Good morning, ladies and gentlemen. Thank you for standing by. Welcome to today's Titan Machinery Second Quarter Fiscal Year 2014 Conference Call. [Operator Instructions] Hosting today's conference will be John Mills, ICR. As a reminder, today's conference is being recorded. And now, I'd like to turn the conference over to Mr. John Mills. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen and welcome to Titan Machinery's Second Quarter Fiscal 2014 Earnings Conference Call. On the call today from the company are David Meyer, Chairman and Chief Executive Officer; Peter Christianson, President; and Mark Kalvoda, Chief Financial Officer. By now, everyone should have access to the earnings release for the fiscal second quarter ended July 31, 2013, which went out this morning at approximately 6:45 a.m. Eastern Time. If you have not received the release, it is available on the Investor Relations portion of Titan's website at titanmachinery.com. This call is being webcast and a replay will be available on the company's website as well. In addition, we are 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 website -- webcast information in the middle of the page. Before we begin, we'd 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. The 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 risks and uncertainties, including those identified in the Risk Factors section of Titan's most recently filed 10-K and subsequent 10-Q. 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. [Operator Instructions] The call will last approximately 45 minutes. David Meyer will provide highlights of the company's second quarter results, a general update on the company's business, then Mark Kalvoda will review the financial results in more detail and Peter Christianson will discuss the company's segment operating results and its fiscal 2014 annual revenue, net income and earnings per share guidance ranges, along with its outlook modeling assumptions. Then, we will open the call to take your questions. Now I'd like to introduce the company's Chairman and CEO, Mr. David Meyer. Go ahead, David.

Thank you, John. Good morning, everyone. Welcome to our second quarter of fiscal 2014 earnings conference call. As John mentioned, to help you follow today's prepared remarks, we have provided a slide presentation, which you can access on the Investor Relations portion of our website at 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 second quarter fiscal 2014 results. Our revenue for the second quarter was $488.2 million, a 19% increase over the last year's second quarter. This sales performance reflects higher year-over-year revenue for our Agriculture, Construction and International business segments. Pretax income was $6.6 million and our earnings per share was $0.18. While our higher-margin Parts and Service business performed well in the second quarter, this was offset by lower-than-expected new and used equipment margins. On today's call, we will review the performance of each of our segments, including equipment margin pressure that is affecting our industry. We will update you on our Construction segment key initiatives. And finally, we will provide an equipment inventory overview and share our revised fiscal 2014 guidance and modeling assumptions. Now I'd like to provide some color on each of our industries that are key to our business. Turning to Slide 3, we provide an overview of our agriculture industry. In our footprint, anticipated annual crop production has been impacted by several factors. 2.6 million acres or 52% of U.S. corn and soybean prevented planting is in the Titan footprint. Also, dry conditions and recent high temperatures are expected to affect crop production in our footprint and lead to lower production compared to other regions of the United States that are experiencing more…

Thanks, David. Turning to Slide 6. The total revenue for the fiscal 2014 second quarter grew 19% to $488.2 million, reflecting growth from acquisitions and same-store sales increases in our Agriculture and International segments, partially offset by a decline in Construction same-store sales, reflecting the challenging construction industry conditions mentioned by David earlier. All of our revenue sources increased quarter-over-quarter, with particular strength in our higher-margin Parts and Service, which is the recurring revenue part of our business. Parts were up 22% and Service was up 30.9%. The increase in Rental revenue of 24.1% reflects our larger rental fleet compared to the same period last year. On Slide 7, our gross profit for the quarter increased 18.7% to $83.5 million, reflecting higher revenue. Our gross profit margin was 17.1%, a decrease of 10 basis points compared to the same quarter last year. The second quarter equipment margin was 8.2%, which is below our expectations, partially due to the used equipment margin pressure that David mentioned earlier. This was a 60 basis point decline from equipment margins of 8.8% in the second quarter of last year. The lower equipment margins were primarily offset by the increase in gross profit from the higher-margin Parts and Service business. Our operating expenses as a percentage of net sales in the second quarter of fiscal 2014 were 14.4% compared to 13.8% the same quarter of last year. The increase in operating expenses as a percentage of revenue primarily reflects lower fixed operating cost leverage in our Construction segment due to the negative same-store sales growth and higher expenses related to our recently acquired construction stores, which are underperforming in the metro markets where they are located. Higher occupancy costs associated with facility improvements to support growth of our higher-margin Parts and Service business also impacted…

Thanks, Mark. On Slide 12, you'll see an overview of our segment results for the second quarter. Agricultural sales were $367.5 million, up 17%. This growth was driven by acquisitions and positive same-store sales results in the quarter. We generated Ag pretax income of $9.8 million, compared to $10 million in the prior period. And as David and Mark mentioned, our Ag business was impacted by lower equipment margins, which was the primary driver of our lower pretax income. Turning to our Construction segment, our revenue was $97.9 million, up 2.8%, which reflects acquisition growth, offset by negative same-store sales. Industry conditions remain challenging for this segment of our business. The pretax loss of $1.7 million was primarily the result of lower equipment sales and increased expenses associated with recent acquisitions. Although we have not achieved our operating targets, we believe this segment of our business represents significant future earnings leverage, as we are able to improve operating margins going forward. As David mentioned, we are executing on our key initiatives to improve this segment of our business. In the second quarter of fiscal 2014, our International revenue was $39.9 million, 103.3% increase compared to the prior year period. This reflects the acquisitions and new store openings made in fiscal 2013 and the first quarter of 2014, as well as higher same-store sales for our dealerships that have been in our network for the full year. Our pretax income for International was $0.1 million compared to $0.4 million in the same quarter last year, reflecting costs associated with building our distribution network. We're establishing our international operations and believe this business represents an additional structural component of our long-term growth strategy. Turning to Slide 13, you'll see our segment results for the first 6 months of the year. Ag revenue…

[Operator Instructions] We will take our first question from Michael Cox with Piper Jaffray.

My first question is on the comment you made about struggling to achieve full price realization on some interim Tier 4 equipment. I was wondering if you could expound a bit on that, and then also speak to the -- your customers' appetite for the final Tier 4 equipment that will be launched next year?

Well, what we've been seeing in the industry is, year-over-year, transaction price increases prior to the Tier 4 finals out there. So somewhere in that range of probably 4% to 8%, and that's going to vary by product. So that's a challenge in any kind of environment when -- but when you see the ag [ph] component with decrease in commodity prices and deterioration in crops on our markets, that kind of compounds that problem. So to answer your question about Tier 4-B, there isn't a lot of price visibility yet to Tier 4-B or Tier 4 final out there right now at this point in time. I think a lot of the benefits to the customers will realize that between the Tier 3 to the Tier 4, as far as from a fuel economy standpoint and some type of things. But in conjunction with the Tier 4-B, typically either [ph] as product enhancements, model changes and some things like that, so -- but I think the biggest impact right now is I think some of the transitional price increases which we're experiencing today in the marketplace.

Okay, that's helpful. And I appreciate the additional color on inventory through the balance of the year. And as you look ahead to next year, is it realistic to assume we work -- that we work back towards a 3x turn, or is a lower number a more realistic target at this point?

I'd say that a lower number would be a more realistic target. It takes time to move that turn from where our existing operating inventory levels are at. It takes time to move that through the system and work it through the retail distribution channel and work that down to an inventory level that supports a 3x turn. So I don't see the 3x happening probably in the next year, but we will be moving towards that direction.

We'll take our next question from Steve Dyer with Craig-Hallum.

The -- even the lowered guidance still implies a relatively aggressive ramp into the back half of the year. Just given commodity prices, crop conditions, the absence of a lot of corn in the bins, et cetera, how much visibility do you have into your customers' sort of sentiment in spending plans, especially with kind of 179 -- Section 179 still up in the air? How confident are you kind of in the way the back half of the year plays out?

Well, first of all, you see some real historic buying patterns. You get some year-over-year rolls. I mean, there's some pre-sell business in the system. You referred to Section 179, but we definitely have -- I mean, there is a lot of farmer income that was put into this calendar year. So from their tax standpoint, the Section 179 and 50% bonus depreciation still into effect for this year for the tax purposes. There's some positives out there. Livestock's strong right now. I see -- you're seeing some good buying opportunities in the fertilizer side of the business, there still really relatively low interest rates. Balance sheets of our customers remained strong. So there is still real positive here as we go into -- support our numbers for the Q4.

Okay. The Parts and Service business was obviously a really nice bright spot in the quarter. Anything from a weather standpoint or what have you that was an anomaly there, or how sustainable is that trend?

As I mentioned, our second quarter was impacted by the weather pattern. If you recall, in the first quarter, it was an extremely late planting season, so some of that after-sales product support revenue did come in to the second quarter.

Okay. Last question for me and I'll turn it over. The rental business, even though you added a lot of inventory, seems to be, from a utilization standpoint, challenged. Just some thoughts there on going forward. Is that a piece of business you're going to remain committed to, and how do you think about that going forward?

Yes, that's a nice piece of construction equipment business. We're fairly new to that business, but I think the people we put into place, some of our processes, our systems, some of the -- where we got the equipment located, in which markets, I think there are a lot of positives out there. So we really have some good people in place right now and we're very committed to that business. You're going to, I think, see a very positive impact to our bottom line as we get through the quarters with that.

We'll go next to Mig Dobre with Robert W. Baird. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: So I guess, the first question for me would be on the equipment gross margin. It looks like that was really the big adjustment to the guidance and expectation this quarter end. I'm wondering, as you're thinking about the risk in gross margin going forward, if we were to look at say a calendar 2014 environment in which new equipment sales are actually down year-over-year and used equipment prices continue to be hedged the way they have been hedged so far, how do you gauge the risk to gross margin going forward? Could we be looking at something in the low 8s? Is that too aggressive? Is that too conservative? Any color would be helpful.

Well, if you look at our results, historically, gross margin on equipment has gone down. It's moved from 8% up to as high as 11%. And with the current inventory levels throughout the industry and the macro lower commodity prices, that's what's been putting pressure on our equipment margins. And so we have to see, as we get increased visibility going forward into 2014 -- calendar year 2014, how that will play out with our margins. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: Okay. But you can point to some -- if -- historical times actually, if you would, maybe going beyond your track record as a public company to where you've had an environment that would help us out in gauging this risk.

Well, I guess if you look at the total numbers for Titan, since we've been a public company, that would give you some color on what the range has been on our equipment gross margins over the last 5 years, 5 years plus. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: All right. And then I'm also wondering, when you're talking to the OEM, what is your sense for their thinking as far as special incentives that they're looking to roll out? Or any really support that they could be potentially giving you, given the fact that there is quite a bit of inventory in the channel, particularly on the combine side of things?

Well, I think that's one thing you'll probably have to talk to the manufacturers about. But I think you're going to continue to see the manufacturers be competitive in the marketplace, depending on the market conditions. Like I say but that, there, I think you're going to have to ask the manufacturers about it.

And we'll go next to Rick Nelson with Stephens.

I would like kind of to explore what -- a little deeper on the equipment margin pressures. If we could look at the Construction segment equipment margin, as well as, separately, from the Ag segment margin, as well as new and used, I'm trying to gauge where the pressures are greatest. And what your assumptions are then for the back half of the year?

Rick, Mark here. Yes, I think on both sides, we're seeing some pressure now. We talked probably a little bit more about some of the Ag pressures out there, given the weather and commodity prices. But we still have that overhang of inventory, excess inventories, in the distribution channel out there in the industry for construction. So we're still seeing some of that pressure that's coming through on our margins. And for the balance of the year, we are expecting lower equipment margins from what we expect -- from what we achieved last year on both the Ag and Construction. And that's leading to some of the lower guidance on those equipment margins.

And in terms of a new guide, what would be your segment Construction assumption? Will you be profitable there? You're down, I think, $8 million through the first half.

Yes. So with some of the seasonality that we see with the third quarter, we do anticipate getting into the black somewhat. But then because of the seasonal low that happens or the lower seasonal activity that happens in Q4, it is down. So the balance of the year, we still see ourselves in the red, but we're making progress over year-over-year comparisons to quarters from fiscal '13.

And then finally, on the acquisition pace. In a typical year, you would target 10% to 15% acquisition growth. Are you basically closing the spigot on acquisitions or just a reduced pace versus a normal year?

No, we're -- like we said, we slowed the pace. No, we have not closed that. In fact, there is ongoing conversations out there. You're probably not seeing a lot of really motivated sellers at this point of time. I think we're a little sensitive with the pricing discipline. And at the same time, as we discussed, we want to make sure we're getting the operation of our recently acquired stores up and going and the improvements we want to do on the Construction side and we're really focused in -- all-hands-on-deck effort in a lot of those functions. At the same time, no, we're definitely in the loop on acquisitions and we are a growth company and continue to look at a long runway as we get through this next 2 or 3 years on the acquisition front.

[Operator Instructions] We'll go to Larry De Maria with William Blair. Lawrence T. De Maria - William Blair & Company L.L.C., Research Division: I just want to continue to talk on the used market. How broadly based is the weakness on used side? Is it still mostly combines? If you could talk about Titan versus the industry, when do you think this correction normalizes the industry, because it seems like it might be a nagging issue into next year? It may structurally lower used price levels into next year, which might be a softer new environment. And then finally, on the used side, is the industry -- and are you guys, at this point of time, trying to liquidate inventory through auctions more so, or still trying to have an orderly [ph] sale through -- to the retail channel? That's the first part.

Sure. Well, let's talk about combines first. So we'll go back to the beginning of the year. We came up on really, really strong Q4 with a lot of revenue, a lot of new combine sales and resulting in a lot of used combine sales. So we had a good number of used combines in the system. In addition, the industry for combines really heated up in Q1 and Q2. So as a result, all brands, a lot have used combines. So proactively, we've put a lot of things in place, a lot of price discipline. We try to get ahead of the market, a lot of early bird type things. And I think we've really done a good job managing our combine inventory, say, against maybe the industry and maybe some of our competitors out there. So right now, if you look at the number of -- the number and the used dollar value of our used combine inventory, it's fairly flat, if not a little bit less than where we were a year ago. So we think we've done a really good job. And like I say, we started off early in the year, so we think we're in pretty good shape on that right now. I would say, combines is always where you've got probably your most vulnerability on that. I think the tractor inventory, even though there is a little bit of pressure because of some of these outside macro factors on commodity prices and some of the crop situations in some markets, tractors seem a little bit more stable than combines are. One thing I think that's going to help some of these used values too, as you see, as we discussed some of these transaction price out there in advance of Tier 4 final…

Well, first of all, we need a little more visibility before we can really comment with any degree of accuracy on calendar 2014. We do have a good number of Tier 4-A units on hand right now that -- and some of these have some nice price advantages to them, I think, which is going to be a positive. So as you look at the Tier 4 final rollouts, you're going see that really vary by manufacturer and by products throughout next year. So the timing of these, there's a lot of positioning going on with the manufacturers, there's a lot of prebuilds going on here. So this is -- it's a pretty dynamic and pretty fluid -- that's going on right there. So I think we're in a good position. We've got some good experience on that. We've got some good people, we're continuing communications. So I think we're going to manage our inventory, the pricing of our inventory and really gauge this as we see things roll out by different product classes in the next calendar year. Lawrence T. De Maria - William Blair & Company L.L.C., Research Division: Right. So I think your principal competitor is out already opening up order boards [ph] for the Tier 4 equipment, the final equipment. Are you guys out taking orders specifically on Tier 4, or are you still in the waiting process?

Well, yes, I think we're going to see fairly consistent to last year as we built our inventory in Q in 2, 3 -- in Q2 and Q3 to take advantage of the year-end tax buying in Q4, so we're going to continue that. And in addition to that, we also do a degree of presell for deliveries in the Q1 and Q2 of calendar year 2014. So I think we're going to continue pretty consistent to what we've done over the last several years and it's worked real well for us. Lawrence T. De Maria - William Blair & Company L.L.C., Research Division: Okay, that's what I'm trying to understand on the pre-sell, but it sounds like it's pretty still early on the pre-sells.

Correct.

And we'll take one more question from Joe Mondillo with Sidoti & Company. Joseph Mondillo - Sidoti & Company, LLC: Just had a question on inventory. I'm just trying to get a little more detail on how you're sort of managing that, given the fact that same-store sales at Construction were down 6%. Ag was up 12%, but a lot of that was due to Parts and Services. So I imagine the equipment parts was maybe flattish, and it's supposed to get worse in the back half. So my question is, with inventory up 18% year-over-year in the second quarter, at the end of the second quarter, why would that be? And why would you continue to build into the third quarter? I know that's how it seasonally usually plays out. But given the weaker demand, I would have expected maybe sort of a -- maybe a little more of a flatter trend through the back half?

Well, there are several things that go into our inventory forecasting and inventory level management, and one of them is that I talked about the growth on our Eastern European expansion and we've put in substantial inventory stocking levels to support that growth. And in addition to that, we do feel like our historical buying patterns will still be in place and that's what we built our guidance on -- our outlook for you. And as well, we made our forecasts and we have to make our order pipeline for our inventory well in advance of when the inventory ships. And so as we get more visibility into our year, then we'll adjust our order pipeline accordingly going forward for our stocking levels for 2014. Joseph Mondillo - Sidoti & Company, LLC: Okay. And then just...

Mark?

I'm sorry, Joe, just on the -- as far as the equipment same-store sales, when you have 12% increase like that in that segment, with 75% to 80% coming from the equipment, the equipment sales were positive as well. They weren't flat on the Ag side for same-store for the quarter. Joseph Mondillo - Sidoti & Company, LLC: Okay. Yes, I guess I was just trying to indicate -- I mean, it looks like the back half is going to be flattish to maybe slightly down, around flattish, I guess. So it just seems like year-over-year, it seems like the inventory should be maybe a little lower. But I understand the comments that you just said. So I just had a follow-up question though. I was just wondering what your sort of anticipation of the floorplan interest rate expense should be, given the, what, the 0% interest inventory that you have out there?

I didn't get that last part, the 0% interest. Joseph Mondillo - Sidoti & Company, LLC: I'm just trying to get an idea of how you expect the floorplan interest rate to trend throughout the next couple of quarters.

Yes, as far as the rate goes, the rate would remain relatively constant. We're not expecting -- we're not anticipating a jump in LIBOR, which most of our floorplan, our interest-bearing floorplan is based on. However, with -- and you can see it on the chart, with the higher levels of inventory, so the volume side is causing some higher interest expense -- floorplan interest expense overall, but the rate is not a driver of an increase in floorplan interest expense. Joseph Mondillo - Sidoti & Company, LLC: So do you expect the expense to rise through the third or fourth quarter? I guess that's what I'm trying to get an idea of.

Yes, it will rise because of the higher inventory levels. As we said, we will build inventory even more so here in the third and that will drive higher interest expense.

There's no other questions in the queue. I'd like to turn the call back to David Meyer for any additional or closing comments.

All right. Thank you for your interest in Titan and we look forward to updating you on our progress on our next call. Have a good day, everybody.

Thank you, sir. And again, that does conclude today's call. Thank you to everyone that has attended and participated. Have a good day.