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Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

 


 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended July 31, 2011

 

Commission File No. 001-33866

 

TITAN MACHINERY INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

No. 45-0357838

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification No.)

 

644 East Beaton Drive

West Fargo, ND 58078-2648

(Address of Principal Executive Offices)

 

Registrant’s telephone number (701) 356-0130

 


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES x   NO o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES x  NO o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o

 

Accelerated filer x

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES o NO x

 

The number of shares outstanding of the registrant’s common stock as of August 31, 2011 was: Common Stock, $0.00001 par value, 20,753,333 shares.

 

 

 



Table of Contents

 

TITAN MACHINERY INC.

QUARTERLY REPORT ON FORM 10-Q

 

Table of Contents

 

 

 

 

Page No.

PART I.

FINANCIAL INFORMATION

 

3

 

 

 

 

ITEM 1.

FINANCIAL STATEMENTS

 

3

 

 

 

 

 

 

 

Consolidated Balance Sheets as of July 31, 2011 and January 31, 2011

 

3

 

 

 

 

 

 

 

Consolidated Statements of Operations for the three and six months ended July 31, 2011 and 2010

 

4

 

 

 

 

 

 

 

Consolidated Statement of Stockholders’ Equity for the six months ended July 31, 2011

 

5

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the six months ended July 31, 2011 and 2010

 

6

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements

 

8

 

 

 

 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

14

 

 

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

25

 

 

 

 

ITEM 4.

CONTROLS AND PROCEDURES

 

26

 

 

 

 

PART II.

OTHER INFORMATION

 

26

 

 

 

 

ITEM 1.

LEGAL PROCEEDINGS

 

26

 

 

 

 

ITEM 1A.

RISK FACTORS

 

26

 

 

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

26

 

 

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

 

26

 

 

 

 

ITEM 4.

(REMOVED AND RESERVED)

 

26

 

 

 

 

ITEM 5.

OTHER INFORMATION

 

26

 

 

 

 

ITEM 6.

EXHIBITS

 

26

 

 

 

 

Signatures

 

27

 

 

 

Exhibit Index

 

28

 

2


 


Table of Contents

 

PART I. — FINANCIAL INFORMATION

 

ITEM 1.                  FINANCIAL STATEMENTS

 

TITAN MACHINERY INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

 

 

 

July 31,

 

January 31,

 

 

 

2011

 

2011

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

102,194

 

$

76,112

 

Receivables, net

 

53,496

 

44,945

 

Inventories

 

622,471

 

429,844

 

Prepaid expenses and other current assets

 

2,291

 

1,003

 

Deferred income taxes

 

3,110

 

3,247

 

 

 

 

 

 

 

Total current assets

 

783,562

 

555,151

 

 

 

 

 

 

 

INTANGIBLES AND OTHER ASSETS

 

 

 

 

 

Noncurrent parts inventories

 

2,850

 

2,405

 

Goodwill

 

21,931

 

18,391

 

Intangible assets, net of accumulated amortization

 

8,153

 

4,734

 

Other

 

2,614

 

2,793

 

 

 

35,548

 

28,323

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT, net of accumulated depreciation

 

98,545

 

65,372

 

 

 

 

 

 

 

 

 

$

917,655

 

$

648,846

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

Accounts payable

 

$

24,712

 

$

15,957

 

Floorplan notes payable

 

494,886

 

320,801

 

Current maturities of long-term debt and short-term advances

 

3,761

 

4,207

 

Customer deposits

 

30,506

 

28,180

 

Accrued expenses

 

14,699

 

16,816

 

Income taxes payable

 

374

 

2,093

 

Total current liabilities

 

568,938

 

388,054

 

 

 

 

 

 

 

LONG-TERM LIABILITIES

 

 

 

 

 

Long-term debt, less current maturities

 

31,933

 

33,409

 

Deferred income taxes

 

9,663

 

9,012

 

Other long-term liabilities

 

3,010

 

3,814

 

 

 

44,606

 

46,235

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

Common stock, par value $.00001 per share, authorized - 25,000 shares; issued and outstanding - 20,754 at July 31, 2011 and 17,917 at January 31, 2011

 

 

 

Additional paid-in-capital

 

216,461

 

140,466

 

Retained earnings

 

87,650

 

74,091

 

 

 

304,111

 

214,557

 

 

 

 

 

 

 

 

 

$

917,655

 

$

648,846

 

 

See Notes to Consolidated Financial Statements

 

3



Table of Contents

 

TITAN MACHINERY INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)

 

 

 

Three Months Ended July 31,

 

Six Months Ended July 31,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

REVENUE

 

 

 

 

 

 

 

 

 

Equipment

 

$

225,283

 

$

153,131

 

$

474,512

 

$

303,491

 

Parts

 

49,292

 

33,947

 

91,202

 

69,010

 

Service

 

25,395

 

17,502

 

46,359

 

34,053

 

Rental and other

 

10,879

 

5,086

 

16,941

 

8,569

 

TOTAL REVENUE

 

310,849

 

209,666

 

629,014

 

415,123

 

 

 

 

 

 

 

 

 

 

 

COST OF REVENUE

 

 

 

 

 

 

 

 

 

Equipment

 

204,430

 

138,342

 

427,731

 

275,143

 

Parts

 

34,426

 

24,184

 

64,146

 

49,370

 

Service

 

8,963

 

6,970

 

16,871

 

12,941

 

Rental and other

 

7,179

 

4,122

 

11,612

 

7,178

 

TOTAL COST OF REVENUE

 

254,998

 

173,618

 

520,360

 

344,632

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

55,851

 

36,048

 

108,654

 

70,491

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

44,060

 

29,212

 

83,496

 

59,008

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

11,791

 

6,836

 

25,158

 

11,483

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

Interest and other income

 

267

 

34

 

552

 

207

 

Floorplan interest expense

 

(1,334

)

(1,911

)

(2,496

)

(3,712

)

Interest expense other

 

(341

)

(358

)

(616

)

(735

)

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

10,383

 

4,601

 

22,598

 

7,243

 

 

 

 

 

 

 

 

 

 

 

PROVISION FOR INCOME TAXES

 

(4,092

)

(1,887

)

(9,039

)

(2,970

)

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$

6,291

 

$

2,714

 

$

13,559

 

$

4,273

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE - NOTE 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE - BASIC

 

$

0.31

 

$

0.15

 

$

0.71

 

$

0.24

 

EARNINGS PER SHARE - DILUTED

 

$

0.30

 

$

0.15

 

$

0.69

 

$

0.24

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES - BASIC

 

20,237

 

17,635

 

19,009

 

17,626

 

WEIGHTED AVERAGE SHARES - DILUTED

 

20,799

 

18,080

 

19,567

 

18,060

 

 

See Notes to Consolidated Financial Statements

 

4



Table of Contents

 

TITAN MACHINERY INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(in thousands)

 

 

 

Common Stock

 

Additional

 

 

 

 

 

 

 

Shares

 

 

 

Paid-In

 

Retained

 

 

 

 

 

Outstanding

 

Amount

 

Capital

 

Earnings

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, JANUARY 31, 2011

 

17,917

 

$

 

$

140,466

 

$

74,091

 

$

214,557

 

Common stock issued in follow-on offering

 

2,760

 

 

74,898

 

 

74,898

 

Common stock issued on grant of restricted stock and exercise of stock options and warrants and tax benefits of equity awards

 

77

 

 

457

 

 

457

 

Stock-based compensation expense

 

 

 

640

 

 

640

 

Net income

 

 

 

 

13,559

 

13,559

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, JULY 31, 2011

 

20,754

 

$

 

$

216,461

 

$

87,650

 

$

304,111

 

 

See Notes to Consolidated Financial Statements

 

5



Table of Contents

 

TITAN MACHINERY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

 

 

Six Months Ended July 31,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

OPERATING ACTIVITIES

 

 

 

 

 

Net income

 

$

13,559

 

$

4,273

 

Adjustments to reconcile net income to net cash used for operating activities

 

 

 

 

 

Depreciation and amortization

 

6,053

 

4,204

 

Deferred income taxes

 

148

 

(353

)

Stock-based compensation expense

 

640

 

564

 

Other

 

168

 

(87

)

Changes in assets and liabilities, net of purchase of equipment dealerships assets and assumption of liabilities

 

 

 

 

 

Receivables, prepaid expenses and other assets

 

(5,325

)

(6,848

)

Inventories

 

(99,638

)

(28,261

)

Floorplan notes payable

 

3,718

 

(818

)

Accounts payable, customer deposits, accrued expenses and other long-term liabilities

 

5,979

 

(4,918

)

Income taxes

 

(2,167

)

2,084

 

 

 

 

 

 

 

NET CASH USED FOR OPERATING ACTIVITIES

 

(76,865

)

(30,160

)

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

Property and equipment purchases

 

(8,524

)

(6,250

)

Net proceeds from sale of equipment

 

642

 

434

 

Purchase of equipment dealerships, net of cash purchased

 

(27,121

)

(2,423

)

Other, net

 

6

 

(293

)

 

 

 

 

 

 

NET CASH USED FOR INVESTING ACTIVITIES

 

(34,997

)

(8,532

)

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

Proceeds from follow-on offering of common stock, net of underwriting discount of $4,166 and other direct costs of $286

 

74,898

 

 

Net change in non-manufacturer floorplan notes payable

 

74,217

 

23,444

 

Short-term advances related to customer contracts in transit, net

 

(390

)

(358

)

Proceeds from long-term debt borrowings

 

 

4,671

 

Principal payments on long-term debt

 

(11,238

)

(3,878

)

Other

 

457

 

89

 

 

 

 

 

 

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

137,944

 

23,968

 

 

 

 

 

 

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

26,082

 

(14,724

)

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

76,112

 

76,185

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

102,194

 

$

61,461

 

 

See Notes to Consolidated Financial Statements

 

6



Table of Contents

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Page — 2

(in thousands)

 

 

 

Six Months Ended July 31,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 

 

 

 

 

Cash paid during the period

 

 

 

 

 

Income taxes, net of refunds

 

$

10,883

 

$

1,247

 

 

 

 

 

 

 

Interest

 

$

2,850

 

$

4,460

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

Property and equipment financed with long-term debt

 

$

2,434

 

$

3,647

 

 

 

 

 

 

 

Net transfer of equipment to fixed assets from inventories

 

$

20,335

 

$

1,744

 

 

 

 

 

 

 

Net transfer of financing to long-term debt from floorplan notes payable

 

$

1,696

 

$

2,423

 

 

See Notes to Consolidated Financial Statements

 

7



Table of Contents

 

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 1 -    BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The unaudited consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The quarterly operating results for Titan Machinery Inc. (the “Company”) are subject to fluctuation due to varying weather patterns, which may impact the timing and amount of equipment purchases, rentals, and after-sales parts and service purchases by our Agriculture and Construction customers. Therefore, operating results for the six-month period ended July 31, 2011 are not necessarily indicative of the results that may be expected for the year ending January 31, 2012. The information contained in the balance sheet as of January 31, 2011 was derived from the audited financial statements for the Company for the year then ended. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended January 31, 2011 as filed with the SEC.

 

Nature of Business

 

Titan Machinery Inc. is engaged in the retail sale, service and rental of agricultural and construction equipment through stores in North Dakota, South Dakota, Minnesota, Iowa, Nebraska, Montana, Wyoming and Wisconsin.

 

Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Transportation Solutions, LLC. All significant accounts, transactions and profits between the consolidated companies have been eliminated in consolidation.

 

Fair Value of Financial Instruments

 

The carrying amount of cash, receivables, payables, short-term debt and other current liabilities approximates fair value because of the short maturity and/or frequent repricing of those instruments. Based upon current borrowing rates with similar maturities, the carrying value of the long-term debt approximates the fair value as of July 31, 2011 and January 31, 2011.

 

Exit and Disposal Costs

 

The Company accounts for exit or disposal activities, including store closures, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 420, Exit or Disposal Cost Obligations. Such costs mainly include lease termination costs and employee termination costs. We record a liability for the net present value of any remaining lease obligations, net of estimated sublease income, at the date we cease using the property. Any subsequent adjustments to that liability as a result of lease termination or changes in estimates of sublease income are recorded in the period incurred. We record a liability for employee termination costs at the date the termination benefits were communicated to the employees.

 

8



Table of Contents

 

Upon acquiring ABC Rental & Equipment Sales in the first quarter of fiscal 2012, the Company decided that it would combine its existing location in Belgrade, Montana into its newly-acquired store in nearby Bozeman, Montana. This merger was completed in July 2011, with all of the Belgrade operations and employees moving to the Bozeman store location. Thus, the Belgrade store was closed as of July 31, 2011. The exit costs relate to lease termination. Estimated lease termination costs totaling $0.4 million for the Belgrade store and adjustments for a previously closed store are included in operating expenses on the consolidated statements of operations for the three and six months ended July 31, 2011.

 

A reconciliation of the beginning and ending liability balance follows:

 

 

 

(in thousands)

 

Balance at January 31, 2011

 

$

207

 

Exit costs incurred and charged to expense

 

386

 

Exit costs paid

 

(66

)

Balance at July 31, 2011

 

$

527

 

 

Recent Accounting Guidance

 

In May 2011, the FASB amended authoritative guidance on fair value measurements, codified in ASC 820, Fair Value Measurements and Disclosures. The amended guidance results in common fair value measurements and disclosure requirements for financial statements reported under U.S. GAAP or International Financial Reporting Standards (“IFRS”). These amendments clarify the FASB’s intent about the application of existing fair value measurement requirements and change particular principles or requirements for measuring fair value and disclosing information about fair value measurements. The guidance is effective for interim and annual periods beginning after December 15, 2011, and is applied prospectively. The Company is in the process of determining the impact that this guidance will have on the Company’s consolidated financial statements.

 

In June 2011, the FASB amended authoritative guidance on the presentation of comprehensive income, codified in ASC 220, Comprehensive Income. The amended guidance requires the presentation of the total comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance is effective for the interim and annual periods beginning after December 15, 2011, and is applied retrospectively. The Company is in the process of determining the impact that this guidance will have on the Company’s consolidated financial statements.

 

Earnings Per Share

 

The following table sets forth the denominator for the computation of basic and diluted earnings per share:

 

 

 

Three Months Ended July 31,

 

Six Months Ended July 31,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

(in thousands)

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Basic weighted-average shares outstanding

 

20,237

 

17,635

 

19,009

 

17,626

 

Plus: Incremental shares from assumed conversions

 

 

 

 

 

 

 

 

 

Restricted Stock

 

182

 

187

 

175

 

177

 

Warrants

 

30

 

56

 

30

 

58

 

Stock Options

 

350

 

202

 

353

 

199

 

Diluted weighted-average shares outstanding

 

20,799

 

18,080

 

19,567

 

18,060

 

 

There were zero and 139,000 stock options outstanding as of July 31, 2011 and 2010, respectively, that were not included in the computation of diluted earnings per share because they were anti-dilutive.

 

9



Table of Contents

 

NOTE 2 -    INVENTORIES

 

 

 

July 31,

 

January 31,

 

 

 

2011

 

2011

 

 

 

(in thousands)

 

New equipment

 

$

396,887

 

$

209,871

 

Used equipment

 

153,379

 

162,254

 

Parts and attachments

 

65,405

 

52,694

 

Work in process

 

6,800

 

5,025

 

 

 

 

 

 

 

 

 

$

622,471

 

$

429,844

 

 

In addition to the above amounts, the Company has estimated that a portion of its parts inventory will not be sold in the next year. Accordingly, these balances have been classified as noncurrent assets.

 

NOTE 3 -    LINES OF CREDIT / FLOORPLAN NOTES PAYABLE

 

Operating Line of Credit

 

As of July 31, 2011, the Company had a $50.0 million working capital line of credit under a Senior Secured Credit Facility (the “Credit Agreement”) with a group of banks led by Wells Fargo Bank, National Association. The Company had $26.4 million outstanding on its operating lines of credit as of July 31, 2011 and January 31, 2011. Amounts outstanding are recorded as long-term debt, within long-term liabilities on the consolidated balance sheets, as the Company does not have the intention or obligation to repay amounts borrowed within one year.

 

Floorplan Lines of Credit

 

As of July 31, 2011, the Company had discretionary floorplan lines of credit for equipment purchases totaling approximately $550.0 million with various lending institutions, including $175.0 million under the aforementioned Credit Agreement, a $300.0 million Wholesale Floorplan Credit Facility with CNH Capital America LLC (“CNH Capital”) and a $75.0 million Wholesale Financing Plan with Rental Agreement with Agricredit Acceptance LLC. Floorplan notes payable relating to these credit facilities totaled approximately $454.3 million of the total floorplan notes payable balance of $494.9 million outstanding as of July 31, 2011 and $300.6 million of the total floorplan notes payable balance of $320.8 million outstanding as of January 31, 2011. As of July 31, 2011, the Company had approximately $90.0 million in available borrowings remaining under these lines of credit. These floorplan notes carried various interest rates primarily ranging from 2.19% to 7.25% as of July 31, 2011, subject to interest-free periods offered by CNH Capital. As of July 31, 2011, the Company was in compliance with all floorplan financial covenants.

 

NOTE 4 -    BUSINESS COMBINATIONS

 

The Company continued to implement its strategy of consolidating dealerships in desired market areas. Below is a summary of the acquisitions completed for the six months ended July 31, 2011. In certain of the business combination transactions the Company recognized goodwill and separately identifiable intangible assets. Factors contributing to the recognition of goodwill and intangible assets include an evaluation of the historical financial performance, proximity to other existing and future planned Company locations, customer relationships and distribution territory. Pro forma results are not presented as the acquisitions are not considered material, individually or in aggregate, to the Company. The results of operations have been included in the Company’s consolidated results of operations since the date of each respective business combination.

 

On February 28, 2011, the Company acquired certain assets of Tri-State Implement, Inc. The acquired entity consisted of one agricultural equipment store located in Sioux Falls, South Dakota which is contiguous to the Company’s existing construction equipment location in Sioux Falls. The acquisition-date fair value of the total consideration transferred for the dealership was $1.0 million.

 

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Table of Contents

 

On March 31, 2011, the Company acquired 100% of the outstanding stock of Schoffman’s Inc., which included the real estate of this entity, and subsequently merged the acquired entity into the Company. The acquisition consisted of one agricultural equipment store in Redwood Falls, Minnesota and is contiguous to the Company’s existing location in Marshall, Minnesota. The acquisition-date fair value of the total consideration transferred for the dealership was $5.8 million.

 

On April 1, 2011, the Company acquired certain assets of ABC Rental & Equipment Sales. The acquired entity consisted of four construction equipment rental stores located in Williston, North Dakota, and Bozeman, Missoula, and Big Sky, Montana. This acquisition expands the Company’s opportunity to capitalize on increased rental activity of the surrounding oil, coal and natural gas exploration and extraction areas in North Dakota and Montana. The acquisition-date fair value of the total consideration transferred for the dealerships was $5.4 million.

 

On May 13, 2011, the Company acquired certain assets of Carlson Tractor & Equipment, Inc. The acquired entity consisted of two construction equipment stores in Rogers and Rosemount, Minnesota and expands the Company’s construction presence in Minnesota. The acquisition-date fair value of the total consideration transferred for the dealerships was $2.9 million.

 

On May 31, 2011, the Company acquired certain assets of St. Joseph Equipment Inc. The acquired entity consisted of four construction equipment locations in Shakopee, Hermantown and Elk River, Minnesota, and La Crosse, Wisconsin. The acquisition establishes the Company’s first construction equipment store in Wisconsin and allows the Company to have the exclusive Case Construction contract for the entire state of Minnesota and 11 counties in western Wisconsin. The acquisition-date fair value of the total consideration transferred for the dealerships was $17.0 million.

 

During the six months ended July 31, 2011, adjustments were recorded for additional consideration of $1.9 million earned and paid under agreements disclosed in the Company’s Form 10-K for the fiscal year ended January 31, 2010 as filed with the SEC. This additional consideration resulted in a net increase in goodwill for the Agriculture segment of $1.9 million.

 

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Table of Contents

 

The allocations of the purchase prices in the above business combinations are presented in the following table.

 

 

 

July 31,

 

 

 

2011

 

 

 

(in thousands)

 

Cash

 

$

96

 

Receivables

 

3,775

 

Inventories

 

29,525

 

Prepaid expenses

 

799

 

Deferred income taxes

 

11

 

Property and equipment

 

8,291

 

Intangible assets

 

3,638

 

Goodwill

 

3,540

 

 

 

 

 

 

 

$

49,675

 

 

 

 

 

Accounts payable

 

$

224

 

Floorplan notes payable

 

13,602

 

Customer deposits

 

223

 

Accrued expenses

 

37

 

Income taxes payable

 

448

 

Long-term debt

 

442

 

Deferred income taxes

 

651

 

 

 

 

 

 

 

$

15,627

 

 

 

 

 

Cash consideration

 

27,217

 

Non-cash consideration: liabilities incurred

 

6,831

 

Total consideration

 

$

34,048

 

 

 

 

 

Goodwill related to the Agriculture operating segment

 

$

2,789

 

Goodwill related to the Construction operating segment

 

$

751

 

 

 

 

 

Goodwill expected to be deductible for tax purposes

 

$

2,690

 

 

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Table of Contents

 

NOTE 5 -    SEGMENT INFORMATION AND OPERATING RESULTS

 

Revenue, income before income tax and total assets at the segment level are reported before eliminations. The Company retains various unallocated income/(expense) items and assets at the general corporate level, which the Company refers to as “Shared Resources” in the table below. Shared Resources assets primarily consist of cash and property and equipment. Intersegment revenue is immaterial.

 

Certain financial information for each of the Company’s business segments is set forth below.

 

 

 

Three Months Ended July 31,

 

Six Months Ended July 31,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

(in thousands)

 

(in thousands)

 

Revenue

 

 

 

 

 

 

 

 

 

Agriculture

 

$

266,353

 

$

181,522

 

$

553,331

 

$

362,904

 

Construction

 

59,821

 

36,209

 

103,960

 

68,313

 

Segment revenue

 

326,174

 

217,731

 

657,291

 

431,217

 

Eliminations

 

(15,325

)

(8,065

)

(28,277

)

(16,094

)

Total

 

$

310,849

 

$

209,666

 

$

629,014

 

$

415,123

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) Before Income Taxes

 

 

 

 

 

 

 

 

 

Agriculture

 

$

10,937

 

$

6,246

 

$

23,896

 

$

11,038

 

Construction

 

576

 

(852

)

1,228

 

(2,767

)

Segment income (loss) before income taxes

 

11,513

 

5,394

 

25,124

 

8,271

 

Shared Resources

 

(887

)

(643

)

(2,014

)

(634

)

Eliminations

 

(243

)

(150

)

(512

)

(394

)

Income before income taxes

 

$

10,383

 

$

4,601

 

$

22,598

 

$

7,243

 

 

 

 

July 31,

 

January 31,

 

 

 

2011

 

2011

 

 

 

(in thousands)

 

Total Assets

 

 

 

 

 

Agriculture

 

$

619,322

 

$

514,049

 

Construction

 

178,537

 

98,535

 

Segment assets

 

797,859

 

612,584

 

Shared Resources (1)

 

121,386

 

37,340

 

Eliminations

 

(1,590

)

(1,078

)

Total

 

$

917,655

 

$

648,846

 

 


(1)          The balance as of July 31, 2011 includes the cash proceeds from the follow-on offering completed in May 2011.

 

NOTE 6 -    SUBSEQUENT EVENTS

 

On September 2, 2011, the Company acquired certain assets of Virgl Implement Inc. and Victor’s Inc., expanding the Company’s agriculture presence in Nebraska. The acquired entities consisted of two agricultural equipment stores in Wahoo and Fremont, Nebraska. Due to the recent acquisition of these entities, the initial business combination accounting will be performed in the three months ending October 31, 2011. The acquisition-date fair value of the total consideration transferred for the dealerships was approximately $13.2 million.

 

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Table of Contents

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our interim unaudited consolidated financial statements and related notes included in Item 1 of Part 1 of this Quarterly Report, and the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended January 31, 2011.

 

Critical Accounting Policies

 

There have been no material changes in our Critical Accounting Policies, as disclosed in our Annual Report on Form 10-K for the year ended January 31, 2011.

 

Overview

 

We own and operate a network of full service agricultural and construction equipment stores in the United States. Based upon information provided to us by CNH Global N.V. or its U.S. subsidiary CNH America LLC, collectively referred to in this Form 10-K as CNH, we are the world’s largest retail dealer of Case IH Agriculture equipment and a major retail dealer of New Holland Agriculture, Case Construction and New Holland Construction equipment in the U.S. We have two primary business segments, Agriculture and Construction, within each of which we sell and rent new and used equipment, sell parts, and service the equipment in the areas surrounding our stores.

 

Our net income was $6.3 million, or $0.30 per diluted share, for the three months ended July 31, 2011, compared to $2.7 million, or $0.15 per diluted share, for the three months ended July 31, 2010. Significant factors impacting the quarterly comparisons were:

 

·                  Increase in revenue due to acquisitions and same-store sales growth in both our Agriculture and Construction segments primarily resulting from the continuation of a strong agriculture equipment market and improved construction equipment market in the region in which we do business;

 

·                  Increase in gross profit primarily due to increased revenue, and improvement in gross profit margin on service and rental and other;

 

·                  Decrease in floorplan interest expense due to our new Credit Agreement entered into on October 31, 2010.

 

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Table of Contents

 

Results of Operations

 

Comparative financial data for each of our four sources of revenue are expressed below. The results for these periods include the operating results of the acquisitions made during these periods. The period-to-period comparisons included below are not necessarily indicative of future results. Segment information is provided later in this discussion and analysis of our results of operations.

 

 

 

Three Months Ended July 31,

 

Percent

 

Six Months Ended July 31,

 

Percent

 

 

 

2011

 

2010

 

Change

 

2011

 

2010

 

Change

 

 

 

(dollars in thousands)

 

 

 

(dollars in thousands)

 

 

 

Equipment

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

225,283

 

$

153,131

 

47.1

%

$

474,512

 

$

303,491

 

56.4

%

Cost of revenue

 

204,430

 

138,342

 

47.8

%

427,731

 

275,143

 

55.5

%

Gross profit

 

$

20,853

 

$

14,789

 

41.0

%

$

46,781

 

$

28,348

 

65.0

%

Gross profit margin

 

9.3

%

9.7

%

(0.4

)%

9.9

%

9.3

%

0.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Parts

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

49,292

 

$

33,947

 

45.2

%

$

91,202

 

$

69,010

 

32.2

%

Cost of revenue

 

34,426

 

24,184

 

42.4

%

64,146

 

49,370

 

29.9

%

Gross profit

 

$

14,866

 

$

9,763

 

52.3

%

$

27,056

 

$

19,640

 

37.8

%

Gross profit margin

 

30.2

%

28.8

%

1.4

%

29.7

%

28.5

%

1.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

25,395

 

$

17,502

 

45.1

%

$

46,359

 

$

34,053

 

36.1

%

Cost of revenue

 

8,963

 

6,970

 

28.6

%

16,871

 

12,941

 

30.4

%

Gross profit

 

$

16,432

 

$

10,532

 

56.0

%

$

29,488

 

$

21,112

 

39.7

%

Gross profit margin

 

64.7

%

60.2

%

4.5

%

63.6

%

62.0

%

1.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental and other

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

10,879

 

$

5,086

 

113.9

%

$

16,941

 

$

8,569

 

97.7

%

Cost of revenue

 

7,179

 

4,122

 

74.2

%

11,612

 

7,178

 

61.8

%

Gross profit

 

$

3,700

 

$

964

 

283.8

%

$

5,329

 

$

1,391

 

283.1

%

Gross profit margin

 

34.0

%

19.0

%

15.0

%

31.5

%

16.2

%

15.3

%

 

15



Table of Contents

 

The following table sets forth our statements of operations data expressed as a percentage of total revenue for the periods indicated:

 

 

 

Three Months Ended July 31,

 

Six Months Ended July 31,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

Equipment

 

72.5

%

73.0

%

75.4

%

73.1

%

Parts

 

15.9

%

16.2

%

14.5

%

16.6

%

Service

 

8.1

%

8.4

%

7.4

%

8.2

%

Rental and other

 

3.5

%

2.4

%

2.7

%

2.1

%

Total revenue

 

100.0

%

100.0

%

100.0

%

100.0

%

 

 

 

 

 

 

 

 

 

 

Total cost of revenue

 

82.0

%

82.8

%

82.7

%

83.0

%

 

 

 

 

 

 

 

 

 

 

Gross profit

 

18.0

%

17.2

%

17.3

%

17.0

%

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

14.2

%

13.9

%

13.3

%

14.2

%

 

 

 

 

 

 

 

 

 

 

Income from operations

 

3.8

%

3.3

%

4.0

%

2.8

%

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

(0.5

)%

(1.1

)%

(0.4

)%

(1.1

)%

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

3.3

%

2.2

%

3.6

%

1.7

%

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

(1.3

)%

(0.9

)%

(1.4

)%

(0.7

)%

 

 

 

 

 

 

 

 

 

 

Net income

 

2.0

%

1.3

%

2.2

%

1.0

%

 

Three Months Ended July 31, 2011 Compared to Three Months Ended July 31, 2010

 

Consolidated Results

 

Revenue

 

 

 

Three Months Ended July 31,

 

 

 

Percent

 

 

 

2011

 

2010

 

Increase

 

Change

 

 

 

(dollars in thousands)

 

 

 

Equipment

 

$

225,283

 

$

153,131

 

$

72,152

 

47.1

%

Parts

 

49,292

 

33,947

 

15,345

 

45.2

%

Service

 

25,395

 

17,502

 

7,893

 

45.1

%

Rental and other

 

10,879

 

5,086

 

5,793

 

113.9

%

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

$

310,849

 

$

209,666

 

$

101,183

 

48.3

%

 

The increase in revenue for the three months ended July 31, 2011, as compared to the same period last year, was due to acquisitions contributing $42.4 million and same-store sales growth contributing $58.8 million to current period revenue. This revenue growth was in both our Agriculture and Construction segments and resulted from the continuation of a strong agriculture equipment market and improved construction equipment market in the region in which we do business.

 

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Table of Contents

 

Cost of Revenue

 

 

 

Three Months Ended July 31,

 

 

 

Percent

 

 

 

2011

 

2010

 

Increase

 

Change

 

 

 

(dollars in thousands)

 

 

 

Equipment

 

$

204,430

 

$

138,342

 

$

66,088

 

47.8

%

Parts

 

34,426

 

24,184

 

10,242

 

42.4

%

Service

 

8,963

 

6,970

 

1,993

 

28.6

%

Rental and other

 

7,179

 

4,122

 

3,057

 

74.2

%

 

 

 

 

 

 

 

 

 

 

Total cost of revenue

 

$

254,998

 

$

173,618

 

$

81,380

 

46.9

%

 

The increase in cost of revenue for the three months ended July 31, 2011, as compared to the same period last year, was primarily due to increased revenue. Acquisitions contributed $33.2 million of the increase in total cost of revenue, while same-store sales growth contributed $48.2 million of the increase. As a percentage of revenue, cost of revenue was 82.0% compared to 82.8% for the second quarter of fiscal 2011.

 

Gross Profit

 

 

 

Three Months Ended July 31,

 

Increase/

 

Percent

 

 

 

2011

 

2010

 

(Decrease)

 

Change

 

 

 

(dollars in thousands)

 

 

 

Gross Profit

 

 

 

 

 

 

 

 

 

Equipment

 

$

20,853

 

$

14,789

 

$

6,064

 

41.0

%

Parts

 

14,866

 

9,763

 

5,103

 

52.3

%

Service

 

16,432

 

10,532

 

5,900

 

56.0

%

Rental and other

 

3,700

 

964

 

2,736

 

283.8

%

 

 

 

 

 

 

 

 

 

 

Total Gross Profit

 

$

55,851

 

$

36,048

 

$

19,803

 

54.9

%

 

 

 

 

 

 

 

 

 

 

Gross Profit Margin

 

 

 

 

 

 

 

 

 

Equipment

 

9.3

%

9.7

%

(0.4

)%

(4.1

)%

Parts

 

30.2

%

28.8

%

1.4

%

4.9

%

Service

 

64.7

%

60.2

%

4.5

%

7.5

%

Rental and other

 

34.0

%

19.0

%

15.0

%

78.9

%

 

 

 

 

 

 

 

 

 

 

Total Gross Profit Margin

 

18.0

%

17.2

%

0.8

%

4.7

%

 

 

 

 

 

 

 

 

 

 

Gross Profit Mix

 

 

 

 

 

 

 

 

 

Equipment

 

37.3

%

41.0

%

(3.7

)%

(9.0

)%

Parts

 

26.6

%

27.1

%

(0.5

)%

(1.8

)%

Service

 

29.5

%

29.2

%

0.3

%

1.0

%

Rental and other

 

6.6

%

2.7

%

3.9

%

144.4

%

 

 

 

 

 

 

 

 

 

 

Total Gross Profit Mix

 

100.0

%

100.0

%

 

 

 

 

 

The $19.8 million increase in gross profit for the three months ended July 31, 2011, as compared to the same period last year, was primarily due to increased revenue. Acquisitions contributed $9.2 million to the increase in gross profit for the three months ended July 31, 2011, while increases in same-store gross profit contributed the remaining $10.6 million. The increase in gross profit margin from 17.2% for the three months ended July 31, 2010 to 18.0% for the three months ended July 31, 2011 was primarily due to the increase in gross profit margin for service and rental and other. The increase in gross profit margin on rental and other is due to an increase in utilization of our rental fleet.

 

17



Table of Contents

 

Operating Expenses

 

 

 

Three Months Ended July 31,

 

 

 

Percent

 

 

 

2011

 

2010

 

Increase

 

Change

 

 

 

(dollars in thousands)

 

 

 

Operating expenses

 

$

44,060

 

$

29,212

 

$

14,848

 

50.8

%

Operating expenses as a percentage of revenue

 

14.2

%

13.9

%

0.3

%

2.2

%

 

The $14.8 million increase in operating expenses, as compared to the same period last year, was primarily due to the additional costs associated with acquisitions such as compensation, rent and depreciation. As a percentage of total revenue, operating expenses increased slightly to 14.2% for the three months ended July 31, 2011 compared to 13.9% for the three months ended July 31, 2010, reflecting higher expenses related to the Construction segment.

 

Other Income (Expense)

 

 

 

Three Months Ended July 31,

 

Increase/

 

Percent

 

 

 

2011

 

2010

 

(Decrease)

 

Change

 

 

 

(dollars in thousands)

 

 

 

Interest and other income

 

$

267

 

$

34

 

$

233

 

685.3

%

Floorplan interest expense

 

(1,334

)

(1,911

)

(577

)

(30.2

)%

Interest expense other

 

(341

)

(358

)

(17

)

(4.7

)%

 

The decrease in floorplan interest expense of $0.6 million was primarily due to lower interest rates and lower interest-bearing floorplan notes payable balances associated with our new Credit Agreement entered into on October 31, 2010, for the three months ended July 31, 2011, as compared to the same period in the prior year. We expect floorplan interest expense and interest expense other in fiscal 2012 to continue to be positively impacted by the aforementioned Credit Agreement.

 

Provision for Income Taxes

 

 

 

Three Months Ended July 31,

 

 

 

Percent

 

 

 

2011

 

2010

 

Increase

 

Change

 

 

 

(dollars in thousands)

 

 

 

Provision for income taxes

 

$

4,092

 

$

1,887

 

$

2,205

 

116.9

%

 

Our effective tax rate decreased from 41.0% for the three months ended July 31, 2010 to 39.4% for the three months ended July 31, 2011. The decrease in our effective tax rate from the comparable period in the prior year primarily reflects a decrease in the effect of permanent differences between financial and income tax reporting, such as incentive stock options.

 

18



Table of Contents

 

Segment Results

 

Certain financial information for our Agriculture and Construction business segments is set forth below. Revenue and income (loss) before income taxes at the segment level are reported before eliminations. “Shared Resources” in the table below refers to the various unallocated income/(expense) items that we have retained at the general corporate level. Intersegment revenue is immaterial.

 

 

 

Three Months Ended July 31,

 

Increase/

 

Percent

 

 

 

2011

 

2010

 

(Decrease)

 

Change

 

 

 

(dollars in thousands)

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

Agriculture

 

$

266,353

 

$

181,522

 

$

84,831

 

46.7

%

Construction

 

59,821

 

36,209

 

23,612

 

65.2

%

Segment revenue

 

326,174

 

217,731

 

108,443

 

49.8

%

Eliminations

 

(15,325

)

(8,065

)

(7,260

)

(90.0

)%

Total

 

$

310,849

 

$

209,666

 

$

101,183

 

48.3

%

 

 

 

 

 

 

 

 

 

 

Income (Loss) Before Income Taxes

 

 

 

 

 

 

 

 

 

Agriculture

 

$

10,937

 

$

6,246

 

$

4,691

 

75.1

%

Construction

 

576

 

(852

)

1,428

 

167.6

%

Segment income (loss) before income taxes

 

11,513

 

5,394

 

6,119

 

113.4

%

Shared Resources

 

(887

)

(643

)

(244

)

(37.9

)%

Eliminations

 

(243

)

(150

)

(93

)

(62.0

)%

Income before income taxes

 

$

10,383

 

$

4,601

 

$

5,782

 

125.7

%

 

Agriculture

 

Agriculture segment revenue for the three months ended July 31, 2011 increased 46.7% compared to the same period last year. The revenue increase was due to acquisitions and an Agriculture same-store sales increase of 26.9% over the three months ended July 31, 2010. The same-store sales growth was positively impacted by a strong equipment market primarily caused by increased farm cash receipts for calendar year 2010 and anticipated strong farm cash receipts for calendar year 2011.

 

Agriculture segment income before income taxes for the three months ended July 31, 2011 increased 75.1% compared to the same period last year, primarily due to higher Agriculture segment revenue. Also contributing to the improvement in segment income before income taxes was a decrease in floorplan interest expense. This decrease resulted from our new Credit Agreement entered into on October 31, 2010, and we expect interest expense in fiscal 2012 to continue to be positively impacted by this new Credit Agreement.

 

Construction

 

Construction segment revenue for the three months ended July 31, 2011 increased 65.2% compared to the same period last year. The revenue increase was due to acquisitions and a Construction same-store sales increase of 34.6% over the three months ended July 31, 2010. The same-store sales growth was positively impacted by an improved construction equipment market in the region in which we do business and results from ongoing operational improvements.

 

The Construction segment earned segment income before income taxes of $0.6 million for the three months ended July 31, 2011, compared to a segment loss before income taxes of $0.9 million in the same period last year. This improvement was primarily caused by an increase in Construction segment revenue and increase in gross profit on rental and other, resulting from increased utilization of our rental fleet. Offsetting the positive effect of increased revenue and gross profit margin was $0.4 million in exit costs primarily related to the closing of our store in Belgrade, Montana.

 

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Table of Contents

 

Shared Resources/Eliminations

 

We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate these net expenses to our segments. Since these allocations are set early in the year, unallocated balances may occur.

 

Eliminations remove any inter-company revenue and income before income taxes residing in our segment results.

 

Six Months Ended July 31, 2011 Compared to Six Months Ended July 31, 2010

 

Consolidated Results

 

Revenue

 

 

 

Six Months Ended July 31,

 

 

 

Percent

 

 

 

2011

 

2010

 

Increase

 

Change

 

 

 

(dollars in thousands)

 

 

 

Equipment

 

$

474,512

 

$

303,491

 

$

171,021

 

56.4

%

Parts

 

91,202

 

69,010

 

22,192

 

32.2

%

Service

 

46,359

 

34,053

 

12,306

 

36.1

%

Rental and other

 

16,941

 

8,569

 

8,372

 

97.7

%

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

$

629,014

 

$

415,123

 

$

213,891

 

51.5

%

 

The increase in revenue for the six months ended July 31, 2011, as compared to the same period last year, was due to acquisitions contributing $79.4 million and same-store sales growth contributing $134.5 million to current period revenue. This revenue growth was in both our Agriculture and Construction segments and resulted from the continuation of a strong agriculture equipment market and improved construction equipment market in the region in which we do business.

 

Cost of Revenue

 

 

 

Six Months Ended July 31,

 

 

 

Percent

 

 

 

2011

 

2010

 

Increase

 

Change

 

 

 

(dollars in thousands)

 

 

 

Equipment

 

$

427,731

 

$

275,143

 

$

152,588

 

55.5

%

Parts

 

64,146

 

49,370

 

14,776

 

29.9

%

Service

 

16,871

 

12,941

 

3,930

 

30.4

%

Rental and other

 

11,612

 

7,178

 

4,434

 

61.8

%

 

 

 

 

 

 

 

 

 

 

Total cost of revenue

 

$

520,360

 

$

344,632

 

$

175,728

 

51.0

%

 

The increase in cost of revenue for the six months ended July 31, 2011, as compared to the same period last year, was primarily due to increased revenue. Acquisitions contributed $62.5 million of the increase in total cost of revenue, while same-store sales growth contributed $113.2 million of the increase. As a percentage of revenue, cost of revenue was 82.7% compared to 83.0% for the same period last year.

 

20



Table of Contents

 

Gross Profit

 

 

 

Six Months Ended July 31,

 

Increase/

 

Percent

 

 

 

2011

 

2010

 

(Decrease)

 

Change

 

 

 

(dollars in thousands)

 

 

 

Gross Profit

 

 

 

 

 

 

 

 

 

Equipment

 

$

46,781

 

$

28,348

 

$

18,433

 

65.0

%

Parts

 

27,056

 

19,640

 

7,416

 

37.8

%

Service

 

29,488

 

21,112

 

8,376

 

39.7

%

Rental and other

 

5,329

 

1,391

 

3,938

 

283.1

%

 

 

 

 

 

 

 

 

 

 

Total Gross Profit

 

$

108,654

 

$

70,491

 

$

38,163

 

54.1

%

 

 

 

 

 

 

 

 

 

 

Gross Profit Margin

 

 

 

 

 

 

 

 

 

Equipment

 

9.9

%

9.3

%

0.6

%

6.5

%

Parts

 

29.7

%

28.5

%

1.2

%

4.2

%

Service

 

63.6

%

62.0

%

1.6

%

2.6

%

Rental and other

 

31.5

%

16.2

%

15.3

%

94.4

%

 

 

 

 

 

 

 

 

 

 

Total Gross Profit Margin

 

17.3

%

17.0

%

0.3