• First Quarter Revenue Increased 4.7% to $442 Million
  • First Quarter Results Impacted by Abnormally Delayed Spring Weather

Titan Machinery Inc., a network of full-service agricultural and construction equipment stores, today reported financial results for the fiscal first quarter ended April 30, 2013.

Fiscal 2014 First Quarter Results

For the first quarter of fiscal 2014, revenue increased 4.7% to $441.7 million from revenue of $421.7 million in the first quarter last year. All four of thec’s revenue sources — equipment, parts, service, rental and other — contributed to this period-over-period revenue growth. Equipment sales were $334.7 million for the first quarter of fiscal 2014, compared to $322.5 million in the first quarter last year. Parts sales were $62.8 million for the first quarter of fiscal 2014, compared to $58.8 million in the first quarter last year. Revenue generated from service was $32.0 million for the first quarter of fiscal 2014, compared to $29.8 million in the first quarter last year. Revenue from rental and other increased to $12.1 million from $10.6 million in the first quarter last year. First quarter of fiscal 2014 revenue was approximately $50 million less than the company previously anticipated due to abnormally delayed spring weather combined with cautionary agriculture customer sentiment and the continued challenging industry conditions in the Construction segment.

Gross profit for the first quarter of fiscal 2014 was $73.9 million, compared to $70.4 million in the first quarter last year. The company’s gross profit margin was 16.7% in the first quarter of fiscal 2014, flat compared to the first quarter last year.

Operating expenses were 15.6% of revenue or $68.9 million for the first quarter of fiscal 2014, compared to 13.0% of revenue or $54.9 million for the first quarter of last year. The increase in operating expenses as a percentage of revenue reflects the impact of lower first quarter revenue and the higher operating expenses as a percent of revenue in the expanded Construction footprint. The company expects operating expenses as a percentage of sales to improve in coming quarters as it expects sales growth to improve.

Floorplan interest expense increased to $3.4 million for the first quarter of 2014 compared to $2.9 million for the same period last year due to increased levels of interest-bearing equipment inventory. Other interest expense increased to $3.2 million for the first quarter of fiscal 2014 compared to $0.8 million for the same period last year due to the company’s April 2012 convertible debt offering.

Pre-tax loss for the first quarter of fiscal 2014 was $1.0 million, compared to pre-tax income of $12.4 million in the first quarter last year. Pre-tax Agriculture segment income was $8.0 million for the first quarter of fiscal 2014, compared to pre-tax income of $14.7 million in the first quarter last year. Pre-tax Construction segment loss was $6.5 million for the first quarter of fiscal 2014, compared to pre-tax loss of $0.4 million in the first quarter last year. The Agriculture and Construction segments were both affected by an abnormally late spring which lasted through the end of the first fiscal quarter of 2014. Beginning with the first quarter of fiscal 2014, the company is segmenting its International results. In the first quarter of fiscal 2014, pre-tax International segment loss was $0.5 million, which was in-line with this seasonally soft quarter, compared to a pre-tax loss of $0.4 million in the first quarter last year.

Net loss attributable to common stockholders for the first quarter of fiscal 2014 was $0.4 million, compared to net income attributable to common stockholders of $7.5 million in the first quarter last year. Loss per diluted share for the first quarter of fiscal 2014 was $0.02 compared to earnings per diluted share of $0.36 in the first quarter last year.

Balance Sheet

The company ended the first quarter of fiscal 2014 with cash of $114.3 million. The company’s inventory level was $1.0 billion as of April 30, 2013, compared to $929.2 million at January 31, 2013. This inventory level primarily reflected an increase in new equipment, which increased to $608.3 million at April 30, 2013, from $542.2 million at January 31, 2013, while used equipment decreased to $273.4 million at April 30, 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 and planned seasonal inventory stocking. The company had available $204.7 million of its $975 million total discretionary floorplan lines of credit as of April 30, 2013.

Acquisitions & New Store Openings

In the first quarter of fiscal 2014, the company completed two acquisitions, consisting of two construction equipment dealership locations in the United States, including the company’s first location in New Mexico. The company also opened its initial Ukrainian dealer facilities in Kiev in April 2013.

Management Comments

David Meyer, Titan Machinery’s  chairman and chief executive officer, stated, “As we previously reported, our first quarter results were impacted by abnormally delayed spring weather. For our Agriculture segment, weather conditions in the second quarter have begun to normalize and the planting progress has significantly improved. We expect the Agriculture revenue that was delayed in the first quarter reflected primarily a timing issue and will be realized in the coming quarters. As a result, we continue to anticipate top line sales growth and are reiterating our annual 2014 sales guidance that we issued on our fiscal 2013 year-end release.”

Mr. Meyer continued, “Our Construction business was also impacted by the late spring weather, as well as the challenging conditions in this industry and the cost of expanding our distribution network. As we discussed on our last conference call, we are focused on a number of key initiatives to drive top and bottom line improvements in our Construction segment and expect to see improvements in the second quarter and the remainder of the year. We believe that our Construction segment is an integral part of our long-term growth strategy and remain confident it will be a structural component of our top and bottom line growth.”

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 reiterating its recently updated annual guidance. For the full year ending January 31, 2014, the company anticipates revenue in the range of $2.35 billion to $2.55 billion, net income attributable to common stockholders 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.