- Revenue for Fiscal First Quarter of 2015 Increased 5.4% to $465 Million
- Adjusted Operating Cash Flow for Fiscal First Quarter of 2015 Increased $8.6 Million to $10.7 Million
- Titan Recognizes Previously Announced Store Closing Costs in the First Quarter
- Titan Reiterates Annual Fiscal 2015 Guidance
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, 2014.
Fiscal 2015 First Quarter Results
For the first quarter of fiscal 2015, revenue was $465.5 million, compared to $441.7 million in the first quarter last year. Equipment sales were $345.0 million for the first quarter of fiscal 2015, compared to $334.7 million in the first quarter last year. Parts sales were $68.4 million for the first quarter of fiscal 2015, compared to $62.8 million in the first quarter last year. Revenue generated from service was $37.1 million for the first quarter of fiscal 2015, compared to $32.0 million in the first quarter last year. Revenue from rental and other increased to $15.0 million for the first quarter of fiscal 2015 from $12.1 million in the first quarter last year.
Gross profit for the first quarter of fiscal 2015 was $75.9 million, compared to $73.9 million in the first quarter last year. The Company’s gross profit margin was 16.3% in the first quarter of fiscal 2015, compared to 16.7% in the first quarter last year. Gross profit from parts and service for the first quarter of fiscal 2015 was 56.7% of overall gross profit and increased to $43.0 million from $38.8 million in the first quarter last year. Solid performance from parts and service was offset by lower equipment margins.
Operating expenses were 15.3% of revenue or $71.2 million for the first quarter of fiscal 2015, compared to 15.6% of revenue or $68.9 million for the first quarter of last year. In the first quarter of fiscal 2015, the Company recognized store closing costs, including realignment costs, of $3.2 million (or $1.9 million after-tax), primarily related to store closing and severance costs associated with the previously announced Construction segment realignment.
Floorplan interest expense increased to $4.6 million for the first quarter of 2015 compared to $3.4 million for the same period last year due to increased levels of interest-bearing equipment inventory.
Pre-tax loss for the first quarter of fiscal 2015 was $6.3 million. Excluding the aforementioned store closing and realignment charges, adjusted pre-tax loss for the first quarter of fiscal 2015 was $3.1 million. This compares to pre-tax loss of $1.0 million in the first quarter last year. Adjusted pre-tax Agriculture segment income was $4.0 million for the first quarter of fiscal 2015, compared to pre-tax income of $8.0 million in the first quarter last year. Adjusted pre-tax Construction segment loss was $3.5 million for the first quarter of fiscal 2015, compared to a pre-tax loss of $6.5 million in the first quarter last year. In the first quarter of fiscal 2015, pre-tax International segment loss was $3.1 million, compared to a pre-tax loss of $0.5 million in the first quarter last year.
Net loss attributable to common stockholders for the first quarter of fiscal 2015 was $4.1 million, or a loss per diluted share of $0.20. This net loss includes the after-tax store closing costs of $1.9 million. Adjusted net loss attributable to common stockholders for the first quarter of fiscal 2015 was $2.2 million, or $0.11 per diluted share. This compares to net loss attributable to common stockholders of $0.4 million, or $0.02 per diluted share, in the first quarter last year.
The Company ended the first quarter of fiscal 2015 with cash of $82.0 million. The Company’s inventory level was $1.12 billion as of April 30, 2014, compared to $1.08 billion as of January 31, 2014. The Company had $701.5 million outstanding floorplan payables on $1.2 billion total discretionary floorplan lines of credit as of April 30, 2014.
In the first quarter of fiscal 2015, the Company’s net cash used for operating activities was $54.6 million on a GAAP basis. The Company evaluates its cash flow from operating activities net of all floorplan payable activity. Taking this adjustment into account, the Company generated adjusted net cash from operating activities of $10.7 million.
First Quarter Fiscal 2015 Construction Segment Realignment and Consolidation
In the first quarter of fiscal 2015, the Company implemented its previously announced Construction segment realignment and consolidation. To better align its Construction and rental businesses in certain markets, the Company reduced its Construction related headcount by approximately 12% primarily through the consolidation and closing of 7 Construction stores in Bozeman, Big Sky and Helena, Montana; Cheyenne, Wyoming; Clear Lake, Iowa; Flagstaff, Arizona; and Rosemount, Minnesota. The Company also consolidated one Agriculture store in Oskaloosa, Iowa, into an existing Titan agriculture dealership. The realignment, combined with other staff reductions, amounted to a total reduction of 4.5% of the Company’s total headcount. The closing and severance costs related to this realignment realized in the first quarter of fiscal 2015 were $3.2 million pre-tax or $0.09 per diluted share; the Company expects to realize additional costs of approximately $0.6 million or $0.02 per diluted share in the second quarter of fiscal 2015. The pro forma benefit to fiscal 2015 earnings per share of this realignment, not including the aforementioned charges, is estimated to be approximately $0.12 per share.
David Meyer, Titan Machinery’s Chairman and Chief Executive Officer, stated, “In the first quarter, we focused on executing on our initiatives. We achieved adjusted operating cash flow of $10.7 million, and based on our year-to-date results and outlook for the remainder of the year, we are reiterating our fiscal 2015 annual revenue, net income, and operating cash flow outlook.”
Mr. Meyer continued, “In the first quarter, we completed the realignment and consolidation of our Construction segment. We believe this improves the overall foundation of our business and beginning in the second quarter we are realizing the cost savings associated with the realignment. Our Construction segment same store sales in the first quarter increased 24.4% on a year-over-year basis, reflecting the improvements we began implementing in the second half of last fiscal year as well as improvements in the industry.
"We remain focused on continued execution across all business segments, including inventory reductions and further improvements in operating cash flow, by managing the controllable aspects of our business and positioning our company for future opportunities.”
Fiscal 2015 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. For the full year ending January 31, 2015, the Company is reiterating is annual outlook. The Company continues to expect revenue to be in the range of $1.95 billion to $2.15 billion. The Company expects adjusted net income attributable to common stockholders to be in the range of $14.8 million to $21.1 million, and adjusted earnings per diluted share to be in the range of $0.70 to $1.00 based on estimated weighted average diluted common shares outstanding of 21.1 million.
The Company expects GAAP net income attributable to common stockholders to be in the range of $12.5 million to $18.8 million, and GAAP earnings per diluted share to be in the range of $0.59 to $0.89 based on estimated weighted average diluted common shares outstanding of 21.1 million. GAAP net income and earnings per diluted share guidance includes the impact of the $3.8 million pre-tax charge, or $0.11 per diluted share, associated with the Company’s realignment that it realized in the first quarter of fiscal 2015.
The Company expects to generate Non-GAAP cash flow from operations in the range of $60.0 million to $80.0 million for fiscal 2015. This reflects an improvement of $110.8 million to $130.8 million compared to Non-GAAP cash flow from operations of $(50.8) million in fiscal 2014. The primary driver of the improved cash flow is the Company’s anticipated reduction in equipment inventory level of approximately $250 million in fiscal 2015.
Non-GAAP Financial Measures
Within this announcement, the Company makes reference to certain adjusted financial measures, which have directly comparable GAAP financial measures as identified in this release. These adjusted measures are provided so that investors have the same financial data that management uses with the belief that it will assist the investment community in properly assessing the underlying performance of the Company for the periods being reported. The presentation of this additional information is not meant to be considered a substitute for measures prepared in accordance with GAAP.
Visit Titan Machinery's Investor Relations Page for full financial tables here.
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). 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. 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.
Investors interested in participating in the live call can dial (888) 337-8198 from the U.S. International callers can dial (719) 325-2463. A telephone replay will be available approximately two hours after the call concludes and will be available through Thursday, June 19, 2014, by dialing (877) 870-5176 from the U.S., or (858) 384-5517 from international locations, and entering confirmation code 5761107.
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