Titan Machinery Inc. (Nasdaq: TITN), a leading network of full-service agricultural and construction equipment stores, today reported financial results for the first quarter ended April 30, 2011.
Fiscal 2012 First Quarter
For the first quarter of fiscal 2012, revenue increased 54.9% to $318.2 million from revenue of $205.5 million in the first 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 $249.2 million for the first quarter of fiscal 2012, compared to $150.4 million in the first quarter last year. Parts sales were $41.9 million for the first quarter of fiscal 2012, compared to $35.1 million in the first quarter last year. Revenue generated from service was $21.0 million for the first quarter of fiscal 2012, compared to $16.6 million in the first quarter last year.
Gross profit for the first quarter of fiscal 2012 was $52.8 million, compared to $34.4 million in the first quarter of last year. The Company's gross profit margin was 16.6% in the fiscal first quarter of 2012, compared to 16.8% in the first quarter last year, reflecting the increased percentage of revenue generated from equipment sales compared to the higher margin parts and service businesses. Gross profit from parts and service revenue for the first quarter of fiscal 2012 increased to $25.2 million from $20.5 million in the first quarter of last year.
Operating expenses decreased to 12.4% of revenue for the first quarter of fiscal 2012 compared to 14.5% for the first quarter of fiscal 2011 due to improved fixed operating cost leverage.
Pre-tax income for the first quarter of fiscal 2012 was $12.2 million, compared to $2.6 million in the first quarter last year. Pre-tax margin was 3.8% for the first quarter of fiscal 2012, compared to 1.3% in the first quarter last year. Pre-tax Agriculture segment income was $13.0 million for the first quarter of fiscal 2012, compared to $4.8 million in the first quarter last year. Pre-tax Construction segment income improved to $0.7 million for the first quarter of fiscal 2012, compared to a loss of $1.9 million in the first quarter last year.
Net income for the first quarter of fiscal 2012 was $7.3 million, compared to net income of $1.6 million in the first quarter last year. Earnings per diluted share for the first quarter of fiscal 2012 were $0.40 compared to $0.09 per diluted share in the first quarter last year.
Balance Sheet
The Company ended the first quarter of fiscal 2012 with cash and cash equivalents of $81.6 million. Working capital as of April 30, 2011 was $156.7 million. The Company had available $213.8 million of its $550 million total discretionary floorplan lines of credit as of April 30, 2011. Additionally, at the end of fiscal first quarter of 2012, the Company had available $23.6 million under its $50 million working capital line of credit.
On May 11, 2011, subsequent to the close of fiscal first quarter of 2012, the Company announced the completion of its follow-on offering of common stock at a price of $28.75 per share. The underwriters exercised, in full, their option to purchase up to an additional 360,000 shares to cover over-allotments, resulting in a total sale of 2.76 million shares of common stock. The Company intends to use the net proceeds of $75.0 million from the offering for strategic acquisitions and business development initiatives, working capital and general corporate purposes.
Acquisitions & Store Expansion / Consolidation
In the first quarter of fiscal 2012, the Company completed three acquisitions, consisting of two agriculture dealerships and four rental equipment locations. In addition, the Company relocated and expanded one Iowa construction equipment store to also sell agriculture equipment. Subsequent to the end of the fiscal first quarter, the Company completed two acquisitions consisting of six locations and announced the planned consolidation and closing of its Belgrade, Montana location.
Tri-State Implement, Inc. consists of one New Holland Agriculture brand equipment dealership located in Sioux Falls, South Dakota. The dealership is strategically located in a regional trade center and we believe is well-positioned to benefit from the robust agriculture activity in the area. The acquisition closed on February 28, 2011.
Schoffman's, Inc. consists of one Case IH Agriculture dealership located in Redwood Falls, Minnesota. The dealership is strategically located in the fertile Minnesota River Valley and is contiguous to Titan Machinery's Marshall, Minnesota dealership. The acquisition closed on March 31, 2011.
ABC Rental & Equipment Sales, an independent rental yard company, consists of four rental equipment locations in Missoula, Bozeman, and Big Sky, Montana, and Williston, North Dakota. The locations in Missoula, Williston and Bozeman will be consolidated with Titan Machinery's existing Case CE dealerships in their respective markets, leveraging the synergies of both companies. The acquisition closed on April 1, 2011.
Carlson Tractor and Equipment, Inc. consists of two New Holland Construction locations in Rosemount and Rogers, Minnesota. The dealerships are strategically located in the Minneapolis metro area. This business provides heavy, medium, and light construction equipment. The acquisition closed May 13, 2011.
St. Joseph Equipment Inc. consists of four construction equipment locations in Shakopee, Hermantown and Elk River, Minnesota, and La Crosse, Wisconsin. Titan Machinery has the exclusive Case Construction contract for the entire state of Minnesota and 11 counties in western Wisconsin. The acquisition closed May 31, 2011.
Center Point, Iowa: The Company relocated its construction store in Cedar Rapids, Iowa to Center Point, Iowa. Given the success of the Company's existing agriculture equipment dealerships in Iowa and the productive agriculture land in the surrounding areas, the Company decided to leverage its brand and operations to include Case IH Agriculture equipment in addition to its full line of Case Construction equipment offerings.
Belgrade, Montana: The Company plans to consolidate its Belgrade, Montana operations into its newly acquired ABC Rental Bozeman location in the second quarter of this year, resulting in the closing of the Belgrade location. The Company expects the closing costs of the Belgrade location to be approximately $0.01 per diluted share and will be realized in the second quarter of fiscal 2012.
Management Comments
David Meyer, Titan Machinery's Chairman and Chief Executive Officer, stated, "We are pleased with our strong agriculture and construction business results for the first quarter of fiscal 2012. These results were driven by organic and acquired growth in both businesses. Agriculture same store sales increased 37.6% and our Construction same store sales increased 33.1%. In addition, our Construction business generated pre-tax income of $0.7 million for the first quarter compared to a loss of $1.9 million for the same period last year."
Mr. Meyer continued, "To reflect our first quarter results and our improved outlook for the year, we are raising our revenue, net income and diluted earnings per share guidance range. We continue to experience strong demand for our equipment offerings, parts and service in both our Agriculture and Construction segments. In recent months, we have closed several strategic agriculture and construction acquisitions and we now have dealerships in eight states throughout the upper Midwest and Northwest. We see additional growth opportunities through acquisitions, and with our recently completed follow-on equity offering of $75 million, we have the financial ability to capitalize on these opportunities and execute on our long-term business strategy of strong organic and acquired growth."