities93,248    
Deferred income taxes4,492  4,955  
Other long-term liabilities7,060  11,044  
Total long-term liabilities139,381  36,675  
Stockholders' Equity    
Common stock    
Additional paid-in-capital249,228  248,423  
Retained earnings88,830  89,228  
Accumulated other comprehensive loss(2,099) (2,340) 
Total stockholders' equity335,959  335,311  
Total Liabilities and Stockholders' Equity$1,029,196  $792,438  


TITAN MACHINERY INC. 
Consolidated Condensed Statements of Operations 
(in thousands, except per share data) 
(Unaudited) 
         
 Three Months Ended July 31, Six Months Ended July 31, 
 2019  2018  2019  2018  
Revenue        
Equipment$214,435  $203,626  $408,390  $371,396  
Parts59,202  55,451  111,140  102,313  
Service26,832  23,169  49,662  43,205  
Rental and other14,512  14,985  24,079  24,032  
Total Revenue314,981  297,231  593,271  540,946  
Cost of Revenue        
Equipment190,707  181,181  363,861  330,404  
Parts41,732  39,349  78,546  72,588  
Service8,737  7,296  16,219  14,163  
Rental and other9,778  10,504  16,719  17,332  
Total Cost of Revenue250,954  238,330  475,345  434,487  
Gross Profit64,027  58,901  117,926  106,459  
Operating Expenses54,855  47,633  107,410  94,360  
Impairment of Long-Lived Assets  156  135  156  
Restructuring Costs  565    565  
Income from Operations9,172  10,547  10,381  11,378  
Other Income (Expense)        
Interest income and other income (expense)620  1,462  1,414  1,846  
Floorplan interest expense(1,399) (1,727) (2,276) (3,077) 
Other interest expense(966) (2,490) (2,607) (4,520) 
Income Before Income Taxes7,427  7,792  6,912  5,627  
Provision for Income Taxes1,916  2,612  1,846  2,061  
Net Income5,511  5,180  5,066  3,566  
         
Diluted Earnings per Share$0.25  $0.23  $0.23  $0.16  
Diluted Weighted Average Common Shares21,964  21,831  21,922  21,788  


TITAN MACHINERY INC. 
Consolidated Condensed Statements of Cash Flows 
(in thousands) 
(Unaudited) 
     
 Six Months Ended July 31, 
 2019  2018  
Operating Activities    
Net income$5,066  $3,566  
Adjustments to reconcile net income to net cash used for operating activities    
Depreciation and amortization13,264  11,447  
Impairment135  156  
Other, net7,643  5,022  
Changes in assets and liabilities    
Inventories(140,149) (73,915) 
Manufacturer floorplan payable128,635  69,225  
Other working capital(20,897) (29,588) 
Net Cash Used for Operating Activities(6,303) (14,087) 
Investing Activities    
Property and equipment purchases(12,350) (5,754) 
Proceeds from sale of property and equipment670  614  
Acquisition consideration, net of cash acquired(2,972)   
Other, net14  (169) 
Net Cash Used for Investing Activities(14,638) (5,309) 
Financing Activities    
Net change in non-manufacturer floorplan payable49,937  50,422  
Principal payments on senior convertible notes(45,644) (20,025) 
Net proceeds from (payments on) long-term debt and finance leases9,846  (14,062) 
Other, net(492) (618) 
Net Cash Provided by Financing Activities13,647  15,717  
Effect of Exchange Rate Changes on Cash66  (44) 
Net Change in Cash(7,228) (3,723) 
Cash at Beginning of Period56,745  53,396  
Cash at End of Period$49,517  $49,673  


TITAN MACHINERY INC. 
Segment Results 
(in thousands) 
(Unaudited) 
     
 Three Months Ended July 31, Six Months Ended July 31, 
 2019  2018  % Change 2019  2018  % Change 
Revenue            
Agriculture$165,692  $151,877  9.1 % $319,464  $293,831  8.7 % 
Construction84,039  77,521  8.4 % 154,782  138,566  11.7 % 
International65,250  67,833  (3.8)% 119,025  108,549  9.7 % 
Total$314,981  $297,231  6.0 % $593,271  $540,946  9.7 % 
             
Income Before Income Taxes            
Agriculture$6,177  $4,960  24.5 % $8,053  $6,283  28.2 % 
Construction1,334  (30) n/m (888) (2,927) 69.7 % 
International505  3,726  (86.4)% 722  3,639  (80.2)% 
Segment income (loss) before income taxes8,016  8,656  (7.4)% 7,887  6,995  12.8 % 
Shared Resources(589) (864) 31.8 % (975) (1,368) 28.7 % 
Total$7,427  $7,792  (4.7)% $6,912  $5,627  22.8 % 


TITAN MACHINERY INC. 
Non-GAAP Reconciliations 
(in thousands, except per share data) 
(Unaudited) 
          
  Three Months Ended July 31, Six Months Ended July 31, 
  2019 2018  2019  2018  
Adjusted Net Income         
Net Income $5,511 $5,180  $5,066  $3,566  
Adjustments         
ERP transition costs 1,701   2,716    
Loss on repurchase of senior convertible notes  615    615  
Restructuring and impairment charges  721  135  721  
Total Pre-Tax Adjustments 1,701 1,336  2,851  1,336  
Less: Tax Effect of Adjustments (1) 357 248  599  248  
Total Adjustments 1,344 1,088  2,252  1,088  
Adjusted Net Income $6,855 $6,268  $7,318  $4,654  
          
Adjusted Diluted EPS         
Diluted EPS $0.25 $0.23  $0.23  $0.16  
Adjustments (2)         
ERP transition costs 0.08   0.13    
Loss on repurchase of senior convertible notes  0.03    0.03  
Restructuring and impairment charges  0.03    0.03  
Total Pre-Tax Adjustments 0.08 0.06  0.13  0.06  
Less: Tax Effect of Adjustments (1) 0.02 0.01  0.03  0.01  
Total Adjustments 0.06 0.05  0.10  0.05  
Adjusted Diluted EPS $0.31 $0.28  0.33  0.21  
          
Adjusted Income (Loss) Before Income Taxes         
Income (Loss) Before Income Taxes $7,427 $7,792  $6,912  $5,627  
Adjustments         
ERP transition costs 1,701   2,716    
Loss on repurchase of senior convertible notes  615    615  
Restructuring and impairment charges  721  135  721  
Total Adjustments 1,701 1,336  2,851  1,336  
Adjusted Income Before Income Taxes $9,128 $9,128  $9,763  $6,963  
          
Adjusted Income (Loss) Before Income Taxes - Agriculture         
Income (Loss) Before Income Taxes $6,177 $4,960  $8,053  $6,283  
Restructuring and impairment charges  233    233  
Adjusted Income Before Income Taxes $6,177 $5,193  $8,053  $6,516  
          
Adjusted Income (Loss) Before Income Taxes - Construction         
Income (Loss) Before Income Taxes $1,334 $(30) $(888) $(2,927) 
Restructuring and impairment charges  332  135  332  
Adjusted Income Before Income Taxes $1,334 $302  $(753) $(2,595) 
          
Adjusted Income (Loss) Before Income Taxes - International         
Income (Loss) Before Income Taxes $505 $3,726  $722  $3,639  
Restructuring and impairment charges  156    156  
Adjusted Income Before Income Taxes $505 $3,882  $722  $3,795  
          
Adjusted EBITDA         
Net Income $5,511 $5,180  $5,066  $3,566  
Adjustments         
Interest expense, net of interest income 885 2,365  2,419  4,264  
Provision for income taxes 1,916 2,612  1,846  2,061  
Depreciation and amortization 7,200 5,921  13,264  11,447  
EBITDA 15,512 16,078  22,595  21,338  
Adjustments         
ERP transition costs (excluding depreciation) 327   426    
Restructuring and impairment charges  721  135  721  
Total Adjustments 327 721  561  721  
Adjusted EBITDA $15,839 $16,799  $23,156  $22,059  
          
Adjusted Net Cash Provided By (Used for) Operating Activities         
Net Cash Provided by (Used for) Operating Activities     $(6,303) $(14,087) 
Net Change in Non-Manufacturer Floorplan Payable     49,937  50,422  
Adjustment for Constant Equity in Inventory     (92,977) (72,833) 
Adjusted Net Cash Provided By (Used for) Operating Activities     $(49,343) $(36,498) 
          
(1) The tax effect of U.S. related adjustments was calculated using a 21% tax rate, determined based on a 21% federal statutory rate and no impact for state taxes given our valuation allowance against state deferred tax assets. No tax effect was recognized for foreign related items as all adjustments occurred in a foreign jurisdiction that has a full valuation allowance on its deferred tax assets.   
(2) Adjustments are net of amounts allocated to participating securities where applicable.     

 

Loading...
Loading...
Date
ticker
name
Actual EPS
EPS Surprise
Actual Rev
Rev Surprise
Posted In: EarningsPress Releases
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...