Titan Machinery Inc (TITN) 2012 Q1 法說會逐字稿

Good day, ladies and gentlemen, thank you for standing by. Welcome to today's Titan Machinery Inc first-quarter fiscal year 2012 earnings conference call. At this time all participants are in a listen-only mode. Following the formal remarks we will conduct a question-and-answer session. Instructions will be provided at that time. Hosting today's conference will be John Mills, with ICR. As a reminder, today's conference is being recorded and now I'd like to turn the conference over to Mr. Mills. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen. Welcome to Titan Machinery's first-quarter conference call. On the call today from the Company are David Meyer, Chairman and Chief Executive Officer; Peter Christianson, President and Chief Operating Officer; and Mark Kalvoda, Chief Financial Officer. By now everyone should have access to the earnings release for the fiscal first quarter ending April 30, 2011 which went out this morning at approximately 6.45 Eastern Time. If you have not received the release it is available on the Investor Relations portion of Titan's website, at www.Titanmachinery.com.

This call is being webcast and a replay will be available on the Company's website as well. In addition, we're providing a slide presentation to accompany today's prepared remarks. We suggest you access the presentation now, by going to Titan's website, and clicking on the Investor Relations tab. The presentation is directly below the webcast information in the middle of the page.

Before we begin, we would like to remind everyone that the prepared remarks contain forward-looking statements. And Management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and, therefore, undue reliance should not be placed upon them. These statements are based on current expectations of Management, and involve inherent risk and uncertainties, including those identified in the risk factors section of Titan's most recently filed 10-K. These risk factors contain a more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward-looking statements. Titan assumes no obligation to update any forward-looking statements that may be made in today's release or call.

Lastly due to the number of participants on the call today, we ask that you keep your question period to 1 or 2 questions and then rejoin the queue. The call will last approximately 45 minutes. David Meyer will provide highlights of the Company's first-quarter results, provide a general update on our business, and review our acquisitions. Then Mark Kalvoda will review the financial results in more detail, and Peter Christianson will discuss our segment operations results and our fiscal 2012 annual revenue, net income and earnings per share guidance, along with our outlook modeling assumptions. Then we will open up the call to take your questions. With that, I'll turn the call over to the Company's Chairman and CEO, Mr. David Meyer. Go ahead, David.

Thank you, John. Good morning everyone. Welcome to our first quarter of fiscal 2012 conference call. As John mentioned, to help you follow today's prepared remarks, we provided a slide presentation which you can access on the Investor Relations portion of our website at www.Titanmachinery.com. If you clicked on the Investor Relations tab on the right side of the page, you'll see the presentation directly below the webcast in the middle of the page.

On slide 2, you will see our fiscal first-quarter 2012 results. Our revenue for the first quarter was $318.2 million, our pre-tax income was $12.2 million, and we earned $0.40 per diluted share. We are pleased with our strong start to fiscal 2012, which was driven by solid results for both our Agricultural and Construction businesses. Our Company is positioned to benefit from a number of factors such as a continuation of the excellent Ag environment in our footprint due the current level of commodity prices and projected increase in farm cash receipts along with the rebound in the Construction equipment business combined with additional strength coming from our CE markets with energy resources.

On slide 3, you will see we are increasing our revenue, net income and diluted earnings per share guidance range to reflect our first-quarter results and our improved outlook for the year. Revenue is now anticipated to be in the range of $1.3 billion to $1.385 billion. We expect net income to be in the range of $31.2 million to $33.3 million. This translates to earnings per share in the range of $1.53 to $1.63, based on 20.4 million weighted average shares outstanding, which now include our May 2011 follow-on offering of 2.6 million additional shares. Previously, our earnings per share guidance was calculated on 18.35 million weighted average shares outstanding.

Now I would like to provide some color on each of the industries that are key to our business. On slide 4, we outline an overview of our Agricultural industry, which has many favorable factors that should continue the momentum from the end of the year last year into the current year production cycle. 2011 spring planting is now nearly complete, and even though at the end of the first quarter some areas of our footprint were wet and unseasonably cool, after a period of favorable weather, spring conditions in our footprint are better than those of many other Agricultural production areas in the United States. The continued strength of the Ag industry is across all sectors, live stock, grow crops, small grains, all sectors are positive. Commodity prices continue to outpace production costs and profitability forecasts continue to look strong, in-line with a multi-year trend of higher farm profits. Interest rates remain at historical low levels.

The recent USDA estimates for 2011 point to net farm income to increase approximately 20% compared to 2010. The 2011 forecast is the second highest inflation adjusted value for net farm income recorded in the last 35 years.

Turning to our equipment, I'm excited to announce initial customer field results show much improved fuel efficiencies with CNH's Tier 4 technology. In addition, our customers are impressed with increased performance of these new tractors. Similar to what we experienced with the Tier 4 tractor product launch, we look forward to the launch of combine Tier 4 technology with calendar year 2012 production.

The $500,000 Section 179 and the 100% bonus depreciation tax incentives available to our Ag and Construction customers in calendar year 2011 will drive additional sales in this calendar year. In summary, we are excited to be participating in a very robust Agricultural economy and are well positioned to capitalize on the opportunities.

Now, turning to the Construction segment of the Business, on slide 5, we have an outline and overview on the Construction industry in our market. Recent regional flooding in our Titan footprint is creating Construction equipment demand in all areas of our Construction business, especially for our machine rentals. In addition, it is important to keep in mind a few other factors that influence the Construction industry in our markets, including the lower unemployment rate in the upper Midwest relative to the national average, and a relatively stable housing market and commercial activity. We also benefit from the fact that North Dakota's currently enjoying a budget surplus, driving infrastructure investment. The Construction industry continues to benefit from the robust Agricultural economy in the region. Farmers and ranchers are an excellent source for new and used Construction equipment such as skid steer loaders, loader backhoes, wheel loaders, excavators, forklifts and dozers.

As we've discussed on previous calls, our business is also benefiting from the increased oil industry activity. As many of you are aware, our stores are capitalized on the Bakken, Three Forks and Tyler Oil formations which are all within our CE footprint in the Dakotas and Montana. In addition, there is increased activity in the Niobrara formation which is in Wyoming, potentially creating additional business opportunities. The oil industry activity in our markets has a multiplier effect on the economy, as it increases the need for additional infrastructure, expansion of new housing, as well as other support industries in addition to drilling exploration and extraction and transportation. The indicators highlight the improvement in the Construction equipment industry. Strong used equipment values are an indicator of strengthening demand and affirming of the overall market.

We are also seeing increased demand for rental equipment, reflecting increased Construction activity. Manufacturers are increasing production levels in-line with sector improvement. In addition to these market factors I just discussed, our Construction business is now better positioned to capitalize on the improving environment in fiscal 2012 due to the successful execution on our Construction Equipment Business Plan in fiscal 2011. In the first quarter of fiscal 2012, we achieved positive pre-tax income from our Construction segment, a significant improvement over the prior year. We're optimistic that we will achieve profitability in fiscal 2012 and continue to generate earnings leverage in this segment of our business.

Regarding acquisitions, slide 6 underscores our successful execution on our long-term acquisition growth strategy. We are very excited about all our recent acquisitions in the first quarter of fiscal 2012. We completed 3 acquisitions, consisting of 2 Ag dealerships and 4 rental equipment locations. In addition, we relocated and expanded one Construction equipment store in Cedar Rapids, Iowa to include the Case IH Agricultural contract. Thus far in the second quarter of fiscal 2012, we have completed 2 acquisitions consisting of 6 Construction dealerships, giving us increased exposure to this segment of our business.

On February 28, we closed on Tri-State Implements, which includes 1 New Holland brand Ag equipment store in Sioux Falls, South Dakota. The dealership is strategically located in our regional trade center and is well positioned to benefit from the Agricultural activity in the area. On March 31 we completed the acquisition of Schoffman's, consisting of 1 Case IH Agricultural dealership located in Redwood Falls, Minnesota. The dealership is strategically located in the fertile Minnesota River Valley and is continguous to our Marshall Dealership.

On April 1 we closed the acquisition of ABC Rental, an independent rental yard Company which consists of 4 rental equipment locations in Missoula, Bozeman, and Big Sky, Montana and also Williston, North Dakota. The locations of Missoula, Williston, and Bozeman will be consolidated with our existing Case CE dealerships in the respective markets, leveraging the synergies of both companies. We are excited about the acquisition and our expansion of the Construction rental business. We have been preparing for the right opportunities to expand our rental model, and with ABC Rental as part of the organization, the proper growth platform is now in place to place this in this area of our business. We believe this is a very strong, long-term growth opportunity for our business.

We also relocated our Case Construction Equipment dealership in Cedar Falls, Iowa to Center Point, Iowa, just outside the Cedar Falls -- Cedar Rapids Metro area. Given the success to our existing Agricultural equipment dealerships in Iowa, the large Center Point Agricultural market potential, improved accessibility and the productive agricultural land in the surrounding areas, we expanded our operations to include Case IH Agricultural equipment and a full-line of construction equipment product lines.

Turning to our acquisition and expansion activities subsequent to the end of the first quarter, on May 13 we closed on the acquisition of Carlson Tractor and Equipment with CE locations in the Minneapolis suburbs of Rosemount and Rogers. We are excited about gaining entry into this large metro area and solidifying our New Holland CE business in the state of Minnesota. On May 31, we closed the acquisition of St Joseph Equipment's Construction equipment business. This consists of 4 Construction equipment locations in Shakopee, Hermantown, and Elk River Minnesota, and LaCrosse, Wisconsin. The this marks our entry into the state of Wisconsin, making it the eighth state in our dealerships.

In addition, with this acquisition, we now have the exclusive Case Construction contract for our existing 8 state footprint including the entire state of Minnesota, and 11 counties in Western Wisconsin. Also in the second quarter, we will be consolidating our Belgrade, Montana operations into the newly acquired ABC Rental Bozeman store, resulting in the closing of the Belgrade location. This will improve our efficiencies in the ABC store as Bozeman is more strategically located to serve this market. We expect the closing costs of the Belgrade location to be approximately $0.01 per diluted share, and will be realized in the second quarter of fiscal 2012.

We continue to see a healthy acquisition pipeline of both Agricultural and Construction dealerships throughout the entire upper Midwest and will continue to make selective and strategic acquisition choices. CNH has been a strong supporter of our acquisition efforts. We are thankful to be associated with this well-run organization representing such powerful brands.

In summary, we are pleased with the beginning of the year. We achieved strong organic and acquired growth and profitability from both of our business segments. We continue to be encouraged by the industry's trends and anticipate that fiscal 2012 will be another great year for strong top-line and bottom-line growth. Now, I would like to turn the call over to Mark Kalvoda, our Chief Financial Officer, to review our financials in greater detail.

Thanks, David. Turning to slide 7. Our total revenue for fiscal 2012 first quarter grew 54.9% to $318.2 million. With approximately two-thirds from organic growth and one-third from acquisition growth. All 3 of our revenue sources contributed to this strong growth with equipment providing the largest increase. It's important to remember that the increased equipment sales volume has a long-term positive impact on our parts and service revenue. We achieve operating leverage as our parts and service gross profits grow and absorb additional fixed operating costs of the dealerships, providing recurring revenue and earning stability to our store unit model.

Turning to slide 8. Our gross profit for the quarter increased 53.3% to $52.8 million. Primarily due to increased equipment gross profits reflecting both higher equipment revenue and equipment margins. Our gross profit margin was 16.6%, compared to 16.8% last year, resulting from the increased percentage of revenue generated from equipment revenue compared to the higher margin parts and service businesses.

We improved our operating expenses as a percentage of net sales in the first quarter of fiscal 2012. Expenses decreased to 12.4% of sales, a 210 basis point improvement, which reflects our ability to leverage fixed operating costs across higher revenues. Our pre-tax margins improved to 3.8%, which represents a 250 basis point improvement over the first quarter of last year. The improvement reflects operating leverage as well as the positive impact of lower floorplan interest expense from our new credit agreement, which began in the fourth quarter of last fiscal year. Earnings per diluted share for the fiscal first quarter 2012 increased to $0.40, compared to $0.09 in the first quarter last year.

Turning to slide 9. We provide an overview of our balance sheet highlights at the end of the first quarter. We have cash and cash equivalents of $82 million. Our inventory is $466 million, which we believe is an appropriate level to support our annual sales plan. I would like to provide more color on our inventory. At the end of our fourth quarter of fiscal 2011, our total inventory was $432 million. It's important to recognize that the inventory balance at the end of the first quarter includes $8 million of additional inventory from our first-quarter acquisitions. The increase in equipment inventory from the fourth quarter compared to the end of the first quarter was all new equipment to support our retail sales plan, as our used equipment actually declined during that period.

Working capital at the end of the first quarter of fiscal 2012 was $157 million. As of April 30, 2011, we had $214 million available of our $550 million total discretionary floorplan lines of credit. Additionally, on May 11, we announced the completion of our follow-on offering of 2.76 million shares of common stock, which generated net proceeds of $75 million. We are very pleased with our successful offering and will use the proceeds for strategic acquisitions, business development initiatives, working capital, and general corporate purposes.

Slide 10 gives an overview of our cash flow statement for first quarter of fiscal 2012. When we evaluate our Business, we look at our cash flow related to inventory, net of floorplan activities, which is reported on our statement of cash flow as both operating and financing activities. When considering non-manufactured floorplan proceeds in the first quarter of fiscal 2012, our net cash used for inventories was $2.5 million.

On our statement of cash flows, the GAAP reported net cash used for operating activities was $4.9 million. We believe including the non-manufactured floorplan proceeds and the advances on contracts in transit as part of our operating cash flow better reflects the net cash flow of our operations. Making these adjustments, the net cash generated from operating activities during the fiscal first quarter of 2012 was approximately $18.1 million. Reconciliation of this non-GAAP measure is contained in this slide which is posted on our website.

Now I would like to turn the call over to Peter to discuss our Agriculture and Construction operating segments in more detail and to provide additional color on our increased fiscal 2012 annual guidance. Peter?

Thanks, Mark. Now turning to slide 11. You'll see an overview of our segment results for the first quarter. We're pleased with the improvement in both segments. Our Agricultural sales were $287 million, driven by acquisitions and strong organic growth due to the favorable Ag economy for our customers in the first quarter. We generated Ag pre-tax income of $13 million, primarily reflecting higher sales as well as higher equipment margins.

Turning to our Construction segment, we're pleased with the strong sales growth due primarily to organic growth. Our Construction sales increased 37.5% to $44.1 million, driving operating leverage as we achieved higher revenue volume through our fixed store operating expenses. We generated pre-tax income of $700,000, compared to a pre-tax loss of $1.9 million last year, a significant improvement. This reflects higher revenue and higher gross margins for equipment, and our other revenue category, which includes rentals, due to increased utilization of our rental fleet. Also, our pre-tax income benefited from lower floorplan interest expense.

Turning to slide 12. This shows our same-store sales results for the first quarter of fiscal 2012. Our overall same-store sales increased 36.9%, highlighting strong year-over-year improvement in both segments. The improved Agricultural same-store sales are reflective of the robust agriculture economy. Our Construction same-store sales increase underscores successful execution on our fiscal 2011 Construction Business Plan and the continuing improved Construction equipment market.

For the first quarter of fiscal 2012, overall same-store gross profit increased 30.8% year-over-year. Improvements in Ag gross profit are driven by the revenue increase as well as higher equipment margins due to increased market demand. Construction store -- same-store gross profit improvements reflect the factors I mentioned earlier. For modeling purposes, it's important to remember that we calculate same-store sales by including stores that were with Titan for the entire period in which we are comparing. In other words, only the stores that were part of Titan for the entire 3 months of the first quarter of fiscal 2011 and the first quarter of fiscal 2012 are included in the first quarter same-store comparison. A total of 13 locations were not included in our first quarter same-store results; 9 agriculture stores and 4 Construction stores.

Now, turning to slide 13, you'll see our fiscal 2012 annual guidance. As David mentioned earlier, we're increasing our revenue, net income, and diluted earnings per share guidance range to reflect our first-quarter results and our improved outlook for the year. As you recall, we update our annual guidance on each of our quarterly earnings calls as we gain better visibility into our fiscal year. We're anticipating achieving increased revenue for the full-year ending January 31, 2012 in a range of $1.31 billion to $1.385 billion, compared to the previous range of $1.275 to $1.35 billion.

Net income is now expected to be in the range of $31.2 million to $33.3 million, an increase compared to the previous range of $27.5 million to $29.4 million, reflecting our higher sales volume and improved margins. Our increased net income range equates to an earnings per diluted share range of $1.53 to $1.63, based on estimated weighted average diluted shares of 20.4 million, compared to estimated weighted average diluted shares of 18.35 million before our May follow-on offering. Keep in mind, the 20.4 million shares include the additional 2.76 million shares from our recently completed follow-on offering. We do not provide quarterly guidance, but for those of you that model our business on a quarterly basis, you should model approximately 21.0 million shares outstanding for the second quarter and 21.2 million shares outstanding for the third and fourth quarters.

When modeling our business for the 2012 forecast, we expect our same-store growth to be higher than our previous forecast. We now expect our Ag same-store sales growth to be in the range of 5% to 10%. We expect our Construction same-store annual growth to be in the range of 12% to 18%. Although this year we experienced much stronger same-store sales in the first quarter for both our Ag and Construction segments, it's important to remember that we had very high second half fiscal 2011 same-store sales. Our annual increase is comping against very strong second half same-store sales growth. 35.4% for our Agricultural segment and 40.7% for our Construction segment.

We're raising our annual equipment margins from the previous expected margin of 9.5% to approximately 9.8%, reflecting our increased first-quarter equipment margins and an increase in margins for the remainder of the year. Based on the continued improvements in our Construction segment, we now expect to achieve profitability on an annual basis in this segment. As you recall, on our last conference call, we were modeling an improvement of $3.4 million to achieve break-even. Based on our first-quarter results, and our anticipated second-quarter cost related to closing the Belgrade, Montana location, we're modeling a $4.4 million annual improvement in earnings to achieve profitability for the year. We look forward to earnings leverage in this segment of our business as we capitalize on the opportunities in this market going forward.

Before we take your questions, I'd like to conclude by thanking our employees for all their hard work and thank our valued customers for their continued support. Operator, we're now ready for the question-and-answer period of the call.

Thank you. (Operator Instructions) Steve Dyer, Craig-Hallum.

Congratulations on the good results. Just was wondering if you could elaborate a little bit more on the acquisition pipeline, anecdotally how that's shaping up? Is it primarily in your existing footprint? I know earlier this year you branched out into Wisconsin, which would seem like it would have a lot of opportunity. Just any indication there. Are you pushing out the walls of your existing footprint, or are a lot of the discussions still in the core upper Midwest, where you've been operating?

Yes, Steve. We like this upper Midwest footprint. It's excellent agriculture area. We understand the business. There's plenty of acquisition opportunities out there. The demographics we talk about each quarter are still there. It's a fragmented group, [8] to dealer principals.

So we're looking for opportunistic acquisitions. We like the state of Iowa. We like the state of Nebraska. So many things would be the same. As we commented on, on previous calls, too, we're exploring other opportunities out there. So we continue to be opportunistic, and like the landscape out there on the acquisition front.

Okay. Great. And then there's been a lot of weather issues around the country, this spring, we had a late spring here in the upper Midwest. How are you feeling about the condition of things in any of your footprint impacted by flood, or how do you look at your footprint out there?

If you look at our footprint, we really need to count our blessings. I think we're in kind of a sweet spot all over. If you look at -- the corn in Iowa's in great shape. Nebraska's in great shape. Up in the north here we had a pretty extended period of some excellent planting conditions.

I'd say the majority of all our crops are in the ground, all in the Dakotas, western Minnesota, like I said earlier, Iowa's in great shape. So we're pretty fortunate right now because there's some pretty tough things going on in a lot of the United States. But I like the position we're in right now in our markets.

All right. Thank you. I will hop back in the queue. Thanks.

Brent Rystrom, Feltl.

We started the call the exact same time the WASDE report came out from the USDA today, and they took down corn acreage, but then noted corn acreage is probably up substantially in the western corn belt. That's got to hit you guys perfectly, right?

Yes, we're seeing -- some of these new varieties and the genetics out there right now, we're seeing corn growing in a lot of our footprint, that wasn't being grown in 15 years ago.

We're hearing probably a 1 million acre pick up between Iowa, Minnesota, Nebraska corn this year from what was originally thought. So that's got to drive the income regionally much higher than that 20% growth, is what I'm guessing, particularly when it looks like corn is going to [limit-up] again today. Looking at some of the acquisitions, or dealership activity, when does the new Marshall facility open?

That will be towards the end of this fiscal year.

All right. And then when looking at St. Joseph Equipment, I was just down there a couple months ago. I forget what county road they're on. But they're about 6 miles off east of LaCrosse into the middle of nowhere. Are you going to relocate that business?

Right now, that's been there a long time. There's a lot of customers that know that. They go to it. It's a destination location. So what we need to do is we just acquired that here just within the last week. So, it's true of any of our markets. We spend a lot of time analyzing the demographics, the customer flow, poll our customers. So we'll make the right decisions as we get into this, Brent.

Okay. Thanks, guys. I'll hop back in the queue as well.

Rick Nelson, Stephens Inc Investments.

Congratulations as well. Terrific quarter. Dave or Peter or Mark, can you talk about inventory availability? Is there enough product out there if demand continued to outpace your own guidance for same-store growth?

Yes, Rick, this is Peter, and you can see that our inventory was up, and this is in-line with our stocking for our retail sales plan. Usually the back half -- as you're aware, the back half of our year is stronger on new retail, so you'll see the numbers on the inventory that Mark gave, and the increase was up in new, and our used is actually down. So that we feel comfortable with what we're doing.

Can you talk about the cadence that you're expecting in terms of same-store growth? I think you have a relatively easy compare here in 2Q, and then they get quite difficult in the second half. Can the momentum we saw in the first quarter be sustained, I guess, into Q2?

Well, again, like I said in my comments, Rick, our first quarter, and actually first and second quarter of last year, we've got not as strong of comps, so we're showing those increases like we showed in our first quarter. But we're modeling -- we feel comfortable with what we're modeling the entire annual same-store revenue at, and that's taking into consideration these stronger same-store comps on the back half of the year, but we feel pretty confident in our annual number.

If I could just follow up on the acquisition pipeline. If you could comment on pricing, given the strength in the Ag economy, and do you see more opportunity in the Ag space or the Construction space within your footprint?

Well, there's actually opportunities in both spaces right now. As you can see, we've made some pretty good bites in the Construction side here with the Minnesota and the Minneapolis, St Paul Metro area with the Carlson and the St, Joseph acquisitions. So we think Construction really looks good, especially up in the upper Midwest markets where we have the energy and the Agricultural influence up here, Rick. But we tend to look at both Ag and CE, and we make opportunistic acquisitions as we see they're fit. And we have been keeping this pricing discipline as we've been doing this.

Great. Thanks a lot, and good luck.

Chris Weltzer, Robert W. Baird.

It was a very strong quarter. Was there anything either related to the timing of planting or any incentive programs that CNH may be running? In other words, is there anything that was 1-timey in the quarter that might not continue into the second quarter from a top-line perspective?

Well, again, as Peter stated, we always look at our year and our customer's annual production cycle because some of these timing between quarters gets a little bit difficult. You have weather. You have commodities. You have planting, and so basically like we've said year over year, we tend to be a little stronger in our third and fourth quarters over our first and second quarters, and I think this year is going to probably shape up pretty similar.

Okay. That's very helpful. And then of the changes to your modeling assumptions, the same-store sales growth numbers and the equipment margins, can you just talk through which ones changed just as a function of first-quarter results, and where your outlook going forward has changed?

Well, when you look at the equipment margins, we had 10.4% versus our original modeling on 9.5%. But we need to always keep in mind that we look at our Business on an annual basis, and we do see some positive signs for this year, and that's why we adjusted our long-term modeling, and increased that percentage. So that's on the equipment margins.

And yes, like Rick had mentioned earlier, the first and second quarters we have lower same-store comps in the back half of the year, we had really strong results last year. So we feel, again, like when we put those all together, that our modeling that we -- where we increase that on our guidance, that that's pretty well in line with what we think we can get done.

Okay. Fair enough. Thank you, guys.

Mr. Rystrom.

From an inventory perspective, the discussions we have with a lot of people in your stores and other dealers is used equipment is selling extremely well. Do you sense at some point that the OEMs will step in and up production further? Do they have capacity to do that beyond what they're doing now?

Well, I think the manufacturers, they can run multiple shifts. They're looking ahead, and I'm sure doing the planning and trying to see what 2012 looks like right now, Brent, but right now I think -- it's nice to have a little bit of a tight market out there, which we're seeing right now. Those typically are years that we make a little bit more money in, so I'm fairly comfortable where we're at right now. And I know all the manufacturers want to keep growing share, and if they see it's a business [out there], they're definitely going to do what it takes to get the production levels in line.

And then real quickly, David, you had mentioned the Tier 4 engines coming on combines. When do those start getting delivered?

We're going to see the production of those Tier 4 combines coming out sometime in the first calendar-year quarter of 2012. So we'll start some pre-sell activities I believe in our fourth quarter of our calendar year this year for delivery in the first quarter of next year for these Tier 4 combines.

All Right. Thank you.

Tom Varesh, M Partners.

You mentioned that you used -- your used equipment inventory was down. Are you selling significant or a material amount of that used equipment into Canada, given where the exchange rate is at?

We're not really seeing a big swing. I know when the dollar was a lot stronger, the US dollar was a lot stronger, the Canadian dollar here will go back in time, there was a lot of it coming the other way. We're selling a few pieces up there, but it's nothing I would say that would mark the charts as something extraordinary. So just here and there, I think. We have pretty strong used markets in our market here right now in the United States.

Okay. That's good for you guys, I guess, because it keeps the equipment in your regions. That gives you an opportunity to sell the parts and servicing, right?

Definitely, we like that part, and we like it in our markets. It's simpler doing business that way, also.

True. Could you comment on -- if I think about a year where weather's normal, and the planting season starts and ends as it's supposed to, and the harvest comes and goes as it's supposed to, if you think about that kind of a year versus years like this year and last year where at some point in the season you've got weather that's impacting, whether it be a late start to the planting or something that causes the harvest to get out of the ground faster or earlier than usual, can you comment on how those 2 different types of years impact, if at all, equipment sales for you guys?

Well, first of all, Tom, we really need to talk about what normal is in our industry. Year in, year out, you're seeing a lot of things that get thrown at these farmers, and that's what's really nice; they're really capable. They get things done, and they seem to be creative and innovative, and put the work in to get that crop and get it off on time.

So I guess the first thing is, we want to see our customers very successful. We want to see them make money. We want to be able to help them do that. But I tell you, as you get any type of adverse conditions, that's when they need machinery and they need the help at all. So that's why we always keep saying -- we're going to talk about our Business on an annual production cycle and annual plan, but the more adverse it is out there, the more there is the need for additional machines, more machines, better machines, higher-horsepower machines, more productivity. But we are not in a normal business.

Okay. That's what I was trying to get at, was to see if in fact you guys do see an uptick in demand in years where weather is impacting. Sounds like you do. Is that accurate? Is that what I just heard?

Well, I'd say, if everything goes real smooth, a lot of times people can get by with what they have. That is all of a sudden if you throw some more dimension at this, some diversity at the situation, then they need equipment, they need more equipment and they're up against some real tight time windows to get the crop in, and get the crop off. And that's what we're hearing -- like I said earlier, we want our customers to be successful. We want them to make money. We're here to help them do that.

Perfect. All right. That's it from me. Thank you very much.

At this time, we have no additional questions. So I will turn the conference back over to David Meyer for closing comments.

Well, thank you for listening to our call today. We look forward to speaking to you again in a few months, and have a great day, everybody.

Ladies and gentlemen, that does conclude today's conference. We thank you all for your participation.