Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
o QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2013
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 May 31, 2013 was: Common Stock, $0.00001 par value, 21,103,249 shares.
QUARTERLY REPORT ON FORM 10-Q
Page No.
PART I.
FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
Consolidated Balance Sheets as of April 30, 2013 and January 31, 2013
3
Consolidated Statements of Operations for the three months ended April 30, 2013 and 2012
4
Consolidated Statements of Comprehensive Income (Loss) for the three months ended April 30, 2013 and 2012
5
Consolidated Statements of Stockholders’ Equity for the three months ended April 30, 2013
6
Consolidated Statements of Cash Flows for the three months ended April 30, 2013 and 2012
7
Notes to Consolidated Financial Statements
9
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
17
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
24
ITEM 4.
CONTROLS AND PROCEDURES
25
PART II.
OTHER INFORMATION
LEGAL PROCEEDINGS
ITEM 1A.
RISK FACTORS
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
DEFAULTS UPON SENIOR SECURITIES
MINE SAFETY DISCLOSURES
26
ITEM 5.
ITEM 6.
EXHIBITS
Signatures
27
Exhibit Index
28
PART I. — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
April 30,
January 31,
2013
(Unaudited)
ASSETS
CURRENT ASSETS
Cash
$
114,252
124,360
Receivables, net
86,019
121,786
Inventories
1,001,227
929,216
Prepaid expenses and other
9,786
8,178
Income taxes receivable
7,384
503
Deferred income taxes
8,170
8,357
Total current assets
1,226,838
1,192,400
INTANGIBLES AND OTHER ASSETS
Noncurrent parts inventories
3,900
3,507
Goodwill
30,944
30,903
Intangible assets, net of accumulated amortization
14,200
14,089
Other
8,545
8,534
Total intangibles and other assets
57,589
57,033
PROPERTY AND EQUIPMENT, net of accumulated depreciation
230,049
194,641
TOTAL ASSETS
1,514,476
1,444,074
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable
33,867
28,282
Floorplan notes payable
761,978
689,410
Current maturities of long-term debt
10,151
10,568
Customer deposits
31,260
46,775
Accrued expenses
35,869
29,590
Income taxes payable
—
310
Total current liabilities
873,125
804,935
LONG-TERM LIABILITIES
Senior convertible notes
126,446
125,666
Long-term debt, less current maturities
58,480
56,592
47,723
47,411
Other long-term liabilities
8,970
9,551
Total long-term liabilities
241,619
239,220
STOCKHOLDERS’ EQUITY
Common stock, par value $.00001 per share, 45,000 shares authorized; 21,103 shares issued and outstanding at April 30, 2013; 21,092 shares issued and outstanding at January 31, 2013
Additional paid-in-capital
237,263
236,521
Retained earnings
160,310
160,724
Accumulated other comprehensive loss
(926
)
(735
Total Titan Machinery Inc. stockholders’ equity
396,647
396,510
Noncontrolling interest
3,085
3,409
Total stockholders’ equity
399,732
399,919
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended April 30,
2012
REVENUE
Equipment
334,745
322,528
Parts
62,837
58,844
Service
31,998
29,752
Rental and other
12,094
10,599
TOTAL REVENUE
441,674
421,723
COST OF REVENUE
303,823
292,085
44,711
40,653
11,363
10,363
7,829
8,213
TOTAL COST OF REVENUE
367,726
351,314
GROSS PROFIT
73,948
70,409
OPERATING EXPENSES
68,933
54,856
INCOME FROM OPERATIONS
5,015
15,553
OTHER INCOME (EXPENSE)
Interest and other income
597
488
Floorplan interest expense
(3,442
(2,898
Other interest expense
(3,167
(793
INCOME (LOSS) BEFORE INCOME TAXES
(997
12,350
BENEFIT FROM (PROVISION FOR) INCOME TAXES
394
(4,891
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST
(603
7,459
LESS: NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTEREST
(189
(138
NET INCOME (LOSS) ATTRIBUTABLE TO TITAN MACHINERY INC.
(414
7,597
EARNINGS (LOSS) PER SHARE - NOTE 1
EARNINGS (LOSS) PER SHARE - BASIC
(0.02
0.36
EARNINGS (LOSS) PER SHARE - DILUTED
WEIGHTED AVERAGE COMMON SHARES - BASIC
20,854
20,723
WEIGHTED AVERAGE COMMON SHARES - DILUTED
20,962
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(in thousands)
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments
(797
249
Unrealized gain on net investment hedge derivative instruments (net of tax of $314)
471
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)
(326
COMPREHENSIVE INCOME (LOSS)
(929
7,708
COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST
(324
(71
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO TITAN MACHINERY INC.
(605
7,779
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
Accumulated
Total Titan
Common Stock
Additional
Machinery Inc.
Total
Shares
Paid-In
Retained
Comprehensive
Stockholders’
Noncontrolling
Stockholders'
Outstanding
Amount
Capital
Earnings
Loss
Equity
Interest
BALANCE, JANUARY 31, 2013
21,092
Common stock issued on grant of restricted stock, exercise of stock options and warrants, and tax benefits of equity awards
11
272
Stock-based compensation expense
470
Comprehensive income:
Net loss
Other comprehensive loss
(191
(135
Total comprehensive loss
BALANCE, APRIL 30, 2013
21,103
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
OPERATING ACTIVITIES
Net income (loss) including noncontrolling interest
Adjustments to reconcile net income to net cash used for operating activities
Depreciation and amortization
5,869
4,927
171
114
358
Noncash interest expense
1,108
174
Other, net
619
(101
Changes in assets and liabilities, net of purchase of equipment dealerships assets and assumption of liabilities
Receivables, prepaid expenses and other assets
34,587
27,590
(42,274
(40,396
5,541
(2,111
Accounts payable, customer deposits, accrued expenses and other long-term liabilities
(4,612
(26,240
Income taxes
(7,195
3,373
NET CASH USED FOR OPERATING ACTIVITIES
(6,319
(24,853
INVESTING ACTIVITIES
Rental fleet purchases
(329
(16,233
Property and equipment purchases (excluding rental fleet)
(5,454
(1,725
Net proceeds from sale of property and equipment
237
61
Purchase of equipment dealerships, net of cash purchased
(4,848
(8,396
771
NET CASH USED FOR INVESTING ACTIVITIES
(9,623
(26,282
FINANCING ACTIVITIES
Proceeds from senior convertible notes offering, net of direct issuance costs of $4,753
145,247
Net change in non-manufacturer floorplan notes payable
8,408
(22,669
Proceeds from long-term debt borrowings
665
1,300
Principal payments on long-term debt
(3,405
(47,806
Proceeds from sale of subsidiary shares to noncontrolling interest holders
2,464
(612
NET CASH PROVIDED BY FINANCING ACTIVITIES
5,940
77,924
EFFECT OF EXCHANGE RATE CHANGES ON CASH EQUIVALENTS
(106
86
NET CHANGE IN CASH AND CASH EQUIVALENTS
(10,108
26,875
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
79,842
CASH AND CASH EQUIVALENTS AT END OF PERIOD
106,717
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) — Page 2
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period
Income taxes, net of refunds
6,486
1,165
4,405
3,556
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
Net property and equipment financed with long-term debt
4,285
10,514
Net transfer of assets to property and equipment from inventories
30,122
15,966
8
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 the Company’s Agriculture, Construction and International customers. Therefore, operating results for the three-month period ended April 30, 2013 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2014. The information contained in the balance sheet as of January 31, 2013 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, 2013 as filed with the SEC.
Nature of Business
The Company is engaged in the retail sale, service and rental of agricultural and construction machinery through stores in the United States and Europe. The Company’s North American stores are located in Arizona, Colorado, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, South Dakota, Wisconsin and Wyoming, and its European stores are located in Bulgaria, Romania, Serbia and Ukraine.
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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates, particularly related to realization of inventory, initial valuation and impairment analyses of intangible assets, collectability of receivables, and income taxes.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. 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, which are Level 3 fair value inputs.
The Company recognized a derivative liability for outstanding foreign currency forward contracts which are recorded at fair value in an amount equal to $0.2 million and $0.1 million as of April 30, 2013 and January 31, 2013, respectively. Fair value was determined based on Level 2 inputs which include observable, market-based pricing components.
The carrying value of long-term debt approximates fair value as of April 30, 2013 and January 31, 2013. Fair value was estimated based upon current borrowing rates with similar maturities, which are Level 3 fair value inputs. The fair value of senior convertible notes was approximately $144.7 million and $152.8 million as of April 30, 2013 and January 31, 2013, respectively. The face value of senior convertible notes was $150.0 million as of April 30, 2013 and January 31, 2013. The carrying value of senior convertible notes was approximately $126.4 million and $125.7 million as of April 30, 2013 and January 31, 2013, respectively. The difference between the face value and the carrying value of these notes is the result of the allocation between the debt and equity components. Fair value of the senior convertible notes was estimated based on Level 2 fair value inputs.
Earnings (Loss) Per Share (“EPS”)
The Company uses the two-class method to calculate basic and diluted EPS. Unvested restricted stock awards are considered participating securities because they entitle holders to non-forfeitable rights to dividends during the vesting term. Under the two-class method, basic EPS were computed by dividing net income (loss) attributable to Titan Machinery Inc. after allocation of income (loss) to participating securities by the weighted-average number of shares of common stock outstanding during the year.
Diluted EPS were computed by dividing net income (loss) attributable to Titan Machinery Inc. after allocation of income (loss) to participating securities by the weighted-average shares of common stock outstanding after adjusting for potential dilution related to the conversion of all dilutive securities into common stock. All potentially dilutive securities were included in the computation of diluted EPS. There were approximately 380,000 and 10,000 stock options outstanding as of April 30, 2013 and 2012, respectively, which were not included in the computation of diluted EPS because they were anti-dilutive. None of the approximately 3,474,000 shares underlying the Company’s senior convertible notes were included in the computation of diluted EPS because the Company’s average stock price was less than the conversion price of $43.17.
The following table sets forth the calculation of basic and diluted EPS:
Numerator
Net income (loss) attributable to Titan Machinery Inc.
Net (income) loss allocated to participating securities
(70
Net income (loss) attributable to Titan Machinery Inc. common stockholders
(409
7,527
Denominator
Basic weighted-average common shares outstanding
Plus: Incremental shares from assumed conversions of stock options and warrants
239
Diluted weighted-average common shares outstanding
Earnings (loss) per share - basic
Earnings (loss) per share - diluted
10
NOTE 2 - INVENTORIES
New equipment
608,349
542,180
Used equipment
273,375
275,626
Parts and attachments
110,428
103,456
Work in process
9,075
7,954
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 - PROPERTY AND EQUIPMENT
Rental fleet equipment
136,827
105,681
Machinery and equipment
22,769
21,086
Vehicles
40,318
38,742
Furniture and fixtures
29,194
27,766
Land, buildings, and leasehold improvements
61,756
56,845
290,864
250,120
Less accumulated depreciation
(60,815
(55,479
NOTE 4 - LINES OF CREDIT / FLOORPLAN NOTES PAYABLE
Working Capital Line of Credit
As of April 30, 2013, the Company had a $75.0 million working capital line of credit under an amended and restated credit agreement with a group of banks led by Wells Fargo Bank, National Association (“Wells Fargo”). The Company had $12.0 million and $7.1 million outstanding on its working capital line of credit as of April 30, 2013 and January 31, 2013, respectively. 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 April 30, 2013, the Company had discretionary floorplan lines of credit for equipment purchases totaling approximately $975.0 million with various lending institutions, including $375.0 million under the aforementioned credit agreement with Wells Fargo, a $450.0 million credit agreement with CNH Capital America LLC (“CNH Capital”) and a $150.0 million credit agreement with Agricredit Acceptance LLC. Floorplan notes payable relating to these credit agreements totaled approximately $677.5 million of the total floorplan notes payable balance of $762.0 million outstanding as of April 30, 2013 and $629.8 million of the total floorplan notes payable balance of $689.4 million outstanding as of January 31, 2013. As of April 30, 2013, the Company had approximately $204.7 million in available borrowings remaining under these lines of credit (net of adjustments based on borrowing base calculations and standby letters of credit under the aforementioned Wells Fargo credit agreement, and rental fleet financing and other acquisition-related financing arrangements under the CNH
Capital credit agreement). These floorplan notes carried various interest rates primarily ranging from 2.45% to 7.25% as of April 30, 2013, subject to interest-free periods offered by CNH Capital. As of April 30, 2013, the Company was in compliance with all floorplan financial covenants.
NOTE 5 - SENIOR CONVERTIBLE NOTES
The Company’s 3.75% Senior Convertible Notes issued on April 24, 2012 (“Convertible Notes”) consisted of the following:
(in thousands except conversion
rate and conversion price)
Principal value
150,000
Unamortized debt discount
(23,554
(24,334
Carrying value of senior convertible notes
Carrying value of equity component, net of deferred taxes
15,546
Conversion rate (shares of common stock per $1,000 principal amount of notes)
23.1626
Conversion price (per share of common stock)
43.17
As of April 30, 2013, the unamortized debt discount will be amortized over a six-year period. As of April 30, 2013 and January 31, 2013, the if-converted value of the Senior Convertible Notes does not exceed the principal balance.
For the three months ended April 30, 2013, the Company recognized coupon interest expense of $1.4 million, and non-cash interest expense of $0.8 million related to the amortization of the debt discount and $0.1 million related to the amortization of the liability-allocated transaction costs. For the three months ended April 30, 2012, the Company recognized coupon interest expense of $0.1 million, and non-cash interest expense of $0.1 million related to the amortization of the debt discount. The effective interest rate of the liability component was equal to 7.00% for the period ended April 30, 2013.
NOTE 6 - DERIVATIVE INSTRUMENTS
The Company holds derivative instruments for the purpose of minimizing exposure to fluctuations in foreign currency exchange rates to which the Company is exposed in the normal course of its operations.
Net Investment Hedges
To protect the value of the Company’s investments in its foreign operations against adverse changes in foreign currency exchange rates, the Company may, from time to time, hedge a portion of its net investment in one or more of its foreign subsidiaries. Gains and losses on derivative instruments that are designated and effective as a net investment hedge are included in other comprehensive income and only reclassified into earnings in the period during which the hedged net investment is sold or liquidated. Any hedge ineffectiveness is recognized in earnings immediately.
The notional amount of outstanding foreign currency forward contracts designated as net investment hedges was approximately $22.0 million as of April 30, 2013. There were no foreign currency forward contracts designated as net investment hedges outstanding as of January 31, 2013. For the three months ended April 30, 2013, the maximum notional amount outstanding at any point during the period was approximately $23.6 million. No derivative instruments designated as net investment hedges were outstanding during the three months ended April 30, 2012.
Derivative Instruments Not Designated as Hedging Instruments
The Company uses foreign currency forward contracts to hedge the effects of fluctuations in exchange rates on outstanding intercompany loans. The Company does not formally designate and document such derivative instruments as
12
hedging instruments; however, the instruments are an effective economic hedge of the underlying foreign currency exposure. Both the gain or loss on the derivative instrument and the offsetting gain or loss on the underlying intercompany loan are recognized in earnings immediately, thereby eliminating or reducing the impact of foreign currency exchange rate fluctuations on net income.
The notional amount of outstanding foreign currency forward contracts not designated as hedging instruments was approximately $21.3 million and $4.0 million as of April 30, 2013 and January 31, 2013, respectively. For the three months ended April 30, 2013, the maximum notional amount outstanding at any point during the period was approximately $22.1 million. No derivative instruments not designated as hedging instruments were outstanding during the three months ended April 30, 2012.
The following table sets forth the fair value of the Company’s outstanding derivative instruments.
Fair Value as of:
Balance
Sheet
Location
Liability Derivatives:
Derivatives designated as hedging instruments:
Net investment hedges:
Foreign exchange contracts
118
Derivatives not designated as hedging instruments:
Total Derivatives
232
The following table sets forth the gains and losses recognized on the Company’s derivative instruments for the three months ended April 30, 2013. No derivative instruments were outstanding during the three-month period ended April 30, 2012.
Amount of Gain (Loss) Recognized in
Income Statement
Income
Classification
Dervatives Designated as Hedging Instruments:
N/A
Dervatives Not Designated as Hedging Instruments:
720
NOTE 7 - 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 three months ended April 30, 2013. In certain of the business combination transactions the Company recognized goodwill. Factors contributing to the recognition of goodwill include an evaluation of future and historical financial performance, the value of the workforce acquired and proximity to other existing and future planned Company locations. 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 statements of operations since the date of each respective business combination.
13
On February 16, 2013, the Company acquired certain assets of Tucson Tractor Company. The acquired entity consisted of one construction equipment store in Tucson, Arizona which is contiguous to the Company’s existing locations in Phoenix and Flagstaff, Arizona and expands the Company’s construction presence in Arizona. The acquisition-date fair value of the total consideration transferred for the store was $4.1 million.
On March 1, 2013, the Company acquired certain assets of Adobe CE, LLC. The acquired entity consisted of one construction equipment store in Albuquerque, New Mexico and expands the Company’s presence into New Mexico. The acquisition-date fair value of the total consideration transferred for the store was $1.2 million.
As of January 31, 2013, the final valuation of the intangible assets acquired in the Toner’s, Inc., acquisition consummated on November 1, 2012 was not complete. As a result, the recorded intangible asset values were based on provisional estimates of fair value. The valuation of such assets was completed during the period ended April 30, 2013 and resulted in a $0.1 million decrease in the value of the distribution rights, a $0.2 million decrease in the value of customer relationships and a $0.3 million increase in the value of goodwill arising from the acquisition. The comparative information as of January 31, 2013 was retrospectively adjusted to reflect the final values assigned to each of the intangible assets.
The allocations of the purchase prices in the above business combinations are presented in the following table. The estimated fair values of the intangible assets acquired are provisional estimates which are subject to change upon completion of the final valuation.
2
Receivables
270
2,658
Property and equipment
2,119
Intangible assets
182
71
Total assets
5,302
LIABILITIES
Total liabilities
Cash consideration
4,850
Non-cash consideration: liabilities incurred
448
Total consideration
5,298
Goodwill related to the Agriculture operating segment
Goodwill related to the Construction operating segment
Goodwill related to the International operating segment
Goodwill expected to be deductible for tax purposes
14
NOTE 8 - SEGMENT INFORMATION AND OPERATING RESULTS
The Company owns and operates a network of full service agricultural and construction equipment stores in the United States and Europe. During the three months ended April 30, 2013, the Company determined that its International operations were a separate reportable segment. As of April 30, 2013, the Company has three reportable segments: Agriculture, Construction and International. The Company’s segments are organized based on types of products sold and geographic areas, as described in the following paragraphs. The operating results for each segment are reported separately to the Company’s senior management to make decisions regarding the allocation of resources, to assess the Company’s operating performance and to make strategic decisions.
The Company’s Agriculture segment sells, services, and rents machinery, and related parts and attachments, for uses ranging from large-scale farming to home and garden use to customers in North America. This segment also includes ancillary sales and services related to agricultural activities and products such as equipment transportation, Global Positioning System (“GPS”) signal subscriptions, hardware merchandise and finance and insurance products.
The Company’s Construction segment sells, services, and rents machinery, and related parts and attachments, for uses ranging from heavy construction to light industrial machinery use to customers in North America. This segment also includes ancillary sales and services related to construction activities such as equipment transportation, GPS signal subscriptions and finance and insurance products.
The Company’s International segment sells, services, and rents machinery, and related parts and attachments, for uses ranging from large-scale farming to home and garden use to customers in Eastern Europe. It also includes export sales of equipment and parts to customers outside of the United States.
Revenue, income (loss) before income taxes 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.
15
Certain financial information for each of the Company’s business segments is set forth below. The financial information for the three months ended April 30, 2012 and as of January 31, 2013 has been reclassified for comparability with current year presentation.
Revenues
Agriculture
360,344
353,580
Construction
82,841
81,608
International
27,730
5,930
Segment revenues
470,915
441,118
Eliminations
(29,241
(19,395
Income (Loss) Before Income Taxes
7,999
14,722
(6,538
(380
(526
(403
Segment income (loss) before income taxes
935
13,939
Shared Resources
(1,238
(752
(694
(837
Income before income taxes
Total Assets
822,707
781,382
333,819
346,554
143,936
119,132
Segment assets
1,300,462
1,247,068
217,198
199,849
(3,184
(2,843
16
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 I 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, 2013.
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, 2013.
Overview
We own and operate a network of full service agricultural and construction equipment stores in the United States and Europe. Based upon information provided to us by CNH Global N.V. or its U.S. subsidiary CNH America, LLC, we are the largest retail dealer of Case IH Agriculture equipment in the world, the largest retail dealer of Case Construction equipment in North America and a major retail dealer of New Holland Agriculture and New Holland Construction equipment in the U.S. We operate our business through three reportable segments, Agriculture, Construction and International. Within each segment, we have four principal sources of revenue: new and used equipment sales, parts sales, service, and equipment rental and other activities.
Our net income (loss) attributable to Titan Machinery Inc. common stockholders was $(0.4) million, or $(0.02) per diluted share, for the three months ended April 30, 2013, compared to $7.5 million, or $0.36 per diluted share, for the three months ended April 30, 2012. Significant factors impacting the quarterly comparisons were:
· Increase in revenue and gross profit due to acquisitions, offset by a decrease in same-store sales and the related gross profit. The decrease in same-store results was primarily due to abnormally delayed spring weather combined with cautionary Agriculture customer sentiment and the continued challenging industry conditions in the Construction segment;
· Operating expenses as a percentage of total revenue increased to 15.6% for the three months ended April 30, 2013 compared to 13.0% for the three months ended April 30, 2012, primarily due to lower same-store sales in the first quarter of fiscal 2014, as compared to the same period last year, and additional expenses associated with acquired stores; and
· Increase in floorplan interest and other interest expense primarily due to the increase in floorplan notes payable and long-term debt, including our Senior Convertible Notes issued in April 2012.
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.
(dollars in thousands)
Revenue
Cost of revenue
Gross profit
30,922
30,443
Gross profit margin
9.2
%
9.4
18,126
18,191
28.8
30.9
20,635
19,389
64.5
65.2
4,265
2,386
35.3
22.5
18
The following table sets forth our statements of operations data expressed as a percentage for each of our four sources of total revenue for the periods indicated:
75.9
76.4
14.2
14.0
7.2
7.1
2.7
2.5
Total revenue
100.0
Total cost of revenue
83.3
16.7
Operating expenses
15.6
13.0
Income from operations
1.1
3.7
Other income (expense)
(1.3
)%
(0.8
(0.2
2.9
Benefit from (provision for) income taxes
0.1
(1.1
Net income including noncontrolling interest
(0.1
1.8
Net loss attributable to noncontrolling interest
0.0
Net income attributable to Titan Machinery Inc.
Three Months Ended April 30, 2013 Compared to Three Months Ended April 30, 2012
Consolidated Results
Percent
Increase
Change
12,217
3.8
3,993
6.8
2,246
7.5
1,495
14.1
Total Revenue
19,951
4.7
The increase in revenue for the first quarter of fiscal 2014, as compared to the same period last year, was due to acquisitions contributing $41.4 million, offset by a decrease in same-store sales of $21.4 million. The decrease in same-store sales primarily was due to abnormally delayed spring weather, combined with cautionary Agriculture customer sentiment and the continued challenging industry conditions in the Construction segment.
19
Gross Profit
Increase/
(Decrease)
479
1.6
(65
(0.4
1,246
6.4
1,879
78.8
Total Gross Profit
3,539
5.0
Gross Profit Margin
(2.1
(6.8
(0.7
12.8
56.9
Total Gross Profit Margin
Gross Profit Mix
41.8
43.2
(1.4
(3.2
24.5
25.9
(5.4
27.9
27.5
0.4
1.5
5.8
3.4
2.4
70.6
Total Gross Profit Mix
The $3.5 million increase in gross profit for the first quarter of fiscal 2014, as compared to the same period last year, was primarily due to increased revenue. Acquisitions contributed $6.5 million to the increase in gross profit for the first quarter of fiscal 2014, offset by decreases in same-store gross profit of $3.0 million. Gross profit margin was 16.7% for both the first quarters of fiscal 2014 and fiscal 2013. Increase in the gross profit margin on rental and other was primarily due to an increase in the dollar utilization of our rental fleet to 23.4% in the first quarter of fiscal 2014 from 22.5% in the same period last year.
Operating Expenses
14,077
25.7
Operating expenses as a percentage of revenue
2.6
20.0
The $14.1 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, travel and depreciation. As a percentage of total revenue, operating expenses increased to 15.6% for the first quarter of fiscal 2014 compared to 13.0% for the first quarter of fiscal 2013. The leveraging of fixed operating costs was negatively impacted by lower same-store sales in the first quarter of fiscal 2014, as compared to the same period last year, and the Construction stores acquired in fiscal year 2013 and the first quarter of fiscal 2014. These recently acquired stores are currently operating at a much higher operating expense ratio than our average Construction store, as they are underperforming in regards to revenue levels in the markets in which they are located.
Other Income (Expense)
109
22.3
544
18.8
2,374
299.4
The increase in floorplan interest expense of $0.5 million and other interest expense of $2.4 million for the first quarter of fiscal 2014, as compared to the same period in the prior year, was primarily due to the increase in floorplan notes payable and long-term debt, including our Senior Convertible Notes issued in April 2012.
20
Benefit From (Provision For) Income Taxes
5,285
108.1
Our effective tax rate was 39.5% for the first quarter of fiscal 2014 compared to 39.6% for the same period last year.
Segment Results
Certain financial information for our Agriculture, Construction and International 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.
6,764
1.9
1,233
21,800
367.6
29,797
(9,846
(50.8
(6,723
(45.7
(6,158
(1620.5
(123
(30.5
(13,004
(93.3
(486
(64.6
143
17.1
(13,347
(108.1
Agriculture segment revenue for the first quarter of fiscal 2014 increased 1.9% compared to the same period last year. The revenue increase was due to acquisitions, offset by an Agriculture same-store sales decrease of 6.4% over the first quarter of fiscal 2013. The decrease in same-store sales primarily was due to abnormally delayed spring weather, combined with cautionary Agriculture customer sentiment. These weather conditions caused a delay in the planting season for our Agriculture customers, which had a negative impact on our parts and service revenue. The cautionary Agriculture customer sentiment experienced during the first quarter of fiscal 2014 negatively affected our equipment revenue.
Agriculture segment income before income taxes for the first quarter of fiscal 2014 decreased 45.7% compared to the same period last year, primarily caused by lower same-store sales in the first quarter of fiscal 2014, additional operating expenses associated with acquisition stores and an increase in floorplan interest expense resulting from higher floorplan notes payable, as compared to the same period in the prior year.
Construction segment revenue for the first quarter of fiscal 2014 increased 1.5% compared to the same period last year. The revenue increase was due to acquisitions, offset by a Construction same-store sales decrease of 7.1% over the first quarter of fiscal 2013. The decrease in same-store sales primarily was due to abnormally delayed spring weather, combined with the continued challenging industry conditions in the Construction segment. These weather conditions caused a delay in construction work for our customers, which had a negative impact on our equipment, parts and service revenue.
21
Our Construction segment loss before income taxes for the first quarter of fiscal 2014 increased $6.2 million compared to the same period last year. The additional loss was primarily due to lower same-store sales in the first quarter of fiscal 2014, additional operating expenses associated with acquired stores and an increase in floorplan interest expense and other interest expense resulting from higher floorplan notes payable and rental fleet debt, respectively, as compared to the same period in the prior year.
International segment revenue for the first quarter of fiscal 2014 increased $21.8 million compared to the same period last year, primarily due to acquisitions and new store openings. Our International segment loss before income taxes for the first quarter of fiscal 2014 increased $0.1 million compared to the same period last year. The loss before income taxes is reflective of the seasonal nature of the business. The loss for the current quarter reflects the seasonality of our business in the areas of Eastern Europe in which our stores are located.
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 or income (loss) before income taxes residing in our segment results.
Liquidity and Capital Resources
Cash Flow Used For Operating Activities
For the three months ended April 30, 2013, cash used for operating activities was $6.3 million. Our cash used for operating activities was primarily the result of an increase in net cash for inventories of $42.3 million and our reported net loss including noncontrolling interest of $0.6 million. This amount was principally offset by a net decrease in receivables, prepaid expenses and other assets of $34.6 million. The increase in inventories primarily reflects new equipment stocking to support forecasted equipment sales and lower than expected equipment sales in the three months ended April 30, 2013. We evaluate our cash flow from operating activities net of all floorplan activity. Taking this adjustment into account, our non-GAAP cash flow used for operating activities was $2.1 million for the three months ended April 30, 2013 and our non-GAAP cash flow used provided by operating activities was $1.7 million for the three months ended April 30, 2012. For reconciliation of this non-GAAP financial measure, please see the Non-GAAP Cash Flow Reconciliation below.
For the three months ended April 30, 2012, cash used for operating activities was $24.9 million. Our cash used for operating activities was primarily the result of an increase in net cash for inventories of $40.4 million and a net decrease in accounts payable, customer deposits, accrued expenses and other long-term liabilities of $26.2 million. This amount was principally offset by our reported net income including noncontrolling interest of $7.5 million, an add-back of non-cash depreciation and amortization of $4.9 million and a net decrease in receivables, prepaid expenses and other assets of $27.6 million. The increase in inventories primarily reflected new equipment stocking to support forecasted equipment sales.
Cash Flow Used For Investing Activities
For the three months ended April 30, 2013, cash used for investing activities was $9.6 million. Our cash flow used for investing activities primarily consisted of purchases of equipment dealerships (net of cash purchased) of $4.8 million and property and equipment purchases (excluding rental fleet) of $5.5 million.
For the three months ended April 30, 2012, cash used for investing activities was $26.3 million. Our cash flow used for investing activities primarily consisted of purchases of equipment dealerships (net of cash purchased) of $8.4 million and purchases of rental fleet of $16.2 million.
22
Cash Flow Provided By Financing Activities
For the three months ended April 30, 2013, cash provided by financing activities was $5.9 million. Our cash flow provided by financing activities was primarily the result of an increase in non-manufacturer floorplan notes payable of $8.4 million, offset by principal payments on long-term debt exceeding proceeds from long-term debt by $2.7 million.
For the three months ended April 30, 2012, cash provided by financing activities was $77.9 million. Our cash flow provided by financing activities was primarily the result of proceeds from our Senior Convertible Notes offering of $145.2 million, offset by a decrease in non-manufacturer floorplan notes payable of $22.7 million and principal payments on long-term debt and short-term advances exceeding proceeds from long-term debt by $46.5 million. We used the proceeds from our Senior Convertible Notes to reduce certain interest-bearing floorplan notes payable and long-term debt balances.
Non-GAAP 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 the adjusted cash flow analysis in the evaluation of our equipment inventory and inventory flooring needs. Non-GAAP cash flow provided by (used for) operating activities is a non-GAAP financial measure which is adjusted for the following:
· Non-manufacturer floorplan notes payable: The adjustment is equal to the net change in non-manufacturer floorplan notes payable, as shown on the consolidated statements of cash flows. GAAP categorizes non-manufacturer floorplan notes payable as financing activities in the consolidated statements of cash flows.
· Impact of senior convertible notes: We issued $150.0 million of Senior Convertible Notes (the “Convertible Notes”) in April 2012. We used a significant amount of the proceeds from the Convertible Notes to reduce our floorplan notes payable balances, resulting in a higher level of equity in our equipment inventory than we have historically maintained. To analyze the impact of this fluctuation of equity in our equipment inventory, we use this adjustment to maintain a constant level of equipment financing. The adjustment is equal to the difference between our actual equity in inventory at the balance sheet date and our historical average level of equity in inventory of 15%. If the level of equity in inventory is less than 15% then we assume that no proceeds of the Convertible Notes were used to pay down floorplan notes payable balances. GAAP categorizes proceeds from our Convertible Notes offering as financing activities in the consolidated statements of cash flows.
We believe that the presentation of non-GAAP cash flow provided by (used for) operating activities is relevant and useful to our investors because it provides information on activities we consider normal operations of our business, regardless of financing source. The following table reconciles net cash provided by (used for) operating activities, a GAAP measure, to non-GAAP cash flow provided by (used for) operating activities and net cash provided by (used for) financing activities, a GAAP measure, to non-GAAP cash flow provided by (used for) financing activities (in thousands):
Adjustment
Non-GAAP
As Reported
(1)
(2)
Measures
Three months ended April 30, 2013:
Net cash provided by (used for) operating activities
2,089
Net cash provided by (used for) financing activities
(8,408
(2,468
Three months ended April 30, 2012:
49,236
1,714
Net cash provided by financing activities
22,669
(49,236
51,357
(1) - Net change in non-manufacturer floorplan notes payable
(2) - Impact of Convertible Notes
Non-GAAP cash flow provided by (used for) operating activities should be evaluated in addition to, and not considered a substitute for, or superior to, other GAAP measures such as net cash provided by (used for) operating activities.
23
Sources of Liquidity
Our primary sources of liquidity are cash reserves, cash flow from operations, proceeds from our public stock offerings, proceeds from the issuance of debt and our Convertible Notes, and borrowings under our credit facilities. We expect that ongoing requirements for debt service and capital expenditures will be funded from these sources.
Adequacy of Capital Resources
Our primary uses of cash have been to fund our strategic acquisitions, finance the purchase of inventory, meet debt service requirements and fund operating activities, working capital, payments due under building space operating leases and manufacturer floorplan notes payable. 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.
Certain Information Concerning Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance, special purpose entities or variable interest 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 rental equipment and buildings under operating leases.
PRIVATE SECURITIES LITIGATION REFORM ACT
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Such “forward-looking” information is 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, 2013, and in other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by the Company).
Forward-looking statements include all statements based on future expectations and specifically include, among other things, all statements relating to our expectations regarding exchange rate impact, equipment sales 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, the continuation of unfavorable conditions in the credit markets and those matters identified and discussed in our Annual Report on Form 10-K under the section titled “Risk Factors.”
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to various market risks, including changes in interest rates and foreign currency exchange rates. Market risk is the potential loss arising from adverse changes in market rates and prices such as interest rates and foreign currency exchange rates.
Interest Rate Risk: Exposure to changes in interest rates results from borrowing activities used to fund operations. For fixed rate debt, interest rate changes affect the fair value of financial instruments but do not impact earnings or cash flows. Conversely, for floating rate debt, interest rate changes generally do not affect the fair market value but do impact future earnings and cash flows, assuming other factors are held constant. We have both fixed and floating rate financing. Some of our floating rate credit facilities contain minimum rates of interest to be charged. Based upon balances and interest rates as of April 30, 2013, holding other variables constant, a one percentage point increase in interest rates for the next 12-month period would decrease pre-tax earnings and cash flow by approximately $4.4 million. Conversely, a one percentage point decrease in interest rates for the next 12-month period would result in an increase to pre-tax earnings and cash flow of approximately $4.4 million. At April 30, 2013, we had variable rate floorplan notes payable of $762.0 million, of which approximately $425.5 million was
interest-bearing, variable notes payable and long-term debt of $16.6 million, and fixed rate notes payable and long-term debt of $52.0 million.
Foreign Currency Exchange Rate Risk: Foreign currency exposures arise as the result of our foreign operations. The Company is exposed to foreign currency exchange rate risk, as our net investment in our foreign operations is exposed to changes in foreign currency exchange rates. In addition, the Company is exposed to the translation of foreign currency earnings to the U.S. dollar, whereby the results of our operations and cash flows may be adversely impacted by fluctuating foreign currency exchange rates. The Company is also exposed to foreign currency transaction risk as the result of certain intercompany financing transactions. The Company attempts to manage its foreign currency exchange rate risk through the use of derivative financial instruments, primarily foreign exchange forward contracts. Based upon balances and exchange rates as of April 30, 2013, holding other variables constant, we believe that a hypothetical 10% increase or decrease in foreign exchange rates would not have a material impact on our results of operations or cash flows.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. After evaluating the effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this Quarterly Report, the Company’s Chief Executive Officer and Chief Financial Officer, with the participation of the Company’s management, have concluded that the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) are effective.
(b) Changes in internal controls. There has not been any change in the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during its most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are currently not a party to any material pending legal proceedings.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, including the important information in “Private Securities Litigation Reform Act,” you should carefully consider the “Risk Factors” discussed in our Form 10-K for the year ended January 31, 2013 as filed with the Securities and Exchange Commission. Those factors, if they were to occur, could cause our actual results to differ materially from those expressed in our forward-looking statements in this report, and materially adversely affect our financial condition or future results. Although we are not aware of any other factors, aside from those discussed in our Form 10-K, that we currently anticipate will cause our forward-looking statements to differ materially from our future actual results, or materially affect the Company’s financial condition or future results, additional risks and uncertainties not currently known to us or that we currently deem to be immaterial might materially adversely affect our actual business, financial condition and/or operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. MINE SAFETY DISCLOSURES
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS
Exhibits - See “Exhibit Index” on page following signatures.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: June 6, 2013
By
/s/ Mark P. Kalvoda
Mark P. Kalvoda
Chief Financial Officer
(Principal Financial Officer)
EXHIBIT INDEX
Exhibit No.
Description
10.1+
Amended and Restated Employment Agreement, dated March 6, 2013, between David Meyer and the registrant (incorporated by reference to Exhibit 10.2 to the registrant’s Annual Report on Form 10-K for the year ended January 31, 2013)
10.2+
Amended and Restated Employment Agreement, dated March 6, 2013, between Peter Christianson and the registrant (incorporated by reference to Exhibit 10.3 to the registrant’s Annual Report on Form 10-K for the year ended January 31, 2013)
10.3
Letter Agreement with CNH Capital America, LLC dated February 15, 2013 (incorporated by reference to Exhibit 10.49 to the registrant’s Annual Report on Form 10-K for the year ended January 31, 2013)
*31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*32.1
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*32.2
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
**101
Financial statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended April 30, 2013, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to the Consolidated Financial Statements.
*Filed herewith
** Furnished herewith
+ Management compensatory plan or arrangement.