Titan Machinery Inc., a leading network of full-service agricultural and construction equipment stores, reported that its revenue increased 43.2% to $193.2 million for the second quarter of fiscal 2010 ended July 31, 2009, compared with revenue of $134.9 million in the second quarter last 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 $141.1 million, compared to $97.8 million in the second quarter last year. Parts sales were $32.5 million in the second quarter, up from $23.6 million in the second quarter last year. Revenue generated from service improved to $15.6 million in the quarter, compared to $10.8 million in the second quarter last year.
Gross profit for the fiscal second quarter increased 41.6% to $36.0 million, compared to $25.4 million in the second quarter of last year. The company's gross profit margin was 18.6% in the fiscal second quarter, compared to 18.8% in the second quarter last year. Gross profit from parts and service revenue contributed 54% of overall gross profit for the fiscal second quarter 2010, which is the same as in the second quarter last year.
Operating income for the second quarter of fiscal 2010 increased 56.8% to $9.3 million, compared to $6 million in the second quarter last year. Operating margin increased to 4.8%, compared to 4.4% in the second quarter last year. Pre-tax income for the fiscal second quarter increased 46.9% to $8.2 million, compared to $5.6 million in the second quarter last year.
Net income for the fiscal second quarter of 2010 was $4.9 million, compared to net income of $3.3 million in the second quarter last year. Earnings per diluted share for the fiscal second quarter of 2010 were $0.27 on approximately 18.0 million shares outstanding, compared to $0.19 per diluted share on approximately 17.2 million shares outstanding in the second quarter last year.
Fiscal 2010 First Six-Months Results
For the six-months ended July 31, 2009, revenue increased 25.0% to $359.5 million from $287.5 million for the same period last year. Gross margin for the first six-months of fiscal 2010 increased to 17.9%, compared to 17.4% in the same period last year. Pre-tax income for the first six months of fiscal 2010 was $11.3 million for a pre-tax margin of 3.1%, compared to $11.3 million, or a pre-tax margin of 3.9%, for the same period last year. Net income for the first six months of fiscal 2010 was $6.6 million, or $0.37 per diluted share, compared to $6.7 million, or $0.43 per diluted share, in the same period last year. The six-month weighted average shares outstanding increased 15.6% to 17.9 million from 15.5 million last year. The increase was due to the company’s May 2008 follow-on offering.
Balance Sheet
The company ended the second quarter of fiscal 2010 with a strong balance sheet. The company's cash and cash equivalents were $86 million as of July 31, 2009. Working capital at the end of the second quarter of fiscal 2010 was $153.3 million. As of July 31, 2009, the company had $105.9 million available of its $365 million total discretionary floorplan lines of credit; additionally, Titan had $24.75 million of available borrowings under its $25 million operating line of credit. Long-term debt, including current maturities and advances, was $39.6 million at the end of the second quarter of fiscal 2010.
“We are pleased with our solid performance in the second quarter of fiscal 2010. Based on our six-month results and the current outlook for the remainder of the year, we are reiterating our annual revenue and earnings per share guidance,” stated David Meyer, Titan Machinery’s chairman and CEO. “Our improved equipment availability, combined with the exceptional parts and service departments we offer our customers, has enabled all three of our main revenue sources — equipment, parts and services — to contribute to our quarter-over-quarter revenue growth of 43%.”
Meyer continued, “Our agriculture equipment business remained strong in the second quarter as our customers continue to have solid balance sheets and ample access to credit, which enables them to invest in equipment. Although there has been some recent volatility in commodity prices, there have been a number of marketing strategies for this year’s crop driving continued purchases of large tractors and combines. On the construction equipment side of our business, we continued to experience softness in the second quarter due to the impact of the continued economic downturn on the construction industry. We are currently integrating our recent construction acquisitions into our Titan Operating Model, which we believe will benefit our business in the long-term.”
Meyer concluded, “Year-to-date, we have completed four acquisitions and opened one new store, strengthening our position as the leading CNH dealer in North America. Our team is doing an excellent job implementing our Titan Operating Model in these new stores, and we are benefiting from our reputation of providing farmers and contractors with the best value and selection of equipment and parts as well as superior service. As we enter the back half of fiscal 2010, we remain confident in our ability to continue to deliver strong results.”
Acquisitions
The Company recently closed two agricultural equipment dealership acquisitions with aggregate revenues of $3.5 million in their most recently completed fiscal years.
Valley Equipment Inc., with one store in Mayville, North Dakota, is a Case IH brand agriculture equipment dealership. Located in the Red River Valley, Mayville is a progressive agriculture community with highly productive soils and is strategically located between Titan Machinery’s Grand Forks and Arthur stores.
Lickness Bros. Implement Co., with one store in Britton, South Dakota, is a Case IH brand agriculture equipment dealership. Lickness Bros. Implement Co. is strategically located in the fertile James River Valley, between Titan Machinery’s Lisbon, North Dakota and Aberdeen, South Dakota stores.
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 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.