Titan Machinery Inc. Announces Fiscal First Quarter Ended April 30, 2009 Results
FARGO, N.D.--Titan Machinery Inc. , a leading network of full service agricultural and construction equipment stores, today reported financial results for the first quarter ended April 30, 2009.
Fiscal 2010 First Quarter
For the first quarter of fiscal 2010, revenue increased 9.0% to $166.3 million from revenue of $152.6 million in the first quarter of the prior year. All three of the Company’s main revenue sources—equipment, parts and service—contributed to this period-over-period revenue growth. Equipment sales were $124.9 million, compared to $120.9 million in the same period last year. Parts sales were $26.4 million in the first quarter, up from $21.5 million in the prior-year period. Revenue generated from service improved to $12.5 million in the quarter, compared to $8.9 million in the first quarter of last year.
Gross profit for the fiscal first quarter increased 15.9% to $28.5 million, compared to $24.6 million in the first quarter of the prior year. The Company's gross profit margin increased 100 basis points to 17.1% in the fiscal first quarter, compared to 16.1% in the first quarter of fiscal 2009. Gross profit from parts and service revenue contributed 55% of overall gross profit for the fiscal first quarter 2010 compared to 46% in the first quarter last year. This reflects a change in sales mix to an increased percentage of revenue generated from the higher margin parts and service business.
Operating income for the fiscal first quarter was $3.8 million compared to $6.4 million in the same period a year ago. Pre-tax income for the fiscal first quarter was $3.0 million, compared to $5.7 million in the same period last year.
Net income for the fiscal first quarter of 2010 was $1.8 million, compared to net income of $3.4 million in the first quarter last year. Earnings per diluted share for the fiscal first quarter 2010 were $0.10 on approximately 17.9 million shares outstanding, compared to $0.24 per share on approximately 13.9 million shares outstanding. The 29% increase in weighted average shares outstanding is due to the Company’s May 2008 follow-on offering.
The Company ended the first quarter of fiscal 2010 with a strong balance sheet. The Company's cash and cash equivalents were $78.7 million as of April 30, 2009. Working capital at the end of the first quarter of fiscal 2010 was $144 million. As of April 30, 2009, the Company had $115 million available of its $321 million total floorplan lines of credit; additionally, the Company had $24.75 million of available borrowings under its $25 million operating line of credit. Long-term debt, including current maturities, was $27.0 million at the end of the first quarter of fiscal 2010.
“We are pleased with our start to fiscal 2010. Based on the first quarter results and the current outlook for the remainder of 2010, we are reiterating our annual revenue and earnings per share guidance,” stated David Meyer, Titan Machinery’s Chairman and Chief Executive Officer. “The well-publicized flooding experienced in the Red River Valley during the first quarter is a very good example of why we evaluate our business on an annual basis due to quarterly weather fluctuations and customer annual production cycles. Taking into account the first quarter flooding, our overall agricultural equipment, parts and service sales performed well. As expected, the strength in our agricultural business was partially offset by the continued softness in the construction equipment sales and rental fleet utilization. With the recent construction equipment acquisitions we made in Iowa, Montana, Wyoming and Nebraska, we anticipate more than 20% of our full fiscal year 2010 revenue coming from our construction business, up from 12% in fiscal 2009. Although the current economic headwinds are impacting our construction dealerships’ financial performance, we are integrating these newly-acquired construction stores into the Titan operating model and will be well-positioned when the construction equipment industry begins to improve. We are confident that the construction equipment stores will be an important contributor to our top and bottom line performance for many years to come, and we are pleased with the increased diversification in our revenue.”
Mr. Meyer continued, “Our first quarter results generated increased revenue and gross profit in all three of our main revenue sources—equipment, parts and service, underscoring the strength of our business model, which is driven by long-term organic and acquired growth. The higher margin parts and service revenue represented 55% of total gross profit for the first quarter and contributed to our 100 basis point improvement in gross margin. Operating expenses during the first quarter of 2010 were in line with our expectations, and we expect operating margins to increase during the remainder of fiscal 2010.
“Looking forward, as the largest CNH dealer in North America, we continue to benefit from economies of scale and our ability to offer customers superior selection, service, technical expertise and value. Our strong balance sheet provides the financial flexibility to invest in our business and make selective strategic acquisitions as we position ourselves for long-term growth and profitability.”
Acquisitions and New Store Opening
The Company recently closed two acquisitions, consisting of two agricultural equipment dealerships, and opened one construction equipment dealership. Estimated annual revenues from these three additional dealerships are expected to be approximately $21 million.
Winger Implement, Inc., with one store in Winger, Minnesota, is a New Holland brand agriculture equipment dealership. Located on the edge of the Red River Valley, this dealership provides great synergies with the Company’s Ada, Crookston and Thief River Falls locations.
Arthur Mercantile, Co., with one store in Arthur, North Dakota, is a Case IH brand agricultural equipment dealership. Arthur Mercantile is located in the fertile Red River Valley farmland, which is considered to be some of the best farmland in North America, and it is the oldest farm equipment dealership in North Dakota.
Minot, North Dakota. The Company opened a new Case Construction Equipment dealership in Minot, North Dakota. This store is expected to benefit from a number of growth opportunities including wind power, coal, mining, natural gas and oil exploration and extraction related to the Bakken Formation. A Case CE store in Minot has been part of the Company’s long-term plan.
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 the Company’s business. The Company is affirming its revenue and net income guidance for the full year ending January 31, 2010. It continues to expect to achieve revenue in the range of $750 million to $790 million. Net income is expected to be in the range of $16.6 million to $18.7 million. The Company expects to achieve earnings per diluted share in the range of $0.92 to $1.04. Weighted average diluted shares outstanding for the fiscal year ending January 31, 2010 are estimated to be approximately 18.0 million shares.
Conference Call and PowerPoint Presentation Information
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.
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) 941-6010 from the U.S. International callers can dial (480) 629-9772. A telephone replay will be available approximately two hours after the call concludes and will be available through Tuesday, June 23, 2009, by dialing (800) 406-7325 from the U.S., or (303) 590-3030 from international locations, and entering confirmation code 4089414. There also will be a simultaneous, live webcast available on the Investor Relations section of the Company's web site at TITAN. The webcast will be archived for 30 days.