Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2017
|
|
2016
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
Interest income and other income
|
$
|
682
|
|
|
$
|
612
|
|
|
$
|
70
|
|
|
11.4
|
%
|
Floorplan interest expense
|
(2,163
|
)
|
|
(3,806
|
)
|
|
(1,643
|
)
|
|
(43.2
|
)%
|
Other interest expense
|
(2,464
|
)
|
|
(2,777
|
)
|
|
(313
|
)
|
|
(11.3
|
)%
|
The decrease in floorplan interest expense for the
second
quarter of fiscal
2018
, as compared to the
second
quarter of fiscal
2017
, was primarily due to a decrease in our average interest-bearing inventory in the
second
quarter of fiscal
2018
. Interest expense associated with our senior convertible notes, which is reflected in other interest expense, decreased
$0.7 million
in the second quarter of fiscal 2018 compared to the second quarter of fiscal 2017 due to interest savings resulting from our repurchases. Other interest expense includes $0.4 million of debt issuance cost write-offs recognized in the second quarter of fiscal 2018 as a result of our election to reduce the maximum available credit under our Wells Fargo Credit Agreement.
Benefit from Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
|
|
Percent
|
|
2017
|
|
2016
|
|
Increase
|
|
Change
|
|
(dollars in thousands)
|
|
|
Benefit from Income Taxes
|
$
|
(2,024
|
)
|
|
$
|
(1,847
|
)
|
|
$
|
177
|
|
|
9.6
|
%
|
Our effective tax rate was
28.1%
for the
second
quarter of fiscal
2018
and
40.6%
for the same period last year. The difference in our effective tax rate is primarily due to the change in mix of our domestic and foreign income or losses before income taxes in relation to our total loss before income taxes, and the impact of valuation allowances recognized for deferred tax assets, including net operating losses, in certain of our domestic and international jurisdictions.
Segment Results
Certain financial information for our Agriculture, Construction and International business segments is set forth below. “Shared Resources” in the table below refers to the various unallocated income/(expense) items that we have retained at the general corporate level. Revenue between segments is immaterial.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2017
|
|
2016
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
Revenue
|
|
|
|
|
|
|
|
Agriculture
|
$
|
138,545
|
|
|
$
|
153,713
|
|
|
$
|
(15,168
|
)
|
|
(9.9
|
)%
|
Construction
|
77,890
|
|
|
83,132
|
|
|
(5,242
|
)
|
|
(6.3
|
)%
|
International
|
52,436
|
|
|
41,488
|
|
|
10,948
|
|
|
26.4
|
%
|
Total
|
$
|
268,871
|
|
|
$
|
278,333
|
|
|
$
|
(9,462
|
)
|
|
(3.4
|
)%
|
|
|
|
|
|
|
|
|
Income (Loss) Before Income Taxes
|
|
|
|
|
|
|
|
Agriculture
|
$
|
(6,882
|
)
|
|
$
|
(4,325
|
)
|
|
$
|
(2,557
|
)
|
|
(59.1
|
)%
|
Construction
|
930
|
|
|
626
|
|
|
304
|
|
|
48.6
|
%
|
International
|
283
|
|
|
(175
|
)
|
|
458
|
|
|
261.7
|
%
|
Segment income (loss) before income taxes
|
(5,669
|
)
|
|
(3,874
|
)
|
|
(1,795
|
)
|
|
(46.3
|
)%
|
Shared Resources
|
(1,541
|
)
|
|
(675
|
)
|
|
(866
|
)
|
|
(128.3
|
)%
|
Total
|
$
|
(7,210
|
)
|
|
$
|
(4,549
|
)
|
|
$
|
(2,661
|
)
|
|
(58.5
|
)%
|
Agriculture
Agriculture segment revenue for the
second
quarter of fiscal
2018
decreased
9.9%
compared to the same period last year. Same-store sales decreased
0.2%
over the
second
quarter of fiscal
2017
. The revenue decrease was primarily due to a decrease in revenue resulting from the impact of our store closings associated with our Fiscal 2018 Restructuring Plan.
Agriculture segment
loss
before income taxes was
$6.9 million
for the
second
quarter of fiscal
2018
compared to a
$4.3 million
loss before income taxes for the
second
quarter of fiscal
2017
. The increased segment loss before income taxes was largely the result of restructuring charges incurred under our Fiscal 2018 Restructuring Plan, which amounted to $5.2 million in the second quarter of fiscal 2018, but partially offset by operating expense savings as a result of this plan and a decrease in floorplan interest expense as the result of a decrease in our interest-bearing inventory in the
second
quarter of fiscal
2018
. The decrease in segment revenue was largely offset by a higher gross profit margin.
Construction
Construction segment revenue for the
second
quarter of fiscal
2018
decreased
6.3%
compared to the same period last year. The revenue decrease was due to a same-store sales decrease of
5.8%
over the second quarter of fiscal 2017, and was primarily the result of decreased equipment revenue, largely resulting from the impact of the incremental revenue associated with our expanded marketing of aged equipment inventory that occurred in the second quarter of fiscal 2017, which totaled $14.0 million, but was partially offset by positive end user demand.
Our Construction segment
income
before income taxes was
$0.9 million
for the
second
quarter of fiscal
2018
compared to
$0.6 million
for the
second
quarter of fiscal
2017
. The increase in segment results was primarily due to a decrease in floorplan interest expense that was the result of a decrease in our average interest-bearing inventory in the
second
quarter of fiscal
2018
and a decrease in operating expenses related to cost savings from our restructuring plan. The decrease in expenses was partially offset by decreases in equipment revenues and gross profit. The dollar utilization of our rental fleet
decreased
slightly from
25.3%
in the
second
quarter of fiscal
2017
to
24.9%
in the
second
quarter of fiscal
2018
.
International
International segment revenue for the
second
quarter of fiscal
2018
increased
26.4%
compared to the same period last year primarily due to increased equipment revenue. Equipment revenue increased in the second quarter of fiscal 2018 primarily due to the build-out of our footprint, availability of subvention funds and positive crop conditions in certain of our markets.
Our International segment
income
before income taxes was
$0.3 million
for the
second
quarter of fiscal
2018
compared to loss before income taxes of
$0.2 million
for the same period last year. The increase in segment income before income taxes was primarily due to the increase in segment revenue as noted above, but partially offset by an increase in operating expenses resulting from the continued build-out of our footprint and presence in our European markets.
Shared Resources/Eliminations
We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments. Since these allocations are set early in the year, and a portion is planned to be unallocated, unallocated balances may occur. Shared Resource segment
loss
before income taxes was
$1.5 million
for the
second
quarter of fiscal
2018
compared to
loss
before income taxes of
$0.7 million
for the same period last year. For the second quarter of fiscal 2018, loss before income taxes was impacted by $0.4 million in debt issuance cost write-offs as a result of our election to reduce the maximum available credit under our Wells Fargo Credit Agreement.
Six Months Ended July 31, 2017
Compared to
Six Months Ended July 31, 2016
Consolidated Results
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
|
|
Percent
|
|
2017
|
|
2016
|
|
Decrease
|
|
Change
|
|
(dollars in thousands)
|
|
|
|
Equipment
|
$
|
335,796
|
|
|
$
|
358,175
|
|
|
$
|
(22,379
|
)
|
|
(6.2
|
)%
|
Parts
|
112,163
|
|
|
115,845
|
|
|
(3,682
|
)
|
|
(3.2
|
)%
|
Service
|
59,275
|
|
|
62,288
|
|
|
(3,013
|
)
|
|
(4.8
|
)%
|
Rental and other
|
25,755
|
|
|
26,885
|
|
|
(1,130
|
)
|
|
(4.2
|
)%
|
Total Revenue
|
$
|
532,989
|
|
|
$
|
563,193
|
|
|
$
|
(30,204
|
)
|
|
(5.4
|
)%
|
The
decrease
in revenue for the first
six
months of fiscal
2018
was primarily the result of our store closings associated with our Fiscal 2018 Restructuring Plan and the impact of incremental revenue associated with our expanded marketing of aged equipment inventory within our Agriculture and Construction segments in the second quarter of fiscal 2017. Approximately $46.8 million of equipment revenue was recognized in the first six months of fiscal 2017 as the result of our expanded marketing plan. The decrease in Agriculture and Construction segment revenue was partially offset by an increase in revenue in our International segment.
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2017
|
|
2016
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
|
Gross Profit
|
|
|
|
|
|
|
|
Equipment
|
$
|
25,550
|
|
|
$
|
26,945
|
|
|
$
|
(1,395
|
)
|
|
(5.2
|
)%
|
Parts
|
32,703
|
|
|
34,226
|
|
|
(1,523
|
)
|
|
(4.4
|
)%
|
Service
|
37,037
|
|
|
38,643
|
|
|
(1,606
|
)
|
|
(4.2
|
)%
|
Rental and other
|
6,436
|
|
|
6,667
|
|
|
(231
|
)
|
|
(3.5
|
)%
|
Total Gross Profit
|
$
|
101,726
|
|
|
$
|
106,481
|
|
|
$
|
(4,755
|
)
|
|
(4.5
|
)%
|
Gross Profit Margin
|
|
|
|
|
|
|
|
Equipment
|
7.6
|
%
|
|
7.5
|
%
|
|
0.1
|
%
|
|
1.3
|
%
|
Parts
|
29.2
|
%
|
|
29.5
|
%
|
|
(0.3
|
)%
|
|
(1.0
|
)%
|
Service
|
62.5
|
%
|
|
62.0
|
%
|
|
0.5
|
%
|
|
0.8
|
%
|
Rental and other
|
25.0
|
%
|
|
24.8
|
%
|
|
0.2
|
%
|
|
0.8
|
%
|
Total Gross Profit Margin
|
19.1
|
%
|
|
18.9
|
%
|
|
0.2
|
%
|
|
1.1
|
%
|
Gross Profit Mix
|
|
|
|
|
|
|
|
Equipment
|
25.1
|
%
|
|
25.3
|
%
|
|
(0.2
|
)%
|
|
(0.8
|
)%
|
Parts
|
32.2
|
%
|
|
32.1
|
%
|
|
0.1
|
%
|
|
0.3
|
%
|
Service
|
36.4
|
%
|
|
36.3
|
%
|
|
0.1
|
%
|
|
0.3
|
%
|
Rental and other
|
6.3
|
%
|
|
6.3
|
%
|
|
—
|
%
|
|
—
|
%
|
Total Gross Profit Mix
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
The
$4.8 million
decrease
in gross profit for the first
six
months of fiscal
2018
, as compared to the same period last year, was primarily due to lower revenue for the first sixth months of fiscal 2018. The decrease in revenues was partially offset by an increase in gross profit margin percentage from
18.9%
for the first
six
months of fiscal
2017
to
19.1%
for the first
six
months of fiscal
2018
.
Our company-wide absorption for the first
six
months of fiscal
2018
increased to
76.6%
as compared to
74.9%
during the same period last year, as our decrease in gross profit from parts, service and rental and other in fiscal 2018 was more than offset by a reduction in our fixed operating costs and floorplan interest expense.
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2017
|
|
2016
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
Operating Expenses
|
$
|
102,510
|
|
|
$
|
105,989
|
|
|
$
|
(3,479
|
)
|
|
(3.3
|
)%
|
Operating Expenses as a Percentage of Revenue
|
19.2
|
%
|
|
18.9
|
%
|
|
0.3
|
%
|
|
1.6
|
%
|
The
$3.5 million
decrease
in operating expenses, as compared to the same period last year, was primarily the result of cost savings resulting from our Fiscal 2018 Restructuring Plan. The increase in operating expenses as a percentage of total revenue was primarily due to the decrease in total revenue in the first
six
months of fiscal
2018
, as compared to the same period last year, which negatively affected our ability to leverage our fixed operating costs.
Restructuring Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
|
|
Percent
|
|
2017
|
|
2016
|
|
Increase
|
|
Change
|
|
(dollars in thousands)
|
|
|
Restructuring Costs
|
$
|
7,893
|
|
|
$
|
271
|
|
|
$
|
7,622
|
|
|
n/m
|
The restructuring costs recognized in the
second
quarters of fiscal
2018
and
2017
are charges associated with the result of our restructuring plans and associated exit costs, including accruals for lease terminations and remaining lease obligations, termination benefits, and the costs associated with relocating certain assets of our closed stores. The Company anticipates recognizing approximately $4.0 million of additional restructuring costs during the remainder of fiscal 2018.
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2017
|
|
2016
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
Interest income and other income
|
$
|
1,460
|
|
|
$
|
749
|
|
|
$
|
711
|
|
|
94.9
|
%
|
Floorplan interest expense
|
(4,819
|
)
|
|
(7,549
|
)
|
|
(2,730
|
)
|
|
(36.2
|
)%
|
Other interest expense
|
(4,584
|
)
|
|
(3,770
|
)
|
|
814
|
|
|
21.6
|
%
|
The
decrease
in floorplan interest expense for the first
six
months of fiscal
2018
, as compared to the same period last year, was primarily due to a decrease in our average interest-bearing inventory in the first
six
months of fiscal
2018
. For the first six months of fiscal 2017, other interest expense includes a $2.1 million gain recognized as a result of our repurchase of $30.1 million face value of senior convertible notes. Interest expense associated with our senior convertible notes, which is reflected in other interest expense, decreased $1.7 million in the first six months of fiscal 2018 compared to the first six months of fiscal 2017 due to interest savings resulting from our repurchases. Other interest expense also includes $0.4 million of debt issuance cost write-offs recognized in the second quarter of fiscal 2018 as a result of our election to reduce the maximum available credit under our Wells Fargo Credit Agreement.
Benefit from Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
|
|
Percent
|
|
2017
|
|
2016
|
|
Increase
|
|
Change
|
|
(dollars in thousands)
|
|
|
Benefit from Income Taxes
|
$
|
(5,502
|
)
|
|
$
|
(3,789
|
)
|
|
$
|
1,713
|
|
|
n/m
|
Our effective tax rate was
33.1%
for the first
six
months of fiscal
2018
and
36.6%
for the same period last year. The difference in our effective tax rate is primarily due to the change in mix of our domestic and foreign income or losses before income taxes in relation to our total loss before income taxes, and the impact of valuation allowances recognized for deferred tax assets, including net operating losses, in certain of our domestic and international jurisdictions.
Segment Results
Certain financial information for our Agriculture, Construction and International business segments is set forth below. “Shared Resources” in the table below refers to the various unallocated income/(expense) items that we have retained at the general corporate level. Revenue between segments is immaterial.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2017
|
|
2016
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
Revenue
|
|
|
|
|
|
|
|
Agriculture
|
$
|
302,170
|
|
|
$
|
332,520
|
|
|
$
|
(30,350
|
)
|
|
(9.1
|
)%
|
Construction
|
141,310
|
|
|
161,133
|
|
|
(19,823
|
)
|
|
(12.3
|
)%
|
International
|
89,509
|
|
|
69,540
|
|
|
19,969
|
|
|
28.7
|
%
|
Total
|
$
|
532,989
|
|
|
$
|
563,193
|
|
|
$
|
(30,204
|
)
|
|
(5.4
|
)%
|
|
|
|
|
|
|
|
|
Income (Loss) Before Income Taxes
|
|
|
|
|
|
|
|
Agriculture
|
$
|
(10,779
|
)
|
|
$
|
(8,083
|
)
|
|
$
|
(2,696
|
)
|
|
(33.4
|
)%
|
Construction
|
(1,703
|
)
|
|
(1,418
|
)
|
|
(285
|
)
|
|
(20.1
|
)%
|
International
|
878
|
|
|
(692
|
)
|
|
1,570
|
|
|
226.9
|
%
|
Segment income (loss) before income taxes
|
(11,604
|
)
|
|
(10,193
|
)
|
|
(1,411
|
)
|
|
(13.8
|
)%
|
Shared Resources
|
(5,016
|
)
|
|
(156
|
)
|
|
(4,860
|
)
|
|
n/m
|
|
Total
|
$
|
(16,620
|
)
|
|
$
|
(10,349
|
)
|
|
$
|
(6,271
|
)
|
|
(60.6
|
)%
|
Agriculture
Agriculture segment revenue for the first
six
months of fiscal
2018
decreased
9.1%
compared to the same period last year. The revenue
decrease
was primarily due to a decrease in revenue resulting from the impact of our store closings associated with our Fiscal 2018 Restructuring Plan. Agriculture same-store sales decreased
2.6%
compared to the same period last year.
Agriculture segment
loss
before income taxes was
$10.8 million
for the first
six
months of fiscal
2018
compared to loss before income taxes of
$8.1 million
over the first
six
months of fiscal
2017
. The increased segment loss before income taxes was largely the result of restructuring charges incurred under our Fiscal 2018 Restructuring Plan, which amounted to $6.7 million for the first six months of fiscal 2018, but partially offset by operating expense savings as a result of this plan and a decrease in floorplan interest expense as the result of a decrease in our interest-bearing inventory in the first six months of fiscal
2018
. The decrease in segment revenue was partially offset by a higher gross profit margin.
Construction
Construction segment revenue for the first
six
months of fiscal
2018
decreased
12.3%
compared to the same period last year. The revenue decrease was due to a Construction same-store sales decrease of
11.7%
compared to the same period last year and was primarily the result of decreased equipment revenue resulting from the impact of the incremental revenue associated with our expanded marketing of aged equipment inventory that occurred in the first six months of fiscal 2017, which totaled approximately $22.7 million, but partially offset by positive end user demand.
Our Construction segment
loss
before income taxes was
$1.7 million
for the first
six
months of fiscal
2018
compared to
$1.4 million
for the first
six
months of fiscal
2017
. The decline in segment results was primarily due to the decrease in revenue noted above, but partially offset by decreases in operating expenses and floorplan interest expense. The decrease in operating expenses reflects cost savings associated with our restructuring plan, and the decrease in floorplan interest expense is the result of a decrease in our average interest-bearing inventory in the first six months of fiscal
2018
as compared to the first six months of fiscal 2017. The dollar utilization of our rental fleet in the first six months of fiscal 2018 was
22.0%
, consistent with the
22.4%
in the first
six
months of fiscal
2017
.
International
International segment revenue for the first
six
months of fiscal
2018
increased
28.7%
compared to the same period last year primarily due to increased equipment revenue. Equipment revenue increased in the first six months of fiscal 2018 primarily due to the build-out of our footprint, availability of subvention funds and positive crop conditions in certain of our markets.
Our International segment
income
before income taxes was
$0.9 million
for the first
six
months of fiscal
2018
compared to segment loss before income taxes of
$0.7 million
for the same period last year. The increase in segment income before income taxes was primarily due to the increase in segment revenue as noted above, but partially offset by an increase in operating expenses resulting from the continued build-out of our footprint and presence in our European markets.
Shared Resources/Eliminations
We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments. Since these allocations are set early in the year, and a portion is planned to be unallocated, unallocated balances may occur. Shared Resource segment loss before income taxes was $5.0 million for the first six months of fiscal 2018 compared to loss before income taxes of $0.2 million for the same period last year. For the first six months of fiscal 2018, loss before income taxes was impacted by $0.9 million in restructuring costs related to the Fiscal 2018 Restructuring Plan and $0.6 million in floorplan interest expense related to the interest rates swap termination and reclassification. For the first six months of fiscal 2017, income before taxes included a $2.1 million gain recognized as a result of our repurchase of $30.1 million face value of senior convertible notes.
Non-GAAP Financial Measures
To supplement net income (loss) including noncontrolling interest and our earnings (loss) per share - diluted ("Diluted EPS"), both GAAP measures, we use adjusted net income (loss) including noncontrolling interest and adjusted Diluted EPS, both non-GAAP measures, which exclude the impact of the gain on repurchase of senior convertible notes, the write-off of debt issuance costs, restructuring costs associated with our realignment/store closings, and reclassification of accumulated losses on our interest rate swap and foreign currency remeasurement losses in Ukraine resulting from a devaluation of the UAH. We believe that the presentation of adjusted net income (loss) including noncontrolling interest 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. Adjusted net income (loss) including noncontrolling interest and adjusted Diluted EPS should be evaluated in addition to, and not considered a substitute for, or superior to, the most comparable GAAP measure. In addition, other companies may calculate these non-GAAP measures in a different manner, which may hinder comparability of our results with those of other companies.
The following tables reconcile (i) net income (loss) including noncontrolling interest, a GAAP measure, to adjusted net income (loss) including noncontrolling interest and (ii) Diluted EPS, a GAAP measure, to adjusted Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Six Months Ended July 31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
(dollars in thousands, except per share data)
|
Net Loss Including Noncontrolling Interest
|
|
|
|
|
|
|
|
Net Loss Including Noncontrolling Interest
|
$
|
(5,186
|
)
|
|
$
|
(2,702
|
)
|
|
$
|
(11,118
|
)
|
|
$
|
(6,560
|
)
|
Adjustments
|
|
|
|
|
|
|
|
Gain on Repurchase of Senior Convertible Notes
|
—
|
|
|
—
|
|
|
(40
|
)
|
|
(2,102
|
)
|
Debt Issuance Cost Write-Off
|
416
|
|
|
—
|
|
|
416
|
|
|
—
|
|
Restructuring Costs
|
5,549
|
|
|
24
|
|
|
7,893
|
|
|
271
|
|
Ukraine Remeasurement (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
195
|
|
Interest Rate Swap Termination & Reclassification
|
—
|
|
|
—
|
|
|
631
|
|
|
—
|
|
Total Pre-Tax Adjustments
|
5,965
|
|
|
24
|
|
|
8,900
|
|
|
(1,636
|
)
|
Less: Tax Effect of Adjustments (2)
|
1,941
|
|
|
9
|
|
|
3,116
|
|
|
(733
|
)
|
Plus: Income Tax Valuation Allowance
|
200
|
|
|
—
|
|
|
200
|
|
|
—
|
|
Total Adjustments
|
4,224
|
|
|
15
|
|
|
5,984
|
|
|
(903
|
)
|
Adjusted Net Loss Including Noncontrolling Interest
|
$
|
(962
|
)
|
|
$
|
(2,687
|
)
|
|
$
|
(5,134
|
)
|
|
$
|
(7,463
|
)
|
|
|
|
|
|
|
|
|
Earnings (Loss) per Share - Diluted
|
|
|
|
|
|
|
|
Loss per Share - Diluted
|
$
|
(0.24
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(0.29
|
)
|
Adjustments (3)
|
|
|
|
|
|
|
|
Gain on Repurchase of Senior Convertible Notes
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.10
|
)
|
Debt Issuance Cost Write-Off
|
0.02
|
|
|
—
|
|
|
0.02
|
|
|
—
|
|
Restructuring Costs
|
0.25
|
|
|
—
|
|
|
0.36
|
|
|
0.01
|
|
Ukraine Remeasurement (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
Interest Rate Swap Termination & Reclassification
|
—
|
|
|
—
|
|
|
0.03
|
|
|
—
|
|
Total Pre-Tax Adjustments
|
0.27
|
|
|
—
|
|
|
0.41
|
|
|
(0.08
|
)
|
Less: Tax Effect of Adjustments (2)
|
0.08
|
|
|
—
|
|
|
0.14
|
|
|
(0.04
|
)
|
Plus: Income Tax Valuation Allowance
|
0.01
|
|
|
—
|
|
|
0.01
|
|
|
—
|
|
Total Non-GAAP Adjustments
|
0.20
|
|
|
—
|
|
|
0.28
|
|
|
(0.04
|
)
|
Adjusted Loss per Share - Diluted
|
$
|
(0.04
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
(0.33
|
)
|
(1) Beginning in the second quarter of fiscal 2017 we discontinued incorporating Ukraine remeasurement losses into our adjusted income (loss) and earnings (loss) per share calculations. The Ukrainian hryvnia (UAH) remained relatively stable subsequent to April 30, 2016 and therefore did not significantly impact our consolidated statement of operations during this period. Absent any future significant UAH volatility and resulting financial statement impact, we will not include Ukraine remeasurement losses in our adjusted amounts in future periods.
(2) The tax effect of adjustments was calculated using a 35% tax rate for all U.S. related items. That rate was determined based on a 35% federal statutory rate and no impact for state taxes given our valuation allowance against state deferred tax assets, including net operating losses. No tax effect was recognized for foreign related items as all adjustments occurred in foreign jurisdictions that have full valuation allowances on deferred tax assets.
(3) Adjustments are net of the impact of amounts attributable to noncontrolling interests and allocated to participating securities.
Liquidity and Capital Resources
Sources of Liquidity
Our primary sources of liquidity are cash reserves, cash generated from operations, and borrowings under our floorplan payable and other credit facilities. We expect these sources of liquidity to be sufficient to fund our working capital requirements, acquisitions, capital expenditures and other investments in our business, service our debt, pay our tax and lease obligations and other commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future, provided, however, that our borrowing capacity under our credit agreements is dependent on compliance with various covenants as further described in the "Risk Factors" section of our Annual Report on Form 10-K.
Equipment Inventory and Floorplan Payable Credit Facilities
As of
July 31, 2017
, the Company had discretionary floorplan payable lines of credit for equipment purchases totaling approximately
$741.0 million
, which included a
$140.0 million
Floorplan Payable Line with Wells Fargo, a
$450.0 million
credit facility with CNH Industrial Capital, a
$45.0 million
credit facility with DLL Finance and the U.S. dollar equivalent of
$106.0 million
in credit facilities related to our foreign subsidiaries. Floorplan payables relating to these credit facilities totaled approximately
$296.2 million
of the total floorplan payable balance of
$308.0 million
outstanding as of
July 31, 2017
.
In May 2017, as a result of the Company's ongoing equipment inventory reduction and related reduction in floorplan financing needs, the Company provided notice to Wells Fargo of its election to reduce the maximum credit amount available under the Wells Fargo Credit Agreement from an aggregate $275.0 million to an aggregate $200.0 million, comprised of a $70.0 million reduction in the Floorplan Payable Line, from $210.0 million to $140.0 million, and a $5.0 million reduction in the Working Capital Line, from $65.0 million to $60.0 million.
Our equipment inventory turnover was
1.6
for the four quarters ended
July 31, 2017
compared to
1.2
for the four quarters ended
July 31, 2016
. The improvement in our equipment inventory turnover was driven by a
24.3%
reduction in equipment inventory from
July 31, 2016
to
July 31, 2017
; however, this decrease was partially offset by lower equipment sales in the four-quarter period ended
July 31, 2017
. Our equity in equipment inventory, which reflects the portion of our equipment inventory balance that is not financed by floorplan payables,
decreased
to
30.1%
as of
July 31, 2017
from
41.1%
as of
January 31, 2017
.
Adequacy of Capital Resources
Our primary uses of cash have been to fund our operating activities, including the purchase of inventories and providing for other working capital needs, meeting our debt service requirements, making payments due under our various leasing arrangements, funding capital expenditures, including rental fleet assets, and, from time to time, opportunistically repurchasing our outstanding senior convertible notes. Based on our current operational performance, we believe our cash flow from operations, available cash and available borrowings under our existing credit facilities will adequately provide our liquidity needs for, at a minimum, the next 12 months. Our main financing arrangements, in which we had discretionary floorplan lines of credit totaling approximately
$741.0 million
as of
July 31, 2017
, are described in Note 4 of the notes to our consolidated financial statements. As of
July 31, 2017
, the Company was in compliance with the financial covenants under these agreements, and was not subject to the fixed charge coverage ratio covenant under the Wells Fargo Credit Agreement as our adjusted excess availability plus eligible cash collateral (as defined therein) was not less than 15% of the total amount of the credit facility as of
July 31, 2017
. While not expected to occur, if anticipated operating results create the likelihood of a future covenant violation, we would expect to work with our lenders on an appropriate modification or amendment to our financing arrangements.
Cash Flow
Cash Flow Provided By Operating Activities
Net cash provided by operating activities was
$66.9 million
for the
six
months ended
July 31, 2017
, compared to
$60.4 million
for the
six
months ended
July 31, 2016
. Net cash provided by operating activities for the
six
month periods ending
July 31, 2017
and 2016 was primarily attributable to a changing mix of manufacturer versus non-manufacturer floorplan financing, and other changes in working capital.
We evaluate our cash flow from operating activities net of all floorplan activity and maintaining a constant level of equity in our equipment inventory. Taking these adjustments into account, our adjusted cash flow used by operating activities was
$19.3 million
for the
six
months ended
July 31, 2017
and adjusted cash flow provided by operating activities was
$1.1 million
for the
six
months ended July 31,
2016
. The decrease in adjusted cash flow is primarily the result of a higher level of seasonal stocking of new equipment inventories in the first six months of fiscal 2018 and the impact of cash generated from the
sale of no trade equipment arising from our expanded marketing of aged equipment inventory in fiscal 2017. See the Adjusted Cash Flow Reconciliation below for a reconciliation of this non-GAAP financial measure to the GAAP measure of cash flow provided by operating activities.
Cash Flow Used For Investing Activities
Net cash used for investing activities was
$15.4 million
for the
six
months ended
July 31, 2017
, compared to
$3.6 million
for the
six
months ended
July 31, 2016
. Cash used for investing activities was primarily for the purchase of rental fleet and property and equipment, net of any proceeds from the sale of property and equipment.
Cash Flow Used For Financing Activities
Net cash used for financing activities was
$47.6 million
for the
six
months ended
July 31, 2017
compared to
$95.4 million
for the
six
months ended
July 31, 2016
. For the
six
months ended
July 31, 2017
, net cash used for financing activities was the result of paying down our non-manufacturer floorplan payables, the use of
$19.3 million
of cash to repurchase senior convertible notes, but partially offset by increased net borrowings under our working capital line under our Wells Fargo Credit Agreement. We may, from time to time, continue to repurchase our senior convertible notes depending on prevailing market conditions, our available liquidity and other factors. These repurchases may be material to our consolidated financial statements. For the
six
months ended
July 31, 2016
, net cash used for financing activities primarily resulted from paying down our non-manufacturer floorplan payables and the use of $25.0 million to repurchase senior convertible notes.
Adjusted Cash Flow Reconciliation
We consider our cash flow from operating activities to include all equipment inventory financing activity regardless of
whether we obtain the financing from a manufacturer or other source. We consider equipment inventory financing with both manufacturers and other sources to be part of the normal operations of our business and use an adjusted cash flow measure in the evaluation of our equipment inventory and inventory flooring needs, which we refer to as "Adjusted Cash Flow." The adjustment is equal to the net change in non-manufacturer floorplan payable, as shown on the consolidated statements of cash flows. GAAP categorizes non-manufacturer floorplan payable as financing activities in the consolidated statements of cash flows.
Adjusted Cash Flow is also impacted by the change in our equity in equipment inventory, which reflects the portion of
our equipment inventory balance that is not financed by floorplan payables. Equity in equipment inventory
decreased
to
30.1%
as of
July 31, 2017
from
41.1%
as of
January 31, 2017
, and
increased
to
26.1%
as of
July 31, 2016
from
24.8%
as of
January 31, 2016
. We analyze our cash flow provided by operating activities by assuming a constant level of equipment inventory financing throughout each respective fiscal year. The adjustment eliminates the impact of this fluctuation of equity in our equipment inventory, and is equal to the difference between our actual level of equity in equipment inventory at each period end presented on the consolidated statements of cash flows, compared to the actual level of equity in equipment inventory at the beginning of the fiscal year.
Adjusted Cash Flow is a non-GAAP financial measure. 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. 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 cash flow provided by (used for) financing activities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used for) Operating Activities
|
|
Net Cash Used for Financing Activities
|
|
Six Months Ended July 31, 2017
|
|
Six Months Ended July 31, 2016
|
|
Six Months Ended July 31, 2017
|
|
Six Months Ended July 31, 2016
|
|
(in thousands)
|
|
(in thousands)
|
Cash Flow, As Reported
|
$
|
66,877
|
|
|
$
|
60,435
|
|
|
$
|
(47,435
|
)
|
|
$
|
(95,392
|
)
|
Adjustment for Non-Manufacturer Floorplan Net Payments
|
(38,030
|
)
|
|
(66,856
|
)
|
|
38,030
|
|
|
66,856
|
|
Adjustment for Constant Equity in Equipment Inventory
|
(48,116
|
)
|
|
7,520
|
|
|
—
|
|
|
—
|
|
Adjusted Cash Flow
|
$
|
(19,269
|
)
|
|
$
|
1,099
|
|
|
$
|
(9,405
|
)
|
|
$
|
(28,536
|
)
|
Adjusted net cash flow provided by (used for) operating activities and adjusted net cash used for financing activities should be evaluated in addition to, and not considered a substitute for, or superior to, the GAAP measures of net cash provided by (used for) operating and financing activities.
Certain Information Concerning Off-Balance Sheet Arrangements
As of
July 31, 2017
, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We are, therefore, not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships. In the normal course of our business activities, we lease real estate, vehicles and equipment under operating leases.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. “Forward-looking” statements are included in this Quarterly Report on Form 10-Q, including in “Management’s Discussion And Analysis Of Financial Condition And Results Of Operations,” as well as in our Annual Report on Form 10-K for the year ended
January 31, 2017
, and in other materials filed or to be filed by the Company with the Securities and Exchange Commission (and included in oral statements or other written statements made or to be made by the Company).
Forward-looking statements are statements based on future expectations and specifically include, among other things, all statements relating to our expectations regarding exchange rate and interest rate impact on our business, the impact of farm income levels on our customers' demand for agricultural equipment and services, the impact of oil prices on market demand for equipment and services, the general market conditions of the agricultural and construction industries, equipment inventory levels, and our primary liquidity sources and adequacy of our capital resources. Any statements that are not based upon historical facts, including the outcome of events that have not yet occurred and our expectations for future performance, are forward-looking statements. The words “potential,” “believe,” “estimate,” “expect,” “intend,” “may,” “could,” “will,” “plan,” “anticipate,” and similar words and expressions are intended to identify forward-looking statements. Such statements are based upon the current beliefs and expectations of our management. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, adverse market conditions in the agricultural and construction equipment industries, and those matters identified and discussed under the section titled “Risk Factors” in our Annual Report on Form 10-K and this Quarterly Report on Form 10-Q.