Titan Machinery Inc. (TITN) SEC Filing 10-Q Quarterly report for the period ending Wednesday, October 31, 2018

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Titan Machinery Inc. Announces Results for Fiscal Third Quarter Ended October 31, 2018

- Revenue for Third Quarter of Fiscal 2019 Increased 10.1% to $364 million -
- EPS for the Third Quarter of Fiscal 2019 was $0.48, or Adjusted EPS of $0.49,
Compared to EPS of $0.11, or Adjusted EPS of $0.20, in the Prior Year Period -
- Company Updates Fiscal 2019 Modeling Assumptions, including a Raise in EPS Range -

West Fargo, ND – November 29, 2018 – Titan Machinery Inc. (Nasdaq: TITN), a leading network of full-service agricultural and construction equipment stores, today reported financial results for the fiscal third quarter ended October 31, 2018.

David Meyer, Titan Machinery’s Chairman and Chief Executive Officer, stated, "We are pleased with the revenue growth across all segments and the operating leverage we are generating in the business. Our third quarter results are indicative of the efforts we've made over the past couple of years to position our business for improved profitability across all segments. The increase in our Agriculture segment revenue is encouraging given the continued industry challenges. Our improved inventory position is helping drive increases in equipment margins, which, combined with a lower annual operating expense level, is generating improvements in profitability. As a result of these improvements and revenue growth across all segments, adjusted earnings per share grew significantly over the prior year period."
Fiscal 2019 Third Quarter Results
Consolidated Results
For the third quarter of fiscal 2019, revenue was $363.6 million, compared to $330.3 million in the third quarter last year. Equipment sales were $241.2 million for the third quarter of fiscal 2019, compared to $216.0 million in the third quarter last year. Parts sales were $70.1 million for the third quarter of fiscal 2019, compared to $64.7 million in the third quarter last year. Revenue generated from service was $33.6 million for the third quarter of fiscal 2019, compared to $31.5 million in the third quarter last year. Revenue from rental and other was $18.8 million for the third quarter of fiscal 2019, compared to $18.1 million in the third quarter last year.

Gross profit for the third quarter of fiscal 2019 was $69.5 million, compared to $61.5 million in the third quarter last year. The increase in gross profit was driven by higher revenue. Gross profit margins increased 50 basis points to 19.1% versus the comparable period last year. The improvement in gross profit margin was due to higher gross profit margins on equipment revenue.

Operating expenses increased by $2.9 million to $53.3 million, or 14.7% of revenue, for the third quarter of fiscal 2019, compared to $50.4 million, or 15.2% of revenue, for the third quarter of last year. The decrease in operating expenses as a percentage of total revenue was primarily due to the increase in total revenue in the third quarter of fiscal 2019, as compared to the third quarter of fiscal 2018, which positively affected our ability to leverage fixed operating costs.

Floorplan interest expense of $1.9 million for the third quarter of fiscal 2019 was flat compared to the third quarter of last year.

In the third quarter of fiscal 2019, net income was $10.8 million, or earnings per diluted share of $0.48, compared to net income of $2.4 million, or earnings per diluted share of $0.11 for the third quarter of last year.

On an adjusted basis, net income for the third quarter of fiscal 2019 was $10.9 million, or adjusted earnings per diluted share of $0.49, compared to adjusted net income of $4.4 million, or adjusted earnings per diluted share of $0.20, for the third quarter of last year.

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The following information was filed by Titan Machinery Inc. on Thursday, November 29, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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  • 18481050_51
    Financial - Expense
    Restructuring costs of $2.5 million were recognized in the third quarter of fiscal 2018 relating to charges recognized in connection with our Fiscal 2018 Restructuring Plan and included accrued charges for lease terminations and remaining lease obligations, termination benefits, and the costs associated with relocating certain assets of our closed stores.
  • 18481050_90
    Financial - Expense
    Restructuring costs of $10.3 million were recognized in the first nine months of fiscal 2018 relating to charges recognized in connection with our Fiscal 2018 Restructuring Plan and included accrued charges for lease terminations and remaining lease obligations, termination benefits, and the costs associated with relocating certain assets of our closed stores.
  • 18481050_83
    Financial - Earnings
    28 28 Gross Profit The $12.8 million increase in gross profit for the first nine months of fiscal 2019, as compared to the same period last year, was primarily due to higher revenue for the first nine months of fiscal 2019 and improved gross profit margins, from 18.9% for the first nine months of fiscal 2018 to 19.4% for the first nine months of fiscal 2019.
  • 18481050_17
    Financial - Earnings
    The increase in gross profit margin was primarily the result of higher gross profit margins on equipment revenues.
  • 18481050_44
    Financial - Earnings
    The increase in gross profit was the result of increased revenue and increased equipment gross profit margins.
  • 18481050_9
    Revenue - Product
    These industry conditions have reduced demand for equipment purchases, service work and parts, resulting in decreased same-store sales, equipment revenue and equipment gross profit margin, and have caused an oversupply of equipment inventory in our geographic footprint.
  • 18481050_65
    Revenue - Product
    The improvement in segment results was primarily the result of increased equipment revenues and improved equipment gross profit margins, but partially offset by increased variable expenses associated with higher equipment revenues.
  • 18481050_93
    Financial - Expense
    Interest expense associated with our senior convertible notes, which is reflected in other interest expense, decreased $0.6 million for the first nine months of fiscal 2019, as compared to the same period last year, due to interest expense savings resulting from our repurchases of our outstanding senior convertible notes.
  • 18481050_89
    Financial - Expense
    29 29 Restructuring Costs Restructuring costs of $0.4 million were recognized for the first nine months of fiscal 2019 related to the Company's revised assumptions, based on changes in circumstances, for our cease-use lease liabilities associated with certain of our previously closed stores.
  • 18481050_16
    Financial - Earnings
    Total gross profit margin increased to 19.1% for the third quarter of fiscal 2019, as compared to 18.6% for the third quarter of fiscal 2018.
  • 18481050_104
    Revenue - Product
    The improvement in segment results was largely the result of an increase in equipment sales volume and higher equipment gross profit margins along with operating expense savings as a result of our Fiscal 2018 Restructuring Plan and a decrease in restructuring charges and floorplan interest expense.
  • 18481050_43
    Financial - Earnings
    Gross profit margins increased from 18.6% for the third quarter of fiscal 2018 to 19.1% for the third quarter of fiscal 2019.
  • 18481050_158
    Financial - Cash Flow
    The increase in adjusted cash flow provided by operating activities for the first nine months of fiscal 2019 is primarily the result of improved operating results in the first nine months of fiscal 2019 as compared to the first nine months of fiscal 2018.
  • 18481050_157
    Financial - Cash Flow
    Taking these adjustments into account, our adjusted cash flow provided by operating activities was $1.5 million for the first nine months of fiscal 2019 and adjusted cash flow used for operating activities for the first nine months of fiscal 2018 was $10.8 million.
  • 18481050_128
    Financial - Earnings
    32 32 The following tables reconcile (i) net income (loss), a GAAP measure, to adjusted net income (loss) and (ii) Diluted EPS, a GAAP measure, to adjusted Diluted EPS: (1) The tax effect of adjustments for the three and nine months ended October 31, 2018 was calculated using a 21% tax rate for all U.S. related items.
  • 18481050_177
    Other - Other
    The following table reconciles net cash provided by (used for) operating activities, a GAAP measure, to adjusted net cash provided by (used for) operating activities and net cash provided by (used for) financing activities, a GAAP measure, to adjusted net cash provided by (used for) financing activities.
  • 18481050_159
    Financial - Cash Flow
    See the Adjusted Cash Flow Reconciliation below for a reconciliation of adjusted cash flow used for operating activities to the GAAP measure of cash flow used for operating activities.
  • 18481050_163
    Other - Other
    For the first nine months of fiscal 2019, net cash provided by financing activities was the result of increased non-manufacturer floorplan payables, the proceeds of which were partially used to repurchase $20.0 million face value of our senior convertible notes using $20.0 million in cash and to repay all amounts outstanding under our working capital line under our Wells Fargo Credit Agreement.
  • 18481050_85
    Financial - Expense
    Our company-wide absorption for the first nine months of fiscal 2019 increased to 85.9% as compared to 81.6% during the same period last year, primarily due to a reduction in our fixed operating costs and floorplan interest expense.
  • 18481050_67
    Revenue - Product
    The increase in revenue, all of which was due to a same-store sales increase, was driven by an increase in equipment, parts and service revenue.
  • 18481050_143
    Revenue - Product
    The increase in equipment sales volume over the four quarter period ended October 31, 2018 as compared to the four quarter period ended October 31, 2017 was offset by an increase in our average equipment inventory over these time periods.
  • 18481050_13
    Financial - Earnings
    See the Non-GAAP Financial Measures section below for a reconciliation of adjusted diluted earnings per share to the most comparable GAAP measure.
  • 18481050_20
    Financial - Expense
    22 22 In February 2017, to better align the Company's cost structure and business in certain markets, the Company announced a dealership restructuring plan (the "Fiscal 2018 Restructuring Plan"), which included the closure of one Construction location and 14 Agriculture locations.
  • 18481050_69
    Revenue - Product
    The increase in segment results was primarily due to increased revenue and reduced restructuring costs recognized in the third quarter of fiscal 2019 as compared to the third quarter of fiscal 2018, but partially offset by lower rental and other gross profit margins.
  • 18481050_125
    Financial - Earnings
    We believe that the presentation of adjusted net income (loss) and adjusted Diluted EPS is relevant and useful to our management and investors because it provides a measurement of earnings on activities that we consider to occur in the ordinary course of our business.
  • 18481050_52
    Financial - Income
    Other Income (Expense) Interest expense associated with our senior convertible notes, which is reflected in other interest expense, decreased in the third quarter of fiscal 2019 by $0.4 million, as compared to the same period last year, due to our repurchases of outstanding senior convertible notes in prior periods.
  • 18481050_174
    Financial - Shares / Equity
    Our equity in equipment inventory decreased to 26.2% as of October 31, 2018 from 38.2% as of January 31, 2018, and decreased to 29.6% as of October 31, 2017 from 41.1% as of January 31, 2017.
  • 18481050_137
    Revenue - Geography
    Floorplan payables relating to these credit facilities totaled approximately $323.9 million of the total floorplan payable balance of $332.9 million outstanding as of October 31, 2018.
  • 18481050_176
    Financial - Cash Flow
    We believe that the presentation of Adjusted Cash Flow is relevant and useful to our investors because it provides information on activities we consider to be the normal operation of our business, regardless of financing source and level of financing for our equipment inventory.
  • 18481050_107
    Revenue - Product
    Construction Construction segment revenue for the first nine months of fiscal 2019 increased 2.7% compared to the same period last year, all of which was due to same-store sales increase in equipment, parts and service revenue.
  • 18481050_66
    Revenue - Product
    Construction Construction segment revenue for the third quarter of fiscal 2019 increased 7.9% compared to the third quarter of fiscal 2018.
  • 18481050_127
    Other - Other
    In addition, other companies may calculate these non-GAAP measures in a different manner, which may hinder comparability of our adjusted results with those of other companies.
  • 18481050_118
    Revenue - Product
    The increase in segment results was primarily due to the increase in segment revenue as noted above plus increased equipment gross profit margins, but partially offset by an increase in operating 31 31 expenses resulting from our AGRAM acquisition and the continued build-out of our footprint and presence in our European markets.
  • 18481050_136
    Revenue - Geography
    Equipment Inventory and Floorplan Payable Credit Facilities As of October 31, 2018, the Company had discretionary floorplan payable lines of credit for equipment purchases totaling $652.5 million, which included a $140.0 million floorplan payable line under the Wells Fargo Credit Agreement, a $320.0 million credit facility with CNH Industrial Capital, a $45.0 million credit facility with DLL Finance and the U.S. dollar equivalent of $147.5 million in credit facilities related to our foreign subsidiaries.
  • 18481050_40
    Revenue - Product
    Same-store sales increased 7.3% primarily as a result of an increase in equipment revenue within our Agriculture segment and an overall revenue increase within our Construction segment.
  • 18481050_46
    Financial - Earnings
    Our company-wide absorption rate increased to 94.0% for the third quarter of fiscal 2019 compared to 92.0% during the same period last year primarily driven by the increase in gross profit from parts and service in the third quarter of fiscal 2019.
  • 18481050_102
    Revenue - Product
    The increase in same-store sales was primarily due to an increase in equipment revenue arising from customer replacement demand.
  • 18481050_173
    Financial - Cash Flow
    We refer to this measure of cash flow as Adjusted Cash Flow.
  • 18481050_175
    Financial - Cash Flow
    35 35 Adjusted Cash Flow is a non-GAAP financial measure.
  • 18481050_80
    Revenue - Product
    Revenue The increase in revenue for the first nine months of fiscal 2019 compared to the first nine months of fiscal 2018 was the result of increased revenue from all revenue sources.
  • 18481050_15
    Revenue - Product
    This revenue increase was primarily the result of higher equipment sales in our Agriculture segment.
  • 18481050_140
    Other - Other
    If both financial tests are not satisfied on February 1, 2019, the Wells Fargo Credit Agreement will immediately mature and all amounts outstanding become immediately due and payable in full.
  • 18481050_61
    Revenue - Product
    Agriculture Agriculture segment revenue for the third quarter of fiscal 2019 increased 13.0% compared to the third quarter of fiscal 2018.
  • 18481050_72
    Revenue - Product
    International International segment revenue for the third quarter of fiscal 2019 increased 4.8% compared to the third quarter of fiscal 2018.
  • 18481050_82
    Revenue - Product
    Our total revenue increase was also positively impacted by our AGRAM acquisition.
  • 18481050_73
    Revenue - Product
    The increase in segment revenue was primarily due to our AGRAM acquisition which was completed early in the third quarter of fiscal 2019.
  • 18481050_81
    Revenue - Product
    Same-store sales increased 5.3% over the comparable prior year period primarily as a result of an increase in equipment revenue within our Agriculture and International segments.
  • 18481050_50
    Financial - Expense
    Restructuring Costs A restructuring benefit of $0.2 million was recognized in the third quarter of fiscal 2019 related to the Company's revised assumptions, based on changes in circumstances, for our cease-use lease liabilities associated with certain of our previously closed store locations.
  • 18481050_112
    Financial - Expense
    The decrease in floorplan and other interest expense was primarily due to a reduced level of interest-bearing inventory and rental fleet in the first nine months of fiscal 2019 compared to the first nine months of fiscal 2018.
  • 18481050_41
    Revenue - Product
    Revenue was also positively impacted by our AGRAM acquisition completed early in the third quarter of fiscal 2019.
  • 18481050_179
    Other - Other
    We are, therefore, not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.
  • 18481050_62
    Revenue - Product
    Agriculture same-store sales increased 12.4% compared to the same period last year.
  • 18481050_100
    Revenue - Product
    30 30 Agriculture Agriculture segment revenue for the first nine months of fiscal 2019 increased 3.6% compared to the same period last year.
  • 18481050_101
    Revenue - Product
    Agriculture same-store sales increased 5.2% compared to the same period last year.
  • 18481050_115
    Revenue - Product
    International International segment revenue for the first nine months of fiscal 2019 increased 14.0% compared to the same period last year primarily due to increased equipment revenue and our AGRAM acquisition that was completed early in the third quarter of fiscal 2019.
  • 18481050_168
    Financial - Cash Flow
    GAAP requires the cash flows associated with non-manufacturer floorplan payables to be recognized as financing cash flows in the consolidated statement of cash flows.
  • 18481050_116
    Revenue - Product
    Equipment revenue increased in the first nine months of fiscal 2019 primarily due to continued strong demand in certain of our markets, which was aided by subvention funds and strong calendar year 2017 crop yields.
  • 18481050_55
    Other - Other
    Our effective tax rate is also impacted by the Tax Cuts and Jobs Act (the "Tax Act") enacted in December 2017.
  • 18481050_96
    Other - Other
    Our effective tax rate is also impacted by the the Tax Act enacted in December 2017.
  • 18481050_54
    Financial - Income
    Our effective tax rate is impacted by the mix of income or losses in our domestic and international jurisdictions as well as the impact of recognizing valuation allowances on our deferred tax assets, including net operating losses.
  • 18481050_95
    Financial - Income
    Our effective tax rate is impacted by the mix of income or losses in our domestic and international jurisdictions as well as the impact of recognizing valuation allowances on our deferred tax assets, including net operating losses.
  • 18481050_42
    Financial - Earnings
    Gross Profit Gross profit for the third quarter of fiscal 2019 increased 13.1% as compared to the same period last year.
  • 18481050_124
    Financial - Earnings
    To supplement net income (loss) and our diluted earnings (loss) per share ("Diluted EPS"), both GAAP measures, we present adjusted net income (loss) and adjusted Diluted EPS, both non-GAAP measures, which exclude gains or losses on repurchases of senior convertible notes, costs associated with our restructuring activities, impairment charges, the write-off of capitalized debt issuance costs and the reclassification of accumulated losses on our interest rate swap.
  • 18481050_63
    Revenue - Product
    The increase in same-stores sales was primarily the result of increased equipment revenue arising from customer replacement demand despite the aforementioned difficult industry conditions.
  • 18481050_86
    Financial - Expense
    Operating Expenses Our operating expenses for the first nine months of fiscal 2019 decreased $5.2 million as compared to the first nine months of fiscal 2018 and operating expenses as a percentage of revenue improved to 16.2% in the first nine months of fiscal 2019 from 17.7% in the first nine months of fiscal 2018.

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  • Form Type: Quarterly
  • Number of times amended: 0
  • Accession Number: 0001409171-18-000086
  • Submitted to the SEC: Thursday, December 6, 2018 12:51:33 PM EST
  • Accepted by the SEC: Thursday, December 6, 2018
  • Period ending: October 2018
  • Industry: Retail Stores