UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~July 31, ~~2016~~2017

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.~~company, or an "emerging growth company". See the definitions of “large accelerated filer,” “accelerated ~~filer” and~~filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	o		Accelerated filer	x

~~Non-accelerated filer~~ o		~~Smaller reporting company~~ o
Non-accelerated filer	o	(Do not check if smaller reporting company)	Smaller reporting company	o

Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. YES o NO x

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 ~~November 30, 2016~~August 31, 2017 was: Common Stock, $0.00001 par value, ~~21,819,309~~22,030,870 shares.

Table of Contents

TITAN MACHINERY INC.

QUARTERLY REPORT ON FORM 10-Q

Table of Contents



		Page No.
PART I.	FINANCIAL INFORMATION	3
ITEM 1.	FINANCIAL STATEMENTS	3
	Consolidated Balance Sheets as of ~~October~~July 31, ~~2016~~2017 and January 31, ~~2016~~2017	3
	Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~October~~July 31, ~~2016~~2017 and ~~2015~~2016	4
	Consolidated Statements of Comprehensive Income (Loss) for the three and ~~nine~~six months ended ~~October~~July 31, ~~2016~~2017 and ~~2015~~2016	5
	~~Consolidated Statements of Stockholders' Equity for the nine months ended October 31, 2016 and 2015~~	6
	Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~October~~July 31, ~~2016~~2017 and ~~2015~~2016	76
	Notes to Consolidated Financial Statements	87
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1917
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3431
ITEM 4.	CONTROLS AND PROCEDURES	3431
PART II.	OTHER INFORMATION	3532
ITEM 1.	LEGAL PROCEEDINGS	3532
ITEM 1A.	RISK FACTORS	3532
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3532
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	3532
ITEM 4.	MINE SAFETY DISCLOSURES	3532
ITEM 5.	OTHER INFORMATION	3532
ITEM 6.	EXHIBITS	35
~~Signatures~~		3632
Exhibit Index		3733
Signatures		34

Table of Contents

PART I. — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TITAN MACHINERY INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share data)


	October 31, 2016			January 31, 2016			July 31, 2017			January 31, 2017
Assets
Current Assets
Cash	$	52,431		$	89,465		$	57,526		$	53,151
Receivables (net of allowance of $3,733 and $3,591 as of October 31, 2016 and January 31, 2016, respectively)	71,803			56,552
Receivables (net of allowance of $3,158 and $3,630 as of July 31, 2017 and January 31, 2017, respectively)							63,698			60,082
Inventories	607,629			689,464			517,464			478,266
Prepaid expenses and other	7,491			9,753			10,465			10,989
Income taxes receivable	4,559			13,011			6,049			5,380
Total current assets	743,913			858,245			655,202			607,868
Noncurrent Assets
Intangible assets, net of accumulated amortization	5,026			5,134			4,960			5,001
Property and equipment, net of accumulated depreciation	169,964			183,179			160,613			156,647
Deferred income taxes							334			547
Other	1,394			1,317			1,312			1,359
Total noncurrent assets	176,384			189,630			167,219			163,554
Total Assets	$	920,297		$	1,047,875		$	822,421		$	771,422

Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	22,888		$	16,863		$	16,331		$	17,326
Floorplan payable	372,055			444,780			308,025			233,228
Current maturities of long-term debt	15,464			1,557			1,477			1,373
Customer deposits	16,215			31,159			20,769			26,366
Accrued expenses	35,403			28,914
Income taxes payable	—			152
Accrued expenses and other							28,918			30,533
Total current liabilities	462,025			523,425			375,520			308,826
Long-Term Liabilities
Senior convertible notes	87,754			134,145			70,975			88,501
Long-term debt, less current maturities	25,427			38,409			49,169			38,236
Deferred income taxes	10,531			11,135			3,263			9,500
Other long-term liabilities	2,217			2,412			8,769			5,180
Total long-term liabilities	125,929			186,101			132,176			141,417
Commitments and Contingencies
Stockholders' Equity
Common stock, par value $.00001 per share, 45,000 shares authorized; 21,819 shares issued and outstanding at October 31, 2016; 21,604 shares issued and outstanding at January 31, 2016	—			—
Common stock, par value $.00001 per share, 45,000 shares authorized; 22,031 shares issued and outstanding at July 31, 2017; 21,836 shares issued and outstanding at January 31, 2017							—			—
Additional paid-in-capital	242,019			242,491			244,522			240,615
Retained earnings	93,586			99,526			72,977			85,347
Accumulated other comprehensive loss	(3,262		)	(4,461		)	(2,774		)	(4,783		)
Total Titan Machinery Inc. stockholders' equity	332,343			337,556
Noncontrolling interest	—			793
Total stockholders' equity	332,343			338,349			314,725			321,179
Total Liabilities and Stockholders' Equity	$	920,297		$	1,047,875		$	822,421		$	771,422

See Notes to Consolidated Financial Statements

Table of Contents

TITAN MACHINERY INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)


	Three Months Ended October 31,						Nine Months Ended October 31,						Three Months Ended July 31,						Six Months Ended July 31,
	2016			2015			2016			2015			2017			2016			2017			2016
Revenue
Equipment	$	212,194		$	215,692		$	570,369		$	681,691		$	167,881		$	173,301		$	335,796		$	358,175
Parts	69,261			73,838			185,106			197,439			55,580			58,336			112,163			115,845
Service	33,777			34,116			96,065			99,860			30,509			31,296			59,275			62,288
Rental and other	17,034			21,329			43,919			53,371			14,901			15,400			25,755			26,885
Total Revenue	332,266			344,975			895,459			1,032,361			268,871			278,333			532,989			563,193
Cost of Revenue
Equipment	201,140			198,095			532,370			628,280			154,729			160,906			310,246			331,230
Parts	48,387			51,673			130,006			138,626			39,103			41,118			79,460			81,619
Service	11,828			12,449			35,473			36,136			11,444			12,045			22,238			23,645
Rental and other	12,485			15,617			32,703			39,674			10,788			11,331			19,319			20,218
Total Cost of Revenue	273,840			277,834			730,552			842,716			216,064			225,400			431,263			456,712
Gross Profit	58,426			67,141			164,907			189,645			52,807			52,933			101,726			106,481
Operating Expenses	53,143			53,484			159,132			165,979			50,523			51,487			102,510			105,989
Impairment and Realignment Costs	275			22			546			1,519
Income from Operations	5,008			13,635			5,229			22,147
Restructuring Costs													5,549			24			7,893			271
Income (Loss) from Operations													(3,265		)	1,422			(8,677		)	221
Other Income (Expense)
Interest income and other income (expense)	502			722			1,251			(565		)
Interest income and other income													682			612			1,460			749
Floorplan interest expense	(3,294		)	(4,602		)	(10,843		)	(13,945		)	(2,163		)	(3,806		)	(4,819		)	(7,549		)
Other interest expense	(2,160		)	(4,041		)	(5,930		)	(11,228		)	(2,464		)	(2,777		)	(4,584		)	(3,770		)
Income (Loss) Before Income Taxes	56			5,714			(10,293		)	(3,591		)
Provision for (Benefit from) Income Taxes	(208		)	2,231			(3,997		)	(354		)
Net Income (Loss) Including Noncontrolling Interest	$	264		$	3,483		$	(6,296	)	$	(3,237	)
Less: Net Income (Loss) Attributable to Noncontrolling Interest	—			27			(356		)	(395		)
Net Income (Loss) Attributable to Titan Machinery Inc.	$	264		$	3,456		$	(5,940	)	$	(2,842	)
Net (Income) Loss Allocated to Participating Securities - Note 1	(8		)	(72		)	120			53
Net Income (Loss) Attributable to Titan Machinery Inc. Common Stockholders	$	256		$	3,384		$	(5,820	)	$	(2,789	)
Loss Before Income Taxes													(7,210		)	(4,549		)	(16,620		)	(10,349		)
Benefit from Income Taxes													(2,024		)	(1,847		)	(5,502		)	(3,789		)
Net Loss Including Noncontrolling Interest													$	(5,186	)	$	(2,702	)	$	(11,118	)	$	(6,560	)
Less: Loss Attributable to Noncontrolling Interest													—			(182		)	—			(356		)
Net Loss Attributable to Titan Machinery Inc.													$	(5,186	)	$	(2,520	)	$	(11,118	)	$	(6,204	)
Net Loss Allocated to Participating Securities - Note 1													99			51			222			117
Net Loss Attributable to Titan Machinery Inc. Common Stockholders													$	(5,087	)	$	(2,469	)	$	(10,896	)	$	(6,087	)
Earnings (Loss) per Share - Note 1
Earnings (Loss) per Share - Basic	$	0.01		$	0.16		$	(0.27	)	$	(0.13	)	$	(0.24	)	$	(0.12	)	$	(0.51	)	$	(0.29	)
Earnings (Loss) per Share - Diluted	$	0.01		$	0.16		$	(0.27	)	$	(0.13	)	$	(0.24	)	$	(0.12	)	$	(0.51	)	$	(0.29	)
Weighted Average Common Shares - Basic	21,218			21,129			21,208			21,093			21,546			21,205			21,461			21,204
Weighted Average Common Shares - Diluted	21,269			21,218			21,208			21,093			21,546			21,205			21,461			21,204

See Notes to Consolidated Financial Statements

Table of Contents

TITAN MACHINERY INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(in thousands)

Three Months Ended October 31, Nine Months Ended October 31,
2016 2015 2016 2015
Net Income (Loss) Including Noncontrolling Interest $ 264
$ 3,483
$ (6,296 ) $ (3,237 )
Other Comprehensive Income (Loss)
Foreign currency translation adjustments 626
(100 ) 945
(3,829 )
Unrealized gain on net investment hedge derivative instruments, net of tax expense of $5 for the three months ended October 31, 2015, and $133 for the nine months ended October 31, 2015 —
7
—
200
Unrealized gain (loss) on interest rate swap cash flow hedge derivative instrument, net of tax expense (benefit) of $91 and ($321) for the three months ended October 31, 2016 and 2015, respectively, and ($109) and ($290) for the nine months ended October 31, 2016 and 2015, respectively 137
(482 ) (163 ) (436 )
Reclassification of loss on interest rate swap cash flow hedge derivative instruments included in net income (loss), net of tax benefit of $133 and $213 for the three months ended October 31, 2016 and 2015, respectively, and $426 and $532 for the nine months ended October 31, 2016 and 2015, respectively 200
320
638
798
Reclassification of loss on foreign currency contract cash flow hedge derivative instruments included in net income (loss), net of tax benefit of $2 for the three months ended October 31, 2015 and $7 for the nine months ended October 31, 2015 —
2
—
10
Total Other Comprehensive Income (Loss) 963
(253 ) 1,420
(3,257 )
Comprehensive Income (Loss) 1,227
3,230
(4,876 ) (6,494 )
Comprehensive Income (Loss) Attributable to Noncontrolling Interest —
(13 ) (333 ) (1,046 )
Comprehensive Income (Loss) Attributable To Titan Machinery Inc. $ 1,227
$ 3,243
$ (4,543 ) $ (5,448 )



	Three Months Ended July 31,						Six Months Ended July 31,
	2017			2016			2017			2016
Net Loss Including Noncontrolling Interest	$	(5,186	)	$	(2,702	)	$	(11,118	)	$	(6,560	)
Other Comprehensive Income (Loss)
Foreign currency translation adjustments	930			(435		)	1,391			319
Unrealized gain (loss) on interest rate swap cash flow hedge derivative instrument, net of tax expense (benefit) of ($142) for the three months ended July 31, 2016, and $19 and ($200) for the six months ended July 31, 2017 and 2016	—			(213		)	29			(300		)
Reclassification of loss on interest rate swap cash flow hedge derivative instrument included in net loss, net of tax benefit of $68 and $144 for the three months ended July 31, 2017 and 2016, and $394 and $292 for the six months ended July 31, 2017 and 2016	104			216			592			439
Total Other Comprehensive Income (Loss)	1,034			(432		)	2,012			458
Comprehensive Loss	(4,152		)	(3,134		)	(9,106		)	(6,102		)
Comprehensive Loss Attributable to Noncontrolling Interest	—			(147		)	—			(333		)
Comprehensive Loss Attributable To Titan Machinery Inc.	$	(4,152	)	$	(2,987	)	$	(9,106	)	$	(5,769	)

See Notes to Consolidated Financial Statements

Table of Contents

TITAN MACHINERY INC.

CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS’ EQUITY (UNAUDITED)~~

~~(in thousands)~~

Common Stock Accumulated Other Comprehensive Income (Loss)
Shares Outstanding Amount Additional Paid-In Capital Retained Earnings Foreign Currency Translation Adjustments Unrealized Gains (Losses) on Net Investment Hedges Unrealized Gains (Losses) on Interest Rate Swap Cash Flow Hedges Unrealized Gains (Losses) on Foreign Currency Contract Cash Flow Hedges Total Total Titan Machinery Inc. Stockholders' Equity Noncontrolling Interest Total Stockholders' Equity
Balance, January 31, 2015 21,406
$ —
$ 240,180
$ 137,418
$ (1,632 ) $ 2,510
$ (1,940 ) $ (37 ) $ (1,099 ) $ 376,499
$ 1,860
$ 378,359
Common stock issued on grant of restricted stock (net of forfeitures and shares withheld for income taxes), exercise of stock options, and tax benefits of equity awards 170
—
170
—
—
—
—
—
—
170
—
170
Stock-based compensation expense —
—
1,799
—
—
—
—
—
—
1,799
—
1,799
Comprehensive loss:
Net loss —
—
—
(2,842 ) —
—
—
—
—
(2,842 ) (395 ) (3,237 )
Other comprehensive income (loss) —
—
—
—
(3,178 ) 200
362
10
(2,606 ) (2,606 ) (651 ) (3,257 )
Total comprehensive loss —
—
—
—
—
—
—
—
—
(5,448 ) (1,046 ) (6,494 )
Balance, October 31, 2015 21,576
$ —
$ 242,149
$ 134,576
$ (4,810 ) $ 2,710
$ (1,578 ) $ (27 ) $ (3,705 ) $ 373,020
$ 814
$ 373,834

Balance, January 31, 2016 21,604
$ —
$ 242,491
$ 99,526
$ (5,500 ) $ 2,711
$ (1,672 ) $ —
$ (4,461 ) $ 337,556
$ 793
$ 338,349
Common stock issued on grant of restricted stock (net of forfeitures and shares withheld for income taxes), exercise of stock options, and tax benefits of equity awards 215
—
(357 ) —
—
—
—
—
—
(357 ) —
(357 )
Stock-based compensation expense —
—
1,805
—
—
—
—
—
—
1,805
—
1,805
Repurchase of Senior Convertible Notes —
—
1,746
—
—
—
—
—
—
1,746
—
1,746
Acquisition of non-controlling interest —
—
(3,666 ) —
(198 ) —
—
—
(198 ) (3,864 ) (460 ) (4,324 )
Comprehensive loss:
Net loss —
—
—
(5,940 ) —
—
—
—
—
(5,940 ) (356 ) (6,296 )
Other comprehensive income (loss) —
—
—
—
922
—
475
—
1,397
1,397
23
1,420
Total comprehensive loss —
—
—
—
—
—
—
—
—
(4,543 ) (333 ) (4,876 )
Balance, October 31, 2016 21,819
$ —
$ 242,019
$ 93,586
$ (4,776 ) $ 2,711
$ (1,197 ) $ —
$ (3,262 ) $ 332,343
$ —
$ 332,343

~~See Notes to Consolidated Financial Statements~~

~~Table of Contents~~

~~TITAN MACHINERY INC.~~

~~CONSOLIDATED STATEMENTS OF~~ CASH FLOWS (UNAUDITED)

(in thousands)


	Nine Months Ended October 31,						Six Months Ended July 31,
	2016			2015			2017			2016
Operating Activities
Net income (loss) including noncontrolling interest	$	(6,296	)	$	(3,237	)
Adjustments to reconcile net income (loss) including noncontrolling interest to net cash provided by operating activities
Net loss including noncontrolling interest							$	(11,118	)	$	(6,560	)
Adjustments to reconcile net loss including noncontrolling interest to net cash provided by operating activities
Depreciation and amortization	19,896			21,588			12,268			12,828
Impairment	275			193
Deferred income taxes	825			474			(4,927		)	792
Stock-based compensation expense	1,805			1,799			1,732			1,205
Noncash interest expense	4,305			5,286			2,139			2,616
Unrealized foreign currency (gain) loss on loans to international subsidiaries	(44		)	778
Gain on repurchase of Senior Convertible Notes	(3,130		)	—
Unrealized foreign currency gain on loans to international subsidiaries							(1,329		)	(413		)
Gain on repurchase of senior convertible notes							(40		)	(2,102		)
Other, net	(980		)	(649		)	(536		)	187
Changes in assets and liabilities
Receivables, prepaid expenses and other assets	(18,070		)	9,828			(2,340		)	(3,731		)
Inventories	91,222			72,437			(31,981		)	13,644
Manufacturer floorplan payable	(20,821		)	124,305			107,833			52,048
Accounts payable, customer deposits, accrued expenses and other long-term liabilities	(2,546		)	(27,845		)
Accounts payable, customer deposits, accrued expenses and other and other long-term liabilities							(4,562		)	(18,273		)
Income taxes	7,957			(6,196		)	(262		)	8,194
Net Cash Provided by Operating Activities	74,398			198,761			66,877			60,435
Investing Activities
Rental fleet purchases	(3,094		)	(292		)	(10,222		)	(2,156		)
Property and equipment purchases (excluding rental fleet)	(7,121		)	(5,713		)	(7,472		)	(2,750		)
Proceeds from sale of property and equipment	2,285			5,135			2,253			1,383
Proceeds upon settlement of net investment hedge derivative instruments	—			337
Payments upon settlement of net investment hedge derivative instruments	—			(23		)
Proceeds from insurance recoveries	1,431			—
Other, net	(517		)	196			78			(66		)
Net Cash Used for Investing Activities	(7,016		)	(360		)	(15,363		)	(3,589		)
Financing Activities
Net change in non-manufacturer floorplan payable	(54,478		)	(201,320		)	(38,030		)	(66,856		)
Repurchase of Senior Convertible Notes	(46,013		)	—
Repurchase of senior convertible notes							(19,340		)	(24,983		)
Proceeds from long-term debt borrowings	—			59,088			33,000			—
Principal payments on long-term debt	(1,935		)	(101,465		)	(22,722		)	(1,349		)
Payment of debt issuance costs	(31		)	(3,381		)
Loan provided to non-controlling interest holder	(2,148		)	—			—			(2,148		)
Other, net	(33		)	143			(482		)	(56		)
Net Cash Used for Financing Activities	(104,638		)	(246,935		)	(47,574		)	(95,392		)
Effect of Exchange Rate Changes on Cash	222			(585		)	435			171
Net Change in Cash	(37,034		)	(49,119		)	4,375			(38,375		)
Cash at Beginning of Period	89,465			127,528			53,151			89,465
Cash at End of Period	$	52,431		$	78,409		$	57,526		$	51,090
Supplemental Disclosures of Cash Flow Information
Cash paid (received) during the period
Income taxes, net of refunds	$	(12,942	)	$	5,283		$	3		$	(12,915	)
Interest	$	15,544		$	18,492		$	7,240		$	11,084
Supplemental Disclosures of Noncash Investing and Financing Activities
Net property and equipment financed with long-term debt, accounts payable and accrued liabilities	$	2,818		$	747
Long-term debt extinguished upon sale of property and equipment	$	—		$	3,315
Net property and equipment financed with long-term debt, accounts payable and accrued expenses and other							$	1,262		$	2,381
Net transfer of assets from property and equipment to inventories	$	(4,411	)	$	(5,743	)	$	(1,905	)	$	2,065
Acquisition of non-controlling interest through satisfaction of outstanding receivables	$	4,324		$	—		$	—		$	4,324

See Notes to Consolidated Financial Statements

Table of Contents

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1—BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. The quarterly operating results for Titan Machinery Inc. (the “Company”) are subject to fluctuation due to varying weather patterns, which may impact the timing and amount of equipment purchases, rentals, and after-sales parts and service purchases by the Company’s Agriculture, Construction and International customers. Therefore, operating results for the ~~nine-month~~six-month period ended ~~October~~July 31, ~~2016~~2017 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, ~~2017.~~2018. The information contained in the balance sheet as of January 31, ~~2016~~2017 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 Annual Report on Form 10-K for the fiscal year ended January 31, ~~2016~~2017 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 its 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 GAAP 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 of ~~intangible~~long-lived 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 material accounts, transactions and profits between the consolidated companies have been eliminated in consolidation.

In June 2016, the Company acquired all of the outstanding ownership interest held by the non-controlling interest holder of the Company's Bulgarian subsidiary. Total consideration, which amounted to $4.3 million, was in the form of the satisfaction of outstanding receivables owed to the Company by the noncontrolling interest holder. As the Company had a controlling interest in the Bulgarian subsidiary prior to the acquisition, the acquisition was accounted for as an equity transaction which resulted in a decrease in the Company's additional paid-in capital in the amount of $3.7 million and a decrease in the Company's accumulated other comprehensive income in the amount of $0.2 million. Subsequent to this acquisition, all of the Company's subsidiaries are wholly-owned.

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 was computed by dividing net income (loss) attributable to Titan Machinery Inc. after allocation of net income (loss) to participating securities by the weighted-average number of shares of common stock outstanding during the relevant period.

Diluted EPS was computed by dividing net income attributable to Titan Machinery Inc. after allocation of net income (loss) to participating securities by the weighted-average shares of common stock outstanding after adjusting for potential

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dilution related to the conversion of all dilutive securities into common stock. All potentially dilutive securities were included in the computation of diluted EPS. All anti-dilutive securities were excluded from the computation of diluted EPS.

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The following table sets forth the calculation of the denominator for basic and diluted EPS:


	Three Months Ended October 31,				Nine Months Ended October 31,						Three Months Ended July 31,						Six Months Ended July 31,
	2016		2015		2016			2015			2017			2016			2017			2016
	(in thousands, except per share data)				(in thousands, except per share data)						(in thousands, except per share data)						(in thousands, except per share data)
Basic Weighted-Average Common Shares Outstanding	21,218		21,129		21,208			21,093			21,546			21,205			21,461			21,204
Plus: Incremental Shares From Assumed Exercise of Stock Options	51		89		—			—			—			—			—			—
Diluted Weighted-Average Common Shares Outstanding	21,269		21,218		21,208			21,093			21,546			21,205			21,461			21,204

Anti-Dilutive Shares Excluded From Diluted Weighted-Average Common Shares Outstanding:
Stock Options	141,000		89,000		146,000			191,000			133			138			143			148
Shares Underlying Senior Convertible Notes (conversion price of $43.17)	2,217		3,474		2,217			3,474			1,748			2,777			1,748			2,777

Earnings (Loss) per Share - Basic	$	0.01	$	0.16	$	(0.27	)	$	(0.13	)	$	(0.24	)	$	(0.12	)	$	(0.51	)	$	(0.29	)
Earnings (Loss) per Share - Diluted	$	0.01	$	0.16	$	(0.27	)	$	(0.13	)	$	(0.24	)	$	(0.12	)	$	(0.51	)	$	(0.29	)

Recent Accounting Guidance

Accounting guidance adopted

In July 2015, the Financial Accounting Standards Board (the "FASB") amended authoritative guidance on accounting for the measurement of inventory, codified in ASC 330, Inventory. The amended guidance requires inventory to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company adopted this guidance on a prospective basis on February 1, 2017. Under the former guidance for measuring inventory, the Company recognized lower of-cost-or-market adjustments using a definition of market value as net realizable value reduced by an allowance for a normal profit margin. Upon implementation of the new authoritative guidance, market is defined solely as net realizable value. The adoption of this guidance did not have a material effect on the Company's consolidated financial statements.

In March 2016, the FASB amended authoritative guidance on stock-based compensation, codified in ASC 718, Compensation - Stock Compensation. The amended guidance changes the accounting for certain aspects of share-based payments, including the income tax consequences, forfeitures, classification of awards as either equity or liabilities, and classification on the statements of cash flows. The Company adopted this guidance on February 1, 2017. Under the new guidance, excess tax benefits or deficiencies related to share-based compensation that were previously recorded to equity are now recognized as a discrete tax benefit or expense in the statement of operations. The impact on income tax expense (benefit) was not material for the first quarter of fiscal 2018. Excess tax benefits are no longer reclassified out of cash flows from operating activities to financing activities in the statement of cash flows. We elected to apply this cash flow presentation requirement prospectively. The amount of excess tax benefits recognized for the three and six months ended July 31, 2017 and 2016 were not material. Cash paid by an employer when directly withholding shares for tax withholding purposes are required to be classified as a financing activity in the statement of cash flows. This method of presentation is consistent with the Company's historical presentation. Also under the new standard, the Company elected to account for forfeitures of share-based instruments as they occur, as compared to the previous guidance under which the Company estimated the number of forfeitures. The Company applied the accounting change on a modified retrospective basis as a cumulative-effect adjustment to retained earnings as of February 1, 2017. The following table summarizes the impact to the Company’s consolidated balance sheet:



	As of February 1, 2017
	Balance Sheet Classification
	Additional paid-in capital		Deferred income tax liability			Retained earnings
	(in thousands)
	Increase (Decrease)
Impact of cumulative-effect adjustment from adoption of ASU 2016-09	$	2,087	$	(835	)	$	(1,252	)

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Accounting guidance not yet adopted

In May 2014 and August 2015, the FASB issued authoritative guidance on accounting for revenue recognition, codified in ASC 606, Revenue from Contracts with Customers. This guidance has been amended on various occasions and supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This guidance is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The Company will adopt this guidance on February 1, ~~2018, and will employ one~~2018.

We are in the process of assessing the ~~two retrospective application methods. The Company has not determined the potential effects~~impact adoption of this standard will have on ~~the~~our consolidated financial ~~statements.~~

~~In August 2014, the FASB issued authoritative guidance~~statements and related disclosures. Our implementation efforts to date consist of an identification and assessment of our primary revenue streams and performing contract analyses over a sample of contracts within each of our revenue streams. Based on ~~management's responsibility~~our assessment to ~~evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and provide related footnote disclosures, codified in ASC 205-40,~~ ~~Going Concern~~. The guidance provides a definition of the term substantial doubt, requires an evaluation every reporting period including interim periods, provides principles for considering the mitigating effect of management’s plans, requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, requires an express statement and other disclosures when substantial doubt is not alleviated, and requires an assessment for a period of one year after the date, that the financial statements are issued (or available to be issued). The Company will adopt this guidance for the year-ended January 31, 2017, and it will apply to each interim and annual period thereafter. The Company doeswe do not expect the adoption of this standard to have a material ~~effect~~impact on our revenue recognition policies for our equipment, parts or service revenues. ASC 606 does not apply to the ~~consolidated financial statements.~~

~~In July 2015,~~recognition of our rental revenues as the ~~FASB amended authoritative guidance on~~ accounting for such revenues is governed by other authoritative guidance. We anticipate adopting the ~~measurement of inventory, codified in ASC 330,~~ ~~Inventory.~~ The amended guidance requires inventory to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company will adopt this guidance on February 1, 2017. Under the current guidance for measuring inventory, the Company recognizes lower-of-cost-or-market adjustments using a definition of market value as net realizable value reducedstandard by ~~an allowance for a normal profit margin. Upon implementation~~use of the modified retrospective approach. In addition, we are continuing to evaluate the changes necessary to our business processes, systems and controls to support recognition and disclosure under the new authoritative guidance, market is defined solely as net realizable value. The Company does not anticipate that the adoption of this guidance will have a material effect on the consolidated financial statements.standard.

In February 2016, the FASB amended authoritative guidance on leases, codified in ASC 842,~~Leases.~~ Leases. The amended guidance requires lessees to recognize most leases on their balance sheets related to the rights and obligations created by those leases. The new standard also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The provisions of this guidance are to be applied using a modified retrospective approach,

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with elective reliefs, which requires application of the guidance for all periods presented. ~~The Company has not determined~~We anticipate adopting the ~~potential effects adoption~~new standard on February 1, 2019, and expect to elect the package of practical expedients afforded under the guidance, including the use of hindsight to determine the lease term. While we continue to evaluate this standard, we anticipate this standard will have a material impact on our consolidated balance sheets due to the capitalization of a right-of-use asset and lease liability associated with our current operating leases, but do not believe it will have a material impact on our consolidated ~~financial statements.~~statements of operations or cash flows.

In ~~March 2016,~~May 2017, the FASB amended authoritative guidance on ~~stock-based~~modifications related to stock compensation, codified in ASC 718, Compensation - Stock ~~Compensation.~~ Compensation. The ~~amended~~amendments provide guidance on determining which changes to the ~~accounting for certain aspects~~terms and conditions of share-based ~~payments, including~~payment awards require an entity to apply modification accounting. The guidance is effective for the ~~income tax consequences, forfeitures, classification~~Company as of ~~awards as either equity or liabilities, and classification on~~ the ~~statements~~first quarter of ~~cash flows.~~its fiscal year ending January 31, 2019. The Company ~~will adopt this guidance on February 1, 2017. The manner of application varies by~~does not believe the various provisions of the guidance, with certain provisions applied on a retrospective or modified retrospective approach, while others are applied prospectively. The adoption of this guidance is not expected toupdate will have a material ~~effect~~impact on ~~the Company's~~its consolidated financial statements.

NOTE 2—INVENTORIES

October 31, 2016 January 31, 2016
(in thousands)
New equipment $ 331,847
$ 323,393
Used equipment 182,039
267,893
Parts and attachments 81,265
87,807
Work in process 12,478
10,371
$ 607,629
$ 689,464

~~NOTE 3—PROPERTY AND EQUIPMENT~~

October 31, 2016 January 31, 2016
(in thousands)
Rental fleet equipment $ 131,102
$ 137,754
Machinery and equipment 22,697
23,051
Vehicles 37,397
36,537
Furniture and fixtures 39,538
38,149
Land, buildings, and leasehold improvements 64,772
63,460
295,506
298,951
Less accumulated depreciation (125,542 ) (115,772 )
$ 169,964
$ 183,179

During the third quarter of fiscal 2017, the Company determined that the current period operating loss combined with historical losses and anticipated future operating losses within certain of its stores was an indication that certain long-lived assets of these stores may not be recoverable. The Company performed step one of the impairment analysis for these assets which have a combined carrying value of $6.2 million. In certain cases, for assets with an aggregate carrying value of $2.6 million, the analysis indicated that the carrying value is not recoverable. Accordingly, the Company performed step two of the impairment analysis and estimated the fair value of these assets using estimated selling prices of similar assets. Step two of the analysis indicated that an impairment charge in the amount of $0.3 million was necessary, of which $0.2 million related to the Agriculture segment and $0.1 million related to the Construction segment. In all other cases, in which the aggregate carrying value of such assets totaled $3.6 million, the Company's analyses indicated that the carrying values are recoverable based on its estimates of future undiscounted cash flows under step one of the impairment analysis.



	July 31, 2017		January 31, 2017
	(in thousands)
New equipment	$	305,510	$	235,161
Used equipment	135,418		160,503
Parts and attachments	74,977		81,734
Work in process	1,559		868
	$	517,464	$	478,266

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NOTE 3—PROPERTY AND EQUIPMENT



	July 31, 2017			January 31, 2017
	(in thousands)
Rental fleet equipment	$	127,884		$	124,417
Machinery and equipment	21,618			22,255
Vehicles	35,282			36,384
Furniture and fixtures	43,388			39,875
Land, buildings, and leasehold improvements	61,715			59,481
	289,887			282,412
Less accumulated depreciation	(129,274		)	(125,765		)
	$	160,613		$	156,647

NOTE 4—LINES OF CREDIT / FLOORPLAN PAYABLE

Floorplan Lines of Credit

Floorplan payable balances reflect the amount owed for new equipment inventory purchased from a manufacturer and for used equipment inventory, which is primarily acquired through trade-in on equipment sales. Certain of the manufacturers from which the Company purchases new equipment inventory offer financing on these purchases, either offered directly from the manufacturer or through the manufacturers’ captive finance subsidiaries. CNH ~~Industrial America LLC's~~Industrial's captive finance subsidiary, CNH Industrial Capital, ~~America LLC ("CNH Industrial Capital"),~~ also provides financing of used equipment inventory. The Company also has floorplan payable balances with non-manufacturer lenders for new and used equipment inventory. Cash flows associated with manufacturer floorplan payable are reported as operating cash flows, while cash flows associated with non-manufacturer floorplan payable are reported as financing cash flows in the Company's consolidated statements of cash flows. The Company has three significant floorplan lines of credit for U.S. operations, floorplan credit facilities for its foreign subsidiaries, and other floorplan payable balances with non-manufacturer lenders and manufacturers.

In August 2016, as a result of the Company's equipment inventory reduction and related reduction in floorplan financing needs, the Company provided notice to Wells Fargo Bank, National Association of its election to reduce the maximum credit amount available under the Second Amended and Restated Credit Agreement (the "Wells Fargo Credit Agreement") from an aggregate $350.0 million to an aggregate $275.0 million, comprised of a $65.0 million reduction in the Floorplan Payable Line, from $275.0 million to $210.0 million, and a $10.0 million reduction in the Working Capital Line, from $75.0 million to $65.0 million. Also in August 2016, the Company elected to reduce the maximum credit amount available under its credit facility with DLL Finance LLC ("DLL Finance"), from $110.0 million to $90.0 million.

As a result of the reduction of the maximum credit amount available under the Wells Fargo Credit Agreement, in the third quarter of fiscal 2017, the Company wrote-off $0.6 million of capitalized debt issuance costs. This charge is recorded in other interest expense in the Consolidated Statements of Operations.

As of ~~October~~July 31, ~~2016,~~2017, the Company had discretionary floorplan lines of credit for equipment inventory purchases totaling approximately ~~$856.2~~$741.0 million, which includes a ~~$210.0~~$140.0 million Floorplan Payable Line under ~~the~~its second amended and restated credit agreement with Wells Fargo (the "Wells Fargo Credit ~~Agreement,~~Agreement"), a $450.0 million credit facility with CNH Industrial Capital, a ~~$90.0~~$45.0 million credit facility with DLL Finance and the U.S. dollar equivalent of ~~$106.2~~$106.0 million in credit facilities related to our foreign subsidiaries. Floorplan payables relating to these credit facilities totaled approximately ~~$362.8~~$296.2 million of the total floorplan payable balance of ~~$372.1~~$308.0 million outstanding as of ~~October~~July 31, ~~2016~~2017 and ~~$420.7~~$228.3 million of the total floorplan payable balance of ~~$444.8~~$233.2 million outstanding as of January 31, ~~2016.~~2017. The remaining outstanding balances relate to equipment inventory financing from manufacturers and non-manufacturer lenders other than the lines of credit described above. As of ~~October~~July 31, ~~2016,~~2017, the interest-bearing U.S. floorplan payables carried various interest rates primarily ranging from ~~2.74%~~3.49% to ~~6.09%~~6.53%, and the foreign floorplan payables carried various interest rates primarily ranging from ~~1.49%~~0.92% to ~~7.70%~~7.23%.

As of ~~October~~July 31, ~~2016,~~2017, the Company had a compensating balance arrangement under one of its foreign floorplan credit facilities which requires a minimum cash deposit to be maintained with the lender in the amount of $5.0 million for the term of the credit facility.

Working Capital Line

As of ~~October~~July 31, ~~2016,~~2017, the Company had a ~~$65~~$60.0 million Working Capital Line under the Wells Fargo Credit Agreement. The Company had ~~no amount~~$26.0 million and $13.0 million outstanding on this Working Capital Line as of ~~October~~July 31, ~~2016~~2017 and January 31, ~~2016.~~2017. As of July 31, 2017, the Working Capital Line carried an interest rate of 3.73%.

Wells Fargo Credit Agreement

As a result of our ongoing equipment inventory reduction and related reduction in floorplan financing needs, in May 2017, the Company provided notice to Wells Fargo of its election to reduce the maximum credit amount available under the Wells Fargo Credit Agreement from an aggregate $275.0 million to an aggregate $200.0 million, comprised of a $70.0 million reduction in the Floorplan Payable Line, from $210.0 million to $140.0 million, and a $5.0 million reduction in the Working Capital Line, from $65.0 million to $60.0 million.

As a result of the reduction of the maximum credit amount available under the Wells Fargo Credit Agreement, in the second quarter of fiscal 2018, the Company wrote off $0.4 million of capitalized debt issuance costs. This charge is recorded in other interest expense in the Consolidated Statements of Operations.

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NOTE 5—SENIOR CONVERTIBLE NOTES

The Company’s 3.75% ~~Senior Convertible Notes~~senior convertible notes issued on April 24, 2012 (“~~Senior Convertible Notes”~~senior convertible notes”) consisted of the following:


	October 31, 2016			January 31, 2016			July 31, 2017			January 31, 2017
	(in thousands except conversion rate and conversion price)						(in thousands except conversion rate and conversion price)
Principal value	$	95,725		$	150,000		$	75,470		$	95,725
Unamortized debt discount	(7,024		)	(13,946		)	(3,968		)	(6,368		)
Unamortized debt issuance costs	(947		)	(1,909		)	(527		)	(856		)
Carrying value of Senior Convertible Notes	$	87,754		$	134,145
Carrying value of senior convertible notes							$	70,975		$	88,501

Carrying value of equity component, net of deferred taxes	$	13,800		$	15,546		$	15,192		$	15,546

Conversion rate (shares of common stock per $1,000 principal amount of notes)	23.1626						23.1626
Conversion price (per share of common stock)	$	43.17					$	43.17

~~In April and September 2016,~~For the six months ended July 31, 2017, the Company repurchased an aggregate of ~~$54.3~~$20.3 million face value ~~($49.1 million carrying value)~~ of its ~~Senior Convertible Notes~~senior convertible notes with ~~$46.0~~$19.3 million in cash, and recognized a pre-tax gain of approximately $3.1 million, of which $2.1 million was recognized in the first quarter and $1.0 million was recognized in the third quarter of fiscal 2017. These gains are included in other interest expense in the Consolidated Statements of Operations.cash.

The Company recognized interest expense associated with its ~~Senior Convertible Notes~~senior convertible notes as follows:


	Three Months Ended October 31,				Nine Months Ended October 31,				Three Months Ended July 31,				Six Months Ended July 31,
	2016		2015		2016		2015		2017		2016		2017		2016
	(in thousands)				(in thousands)				(in thousands)				(in thousands)
Cash Interest Expense
Coupon interest expense	$	996	$	1,406	$	3,457	$	4,219	$	708	$	1,124	$	1,491	$	2,461
Noncash Interest Expense
Amortization of debt discount	703		925		2,406		2,745		540		793		1,111		1,703
Amortization of transaction costs	100		138		347		412		74		114		154		247
	$	1,799	$	2,469	$	6,210	$	7,376	$	1,322	$	2,031	$	2,756	$	4,411

The ~~Senior Convertible Notes~~senior convertible notes mature on May 1, 2019, unless purchased earlier ~~purchased~~ by the Company, redeemed or converted. As of ~~October~~July 31, ~~2016,~~2017, the unamortized debt discount will be amortized over a remaining period of approximately ~~2.5~~1.8 years. As of ~~October~~July 31, ~~2016~~2017 and January 31, ~~2016,~~2017, the if-converted value of the ~~Senior Convertible Notes~~senior convertible notes did not exceed the principal balance. The effective interest rate of the liability component was equal to 7.3% for each of the consolidated statements of operations periods presented.

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NOTE 6—DERIVATIVE INSTRUMENTS

The Company holds derivative instruments for the purpose of minimizing exposure to fluctuations in foreign currency exchange rates and benchmark interest 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.

Cash Flow ~~Hedges~~Hedge

On October 9, 2013, the Company entered into a forward-starting interest rate swap instrument, which has a notional amount of $100.0 million, an effective date of September 30, 2014 and a maturity date of September 30, 2018. The objective of the instrument is to, beginning on September 30, 2014, protect the Company from changes in benchmark interest rates to which the Company is exposed through certain of its variable interest rate credit facilities. The instrument provides for a fixed interest rate of 1.901% up to the maturity date.

The Company may, from time to time, hedge foreign currency exchange rate risk arising from inventory purchases denominated in Canadian dollars through the use of foreign currency forward contracts. The maximum length of time over which the Company hedges its exposure to the variability in future cash flows associated with the Canadian dollar purchasing is less than 12 months.

The interest rate swap instrument ~~and foreign currency contracts have been~~was designated as a cash flow hedging ~~instruments~~instrument and accordingly changes in the effective portion of the fair value of the ~~instruments are~~instrument have been recorded in other comprehensive income and only reclassified into earnings in the period(s) in which the related hedged item affects earnings or the anticipated underlying hedged transactions are no longer probable of occurring. Any hedge ineffectiveness is recognized in earnings immediately.

In April 2017, the Company elected to terminate its outstanding interest rate swap instrument. The Company paid $0.9 million to terminate the instrument. This cash payment is presented as a financing cash outflow in the consolidated statements of cash flows.

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 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 following table sets forth the notional value of the Company's outstanding derivative instruments.


	Notional Amount as of:				Notional Amount as of:
	October 31, 2016		January 31, 2016		July 31, 2017		January 31, 2017
	(in thousands)				(in thousands)
Cash flow hedges:
Interest rate swap	$	100,000	$	100,000	$	—	$	100,000
Derivatives not designated as hedging instruments:
Foreign currency contracts	15,844		13,148		13,300		18,021

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The following table sets forth the fair value of the Company’s outstanding derivative instruments. ~~Asset derivatives are included in prepaid expenses and other in the consolidated balance sheets, and liability~~Liability derivatives are included in accrued expenses in the consolidated balance sheets.


	Fair Value as of:				Fair Value as of:
	October 31, 2016		January 31, 2016		July 31, 2017		January 31, 2017
	(in thousands)
Asset Derivatives:
Derivatives not designated as hedging instruments:
Foreign currency contracts	$	—	$	125
Total Asset Derivatives	$	—	$	125
					(in thousands)
Liability Derivatives:
Derivatives designated as hedging instruments:
Cash flow hedges:
Interest rate swap	$	2,012	$	2,836	$	—	$	1,155
Derivatives not designated as hedging instruments:
Foreign currency contracts	121		—		238		200
Total Liability Derivatives	$	2,133	$	2,836	$	238	$	1,355

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The following table sets forth the gains and losses (before the related income tax effects) recognized in other comprehensive income (loss) ("OCI") and income (loss) related to the Company’s derivative instruments for the three and ~~nine~~six months ended ~~October~~July 31, ~~2016~~2017 and ~~2015,~~2016, respectively.

Three Months Ended October 31, Nine Months Ended October 31,
2016 2015 2016 2015
OCI Income (Loss) OCI Income (Loss) OCI Income (Loss) OCI Income (Loss)
(in thousands) (in thousands)
Dervatives Designated as Hedging Instruments:
Net investment hedges:
Foreign currency contracts $ —
$ —
$ 12
$ —
$ —
$ —
$ 333
$ —
Cash flow hedges:
Interest rate swap ^(a)
228
(333 ) (803 ) (446 ) (272 ) (1,064 ) (727 ) (1,330 )
Foreign currency contracts ^(b)
—
—
—
(4 ) —
—
—
(17 )
Dervatives Not Designated as Hedging Instruments:
Foreign currency contracts ^(c)
—
126
—
(54 ) —
112
—
751
Total Derivatives $ 228
$ (207 ) $ (791 ) $ (504 ) $ (272 ) $ (952 ) $ (394 ) $ (596 )



	Three Months Ended July 31,											Six Months Ended July 31,
	2017					2016						2017					2016
	OCI		Income (Loss)			OCI			Income (Loss)			OCI		Income (Loss)			OCI			Income (Loss)
	(in thousands)											(in thousands)
Dervatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate swap ^(a)	—		(172		)	(356		)	(360		)	48		(986		)	(500		)	(731		)
Dervatives Not Designated as Hedging Instruments:
Foreign currency contracts ^(b)	—		(988		)	—			626			—		(1,056		)	—			(14		)
Total Derivatives	$	—	$	(1,160	)	$	(356	)	$	266		$	48	$	(2,042	)	$	(500	)	$	(745	)

^(a) No material hedge ineffectiveness has been recognized. The amounts shown in Income (Loss) above are reclassification amounts from accumulated other comprehensive income (loss) and are recorded in floorplan interest expense in the consolidated statements of operations.

^(b) Amounts are included in ~~Cost of revenue - equipment in the consolidated statements of operations.~~

^(c) ~~Amounts are included in~~ Interest income and other income (expense) in the consolidated statements of operations.

~~No components~~For the three months ended April 30, 2017, the Company reclassified $0.6 million of pre-tax accumulated losses on its interest rate swap instrument from accumulated other comprehensive income (loss) to income as the ~~Company's net investment or cash flow hedging instruments~~original forecasted interest payments, which served as the hedged item underlying the interest rate swap instrument, were ~~excluded from~~no longer probable of occurring during the ~~assessment of hedge ineffectiveness.~~

time period over which such transactions were previously anticipated to occur. As of ~~October~~July 31, ~~2016,~~2017, the Company had ~~$2.0~~$0.1 million in remaining pre-tax net unrealized losses associated with its interest rate swap cash flow hedging instrument recorded in accumulated other comprehensive ~~income. The~~income (loss), all of which the Company expects ~~that $1.2~~

~~Table of Contents~~

~~million of pre-tax unrealized losses associated with its interest rate swap~~ will be reclassified into income over the next 12 months.

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NOTE 7—FAIR VALUE OF FINANCIAL INSTRUMENTS

The ~~assets and~~ liabilities which are measured at fair value on a recurring basis as of ~~October~~July 31, ~~2016~~2017 and January 31, ~~2016~~2017 are as follows:


	October 31, 2016								January 31, 2016								July 31, 2017								January 31, 2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)								(in thousands)								(in thousands)								(in thousands)
Financial Assets
Foreign currency contracts	$	—	$	—	$	—	$	—	$	—	$	125	$	—	$	125
Total Financial Assets	$	—	$	—	$	—	$	—	$	—	$	125	$	—	$	125

Financial Liabilities
Interest rate swap	$	—	$	2,012	$	—	$	2,012	$	—	$	2,836	$	—	$	2,836	$	—	$	—	$	—	$	—	$	—	$	1,155	$	—	$	1,155
Foreign currency contracts	—		121		—		121		—		—		—		—		—		238		—		238		—		200		—		200
Total Financial Liabilities	$	—	$	2,133	$	—	$	2,133	$	—	$	2,836	$	—	$	2,836	$	—	$	238	$	—	$	238	$	—	$	1,355	$	—	$	1,355

The valuation for the Company's foreign currency contracts and interest rate swap derivative instruments were valued using discounted cash flow analyses, an income approach, utilizing readily observable market data as inputs.

The Company also valued certain long-lived assets at fair value on a non-recurring basis as of January 31, ~~2016~~2017 as part of its long-lived asset impairment testing. The estimated fair value of such assets as of January 31, ~~2016~~2017 was ~~$5.6~~$3.6 million and consisted of real estate assets ~~where~~and fair value was ~~estimated~~determined by ~~a professional appraisal of such assets. The real estate appraisals utilized~~utilizing market and income approaches incorporating both observable and unobservable inputs, and are deemed to be Level 3 fair value inputs. The most significant unobservable inputs used in the fair value measurements under the market approach include adjustments to observable market sales information to incorporate differences in geographical locations and age and condition of subject assets, and the most significant unobservable inputs under the income approach include forecasted net cash generated from the use of the subject assets and the discount rate applied to such cash flows to arrive at a fair value estimate. In addition, in certain instances as of ~~October 31, 2016 and~~ January 31, ~~2016,~~2017, the Company estimated the fair value of ~~certain~~ long-lived assets to approximate zero as no future cash flows were assumed to be generated from the use of such assets and the expected sales values ~~of such assets~~ were deemed to be nominal. All such fair value measurements were based on unobservable inputs and thus are Level 3 fair value inputs. No long-lived assets were valued at fair value on a non-recurring basis as of July 31, 2017.

The Company also has financial instruments that are not recorded at fair value in its consolidated financial statements. 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 2 fair value inputs. Based upon current borrowing rates with similar maturities, which are Level 2 fair value inputs, the carrying value of long-term debt approximates the fair value as of ~~October~~July 31, ~~2016~~2017 and January 31, ~~2016,~~2017, respectively. The following table provides details on the ~~Senior Convertible Notes~~senior convertible notes as of ~~October~~July 31, ~~2016~~2017 and January 31, ~~2016.~~2017. 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, and unamortized debt issuance costs. Fair value of the ~~Senior Convertible Notes~~senior convertible notes was estimated based on Level 2 fair value inputs.

October 31, 2016 January 31, 2016
Estimated Fair Value Carrying Value Face Value Estimated Fair Value Carrying Value Face Value
(in thousands) (in thousands)
Senior convertible notes $ 85,000
$ 87,754
$ 95,725
$ 105,000
$ 134,145
$ 150,000



	July 31, 2017						January 31, 2017
	Estimated Fair Value		Carrying Value		Face Value		Estimated Fair Value		Carrying Value		Face Value
	(in thousands)						(in thousands)
Senior convertible notes	$	73,000	$	70,975	$	75,470	$	87,000	$	88,501	$	95,725

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NOTE 8—SEGMENT INFORMATION AND OPERATING RESULTS

The Company has three reportable segments: Agriculture, Construction and International. Revenue between segments is immaterial. 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.

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


	Three Months Ended October 31,						Nine Months Ended October 31,						Three Months Ended July 31,						Six Months Ended July 31,
	2016			2015			2016			2015			2017			2016			2017			2016
	(in thousands)						(in thousands)						(in thousands)						(in thousands)
Revenue
Agriculture	$	205,540		$	211,302		$	538,060		$	660,606		$	138,545		$	153,713		$	302,170		$	332,520
Construction	80,789			87,023			241,922			249,601			77,890			83,132			141,310			161,133
International	45,937			46,650			115,477			122,154			52,436			41,488			89,509			69,540
Total	$	332,266		$	344,975		$	895,459		$	1,032,361		$	268,871		$	278,333		$	532,989		$	563,193

Income (Loss) Before Income Taxes
Agriculture	$	(1,798	)	$	4,219		$	(9,881	)	$	693		$	(6,882	)	$	(4,325	)	$	(10,779	)	$	(8,083	)
Construction	(105		)	1,413			(1,523		)	(3,089		)	930			626			(1,703		)	(1,418		)
International	604			351			(88		)	(3,074		)	283			(175		)	878			(692		)
Segment income (loss) before income taxes	(1,299		)	5,983			(11,492		)	(5,470		)	(5,669		)	(3,874		)	(11,604		)	(10,193		)
Shared Resources	1,355			(269		)	1,199			1,879			(1,541		)	(675		)	(5,016		)	(156		)
Total	$	56		$	5,714		$	(10,293	)	$	(3,591	)	$	(7,210	)	$	(4,549	)	$	(16,620	)	$	(10,349	)


	October 31, 2016		January 31, 2016		July 31, 2017		January 31, 2017
	(in thousands)				(in thousands)
Total Assets
Agriculture	$	475,418	$	557,579	$	393,330	$	411,726
Construction	264,393		294,891		238,337		221,092
International	127,703		109,706		137,853		106,899
Segment assets	867,514		962,176		769,520		739,717
Shared Resources	52,783		85,699		52,901		31,705
Total	$	920,297	$	1,047,875	$	822,421	$	771,422

NOTE 9—RESTRUCTURING COSTS

In February 2017, to better align the Company's cost structure and business in certain markets, the Company announced a restructuring plan (the "Fiscal 2018 Restructuring Plan"), to close one Construction location and 14 Agriculture locations. As of July 31, 2017, the Company has closed and fully exited all of these locations. The Fiscal 2018 Restructuring Plan is expected to result in a significant reduction of expenses while allowing the Company to continue to provide a leading level of service to its customers. In total, over the term of the Fiscal 2018 Restructuring Plan, the Company anticipates recognizing approximately $15.0 million of restructuring charges consisting primarily of fixed asset impairment charges, lease termination costs and termination benefits. The Company anticipates the restructuring charges to be approximately $10.0 million, $3.0 million and $2.0 million within its Agriculture, Construction and Shared Resources segments.

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~~NOTE 9—STORE CLOSINGS AND REALIGNMENT COSTS~~

~~Exit~~Restructuring costs associated with the Company's ~~store closings and realignment activities~~Fiscal 2018 Restructuring Plan are summarized in the following table. Such costs are included in ~~Impairment and Realignment Costs~~the restructuring costs line in the consolidated statements of operations. Cumulative amounts reflect restructuring costs recognized to date associated with the Fiscal 2018 Restructuring Plan and include restructuring costs recognized in the fourth quarter of fiscal 2017.

Three Months Ended October 31, Nine Months Ended October 31,
2016 2015 2016 2015
(in thousands) (in thousands)
Agriculture Segment
Lease termination costs (a) $ —
$ (38 ) $ (120 ) $ 223
Employee severance costs —
(15 ) —
225
Impairment of fixed assets, net of gains on asset disposition —
—
—
10
Asset relocation and other closing costs —
(34 ) —
34
$ —
$ (87 ) $ (120 ) $ 492
Construction Segment
Lease termination costs (a) $ —
$ 46
$ (8 ) $ 137
Employee severance costs —
29
21
362
Impairment of fixed assets, net of gains on asset disposition —
10
—
106
Asset relocation and other closing costs —
(5 ) —
88
$ —
$ 80
$ 13
$ 693
Shared Resource Center
Lease termination costs (a) $ —
$ (12 ) $ —
$ 37
Employee severance costs —
—
378
187
Impairment of fixed assets, net of gains on asset disposition —
41
—
110
$ —
$ 29
$ 378
$ 334
Total
Lease termination costs (a) $ —
$ (4 ) $ (128 ) $ 397
Employee severance costs —
14
399
774
Impairment of fixed assets, net of gains on asset disposition —
51
—
226
Asset relocation and other closing costs —
(39 ) —
122
$ —
$ 22
$ 271
$ 1,519



	Three Months Ended July 31, 2017			Six Months Ended July 31, 2017			Cumulative Amount
	(in thousands)
Lease accrual and termination costs	$	4,069		$	4,322		$	4,322
Termination benefits	1,906			3,724			3,724
Impairment of fixed assets, net of gains on asset disposition	(565		)	(565		)	2,392
Asset relocation and other costs	139			412			460
	$	5,549		$	7,893		$	10,898

Restructuring charges associated with the Company's Fiscal 2018 Restructuring Plan are summarized by segment in the following table:

^(a) ~~Net of gain on changes in lease termination accrual assumptions~~



	Three Months Ended July 31, 2017		Six Months Ended July 31, 2017		Cumulative Amount
	(in thousands)
Segment
Agriculture	$	5,194	$	6,672	$	7,775
Construction	252		338		2,240
Shared Resources	103		883		883
Total	$	5,549	$	7,893	$	10,898

A reconciliation of the beginning and ending exit cost liability balance, of which $3.3 million is included in other long-term liabilities and $1.9 million is included in accrued expenses and other in the consolidated balance sheets, follows:

Amount
(in thousands)
Balance, January 31, 2016 $ 660
Exit costs incurred and charged to expense
Lease termination costs (128 )
Employee severance costs 399
Exit costs paid
Lease termination costs (430 )
Employee severance costs (399 )
Balance, October 31, 2016 $ 102



	Lease Accrual & Termination Costs			Termination Benefits			Asset Relocation & Other Costs			Total
	(in thousands)
Balance, January 31, 2017	$	—		$	—		$	—		$	—
Exit costs incurred and charged to expense	4,322			3,418			412			8,152
Exit costs paid	(536		)	(2,000		)	(412		)	(2,948		)
Balance, July 31, 2017	$	3,786		$	1,418		$	—		$	5,204

Restructuring charges recognized for the six months ended July 31, 2016 totaled $0.3 million, and for the three months ended July 31, 2016 were not material. These charges were the result of prior cost reduction plans. As of January 31, 2017, these plans were substantially complete.

NOTE 10—RELATED PARTY TRANSACTIONS

Effective February 1, 2017, the Company and Peter Christianson (our former President and former member of our Board of Directors), who is a brother of Tony Christianson (a member of our Board of Directors), agreed to terminate a consulting arrangement between the parties. In connection with the termination, the Company agreed to pay Mr. Peter Christianson the sum of $0.7 million, payable in two equal installments in fiscal 2018 and 2019. All unvested stock options and shares of restricted stock held by Mr. Peter Christianson will continue to vest as scheduled. As a result of the termination agreement, the Company recognized for the six months ended July 31, 2017, a total of $0.8 million in termination costs, consisting of $0.7 million for future cash payments owed to Mr. Peter Christianson and $0.1 million for unvested shares of restricted stock. These termination costs are included in restructuring costs in the consolidated statements of operations.

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~~NOTE 10—INCOME TAXES~~

The Company incurs a provision for income taxes in jurisdictions in which it has taxable income. Generally the Company receives a benefit for income taxes in jurisdictions in which it has taxable losses unless it has recorded a valuation allowance for that jurisdiction. These losses are available to reduce future taxable income in these jurisdictions if earned within the allowable net operating loss carryforward period. The foreign jurisdictions in which the Company operates have net operating loss carryforward periods ranging from five to seven years, with certain jurisdictions having indefinite carryforward periods.

~~The components of income (loss) before income taxes are as follows:~~

Three Months Ended October 31, Nine Months Ended October 31,
2016 2015 2016 2015
(in thousands) (in thousands)
U.S. $ (547 ) $ 5,363
$ (10,204 ) $ (521 )
Foreign 603
351
(89 ) (3,070 )
Total $ 56
$ 5,714
$ (10,293 ) $ (3,591 )

~~A reconciliation of the statutory federal income tax rate to the Company's effective income tax rate is as follows:~~

Three Months Ended October 31, Nine Months Ended October 31,
2016 2015 2016 2015
U.S. statutory rate 35.0 % 35.0 % (35.0 )% (35.0 )%
Foreign statutory rates (406.2 )% (0.2 )% 1.2 % 22.4 %
State taxes on income net of federal tax benefit 4.2 % 4.2 % (4.2 )% (4.2 )%
Change in valuation allowance (221.1 )% (11.1 )% (4.4 )% 27.8 %
Tax effect of Ukrainian hryvnia devaluation^(a)
55.2 % 6.4 % 2.2 % (13.3 )%
All other, net 166.7 % 4.7 % 1.4 % (7.6 )%

(366.1 )% 39.0 % (38.8 )% (9.9 )%

^(a) Represents the tax impact of differences in foreign currency losses recognized as the result of Ukrainian hryvnia devaluation between Ukrainian taxable income (loss) and financial reporting income (loss).

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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 related 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, ~~2016.~~

2017.

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 Industrial N.V. or its U.S. subsidiary CNH Industrial 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.

The agriculture industry has been experiencing challenging conditions such as ~~decreases in~~low agricultural commodity prices and net farm income, which, among other things, have a negative effect on customer sentiment and our customers' ability to secure financing for their equipment purchases. Changes in actual or anticipated net farm income generally have a direct correlation with agricultural equipment purchases by farmers. In ~~November of 2016,~~August 2017, the U.S. Department of Agriculture ("USDA") published its U.S. farm sector financial indicators. The USDA projected net farm income for calendar year 2017 to remain relatively flat as compared to calendar year 2016 toand decrease ~~34%~~30.4% as compared to the most recent five-year average. These industry conditions have negatively impacted our customer demand, resulting in decreased ~~same-store sales and~~ equipment revenue and an oversupply of equipment inventory in ~~the agriculture industry in fiscal 2017.~~our geographic footprint.

Certain of our Construction stores, particularly those in the northern and western parts of our footprint, are impacted by the strength of the oil industry. The significant decrease in oil prices, which began in the third quarter of fiscal 2015, ~~and~~ continued through ~~the first nine months of~~2016, and remained at lower prices in fiscal 2017 ~~has~~and 2018, caused a decrease in oil production and infrastructure activity in these areas. In addition, the aforementioned agriculture industry conditions have also led to a reduction of purchases of construction equipment by customers in the agriculture industry, negatively affecting certain of our Construction stores. These factors have reduced demand for equipment purchases, equipment rentals, and service work and parts, and have caused an oversupply of equipment inventory and rental fleet equipment in these areas.

Our net ~~income~~loss including noncontrolling interest was ~~$0.3~~$5.2 million, or ~~$0.01~~$0.24 per diluted share, for the three months ended ~~October~~July 31, ~~2016,~~2017, compared to ~~$3.4~~a net loss including noncontrolling interest of $2.7 million, or ~~$0.16~~$0.12 per diluted share, for the three months ended ~~October~~July 31, ~~2015.~~2016. On ~~a non-GAAP~~an adjusted basis, our diluted loss per share was $0.04 for the three months ended July 31, 2017, compared to an adjusted diluted loss per share ~~was $0.01~~of $0.12 for the three months ended ~~October~~July 31, ~~2016, compared to non-GAAP adjusted diluted earnings per share of $0.20 for the three months ended October 31, 2015.~~2016. See the Non-GAAP Financial Measures section below for a reconciliation of these non-GAAP measures to the most comparable GAAP measures. Significant factors impacting the quarterly comparisons were:

Revenue decreased ~~3.7%~~3.4% for the ~~third~~second quarter of fiscal ~~2017,~~2018, as compared to the ~~third~~second quarter last year, driven by ~~a decrease~~the result of our store closings associated with our Fiscal 2018 Restructuring Plan, and also impacted by the result of our expanded marketing of aged equipment inventory during fiscal 2017, but partially offset by increased revenues in ~~same-store sales in both~~ our ~~Agriculture and Construction segments;~~International segment.

Total gross profit margin ~~decreased~~increased to ~~17.6%~~19.6% for the ~~third~~second quarter of fiscal ~~2017,~~2018, as compared to ~~19.5%~~19.0% for the ~~third~~second quarter of fiscal ~~2016.~~2017. The ~~decrease~~increase in gross profit margin was primarily the result of equipment gross margin compression as we accelerated our used inventory reduction efforts in the third quarter of fiscal 2017 by aggressively retailing used equipment inventories. In addition, a changing mix of equipment sales more heavily weighted towards used equipment revenue in the third quarter of fiscal 2017 also contributed to the lowerhigher gross profit ~~margin;~~margins on equipment revenues.

Floorplan interest expense decreased ~~28.4%~~43.2% in the ~~third~~second quarter of fiscal ~~2017,~~2018, as compared to the ~~third~~second quarter last year, primarily due to a decrease in our average interest-bearing inventory in the ~~third~~second quarter of fiscal ~~2017; other interest expense decreased 46.5%~~2018.

Restructuring costs amounted to $5.5 million in the ~~third~~second quarter of fiscal ~~2017, as compared to~~2018. See the third quarter last year, due primarily to a $1.0 million gain recognized in the third quarter of fiscal 2017 related to repurchases of $24.2 million of our Senior Convertible Notes and to the interest savings resulting from that repurchase and the repurchase of $30.1 million of Senior Convertible Notes in April 2016.Fiscal 2018 Restructuring Plan section below for further details.

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~~Realignment Costs~~Fiscal 2018 Restructuring Plan

~~We recognized $0.3 million and $1.5 million in realignment costs during the nine months ended October 31, 2016 and 2015, respectively. To~~In February 2017, to better align ~~our~~the Company's cost structure and ~~re-balance staffing levels with the evolving needs of the~~ business in ~~March 2015, we approved~~certain markets, the Company announced a ~~realignment~~dealership restructuring plan, ~~that reduced our headcount by approximately 14%,~~ which included ~~headcount reductions at stores in each~~the anticipated closure of ~~our operating segments and our Shared Resource Center, as well as from the closing of three Agriculture stores and~~ one Construction ~~store. Our remaining stores~~location and 14 Agriculture locations. As of July 31, 2017, the Company has closed and fully exited all of these locations. The restructuring plan is expected to result in ~~each~~a significant reduction of expenses while allowing the ~~respective areas assumed~~Company to continue to provide a leading level of service to its customers. In total, the ~~distribution rights~~Company anticipates recognizing approximately $15.0 million of restructuring charges consisting primarily of fixed asset impairment charges, lease termination costs and termination benefits. The Company recognized $3.0 million of restructuring charges in the fourth quarter of fiscal 2017 and $7.9 million for the ~~CNH Industrial brand previously held by the closed stores.~~ six months ended July 31, 2017.

See also the Non-GAAP Financial Measures section below for the impact of these costs on ~~adjusted net income (loss) and adjusted Diluted EPS.~~

~~Foreign Currency Remeasurement Losses~~

In February of 2014, the National Bank of Ukraine terminated the currency peg of the Ukrainian hryvnia ("UAH") to the USD; subsequent to this currency decoupling and as a result of the economic and political conditions present in the country, the UAH experienced significant devaluation from the date the currency peg was terminated through July 2015, and continued to experience more modest volatility through April 2016. We recognized foreign currency remeasurement losses resulting from a devaluation of the UAH totaling $0.2 million and $2.3 million for the nine months ended October 31, 2016 and 2015, respectively. These losses are included in interest income and other income (expense) in our consolidated statements of operations. See also the Non-GAAP Financial Measures section below for impact of these costs on adjusted net income (loss) and adjusted Diluted EPS.

Critical Accounting Policies and Estimates

There have been no material changes in our Critical Accounting Policies and Estimates, as disclosed in our Annual Report on Form 10-K for the year ended January 31, ~~2016.~~2017.

Results of Operations

The results shown below include the operating results of any 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.

Same-store sales for any period represent sales by stores that were part of the Company for the entire comparable periods in the current and preceding fiscal years. We do not distinguish relocated or newly-expanded stores in this same-store analysis. Closed stores are excluded from the same-store analysis. Stores that do not meet the criteria for same-store classification are described as excluded stores throughout the Results of Operations section in this Quarterly Report on Form 10-Q.

~~Table of Contents~~

Comparative financial data for each of our four sources of revenue are expressed below.


	Three Months Ended October 31,						Nine Months Ended October 31,						Three Months Ended July 31,						Six Months Ended July 31,
	2016			2015			2016			2015			2017			2016			2017			2016
	(dollars in thousands)						(dollars in thousands)						(dollars in thousands)						(dollars in thousands)
Equipment
Revenue	$	212,194		$	215,692		$	570,369		$	681,691		$	167,881		$	173,301		$	335,796		$	358,175
Cost of revenue	201,140			198,095			532,370			628,280			154,729			160,906			310,246			331,230
Gross profit	$	11,054		$	17,597		$	37,999		$	53,411		$	13,152		$	12,395		$	25,550		$	26,945
Gross profit margin	5.2		%	8.2		%	6.7		%	7.8		%	7.8		%	7.2		%	7.6		%	7.5		%
Parts
Revenue	$	69,261		$	73,838		$	185,106		$	197,439		$	55,580		$	58,336		$	112,163		$	115,845
Cost of revenue	48,387			51,673			130,006			138,626			39,103			41,118			79,460			81,619
Gross profit	$	20,874		$	22,165		$	55,100		$	58,813		$	16,477		$	17,218		$	32,703		$	34,226
Gross profit margin	30.1		%	30.0		%	29.8		%	29.8		%	29.6		%	29.5		%	29.2		%	29.5		%
Service
Revenue	$	33,777		$	34,116		$	96,065		$	99,860		$	30,509		$	31,296		$	59,275		$	62,288
Cost of revenue	11,828			12,449			35,473			36,136			11,444			12,045			22,238			23,645
Gross profit	$	21,949		$	21,667		$	60,592		$	63,724		$	19,065		$	19,251		$	37,037		$	38,643
Gross profit margin	65.0		%	63.5		%	63.1		%	63.8		%	62.5		%	61.5		%	62.5		%	62.0		%
Rental and other
Revenue	$	17,034		$	21,329		$	43,919		$	53,371		$	14,901		$	15,400		$	25,755		$	26,885
Cost of revenue	12,485			15,617			32,703			39,674			10,788			11,331			19,319			20,218
Gross profit	$	4,549		$	5,712		$	11,216		$	13,697		$	4,113		$	4,069		$	6,436		$	6,667
Gross profit margin	26.7		%	26.8		%	25.5		%	25.7		%	27.6		%	26.4		%	25.0		%	24.8		%

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

~~Table of Contents~~


	Three Months Ended October 31,				Nine Months Ended October 31,				Three Months Ended July 31,				Six Months Ended July 31,
	2016		2015		2016		2015		2017		2016		2017		2016
Revenue
Equipment	63.9	%	62.5	%	63.7	%	66.0	%	62.5	%	62.3	%	63.1	%	63.5	%
Parts	20.8	%	21.4	%	20.7	%	19.1	%	20.7	%	21.0	%	21.0	%	20.6	%
Service	10.2	%	9.9	%	10.7	%	9.7	%	11.3	%	11.2	%	11.1	%	11.1	%
Rental and other	5.1	%	6.2	%	4.9	%	5.2	%	5.5	%	5.5	%	4.8	%	4.8	%
Total Revenue	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Total Cost of Revenue	82.4	%	80.5	%	81.6	%	81.6	%	80.4	%	81.0	%	80.9	%	81.1	%
Gross Profit Margin	17.6	%	19.5	%	18.4	%	18.4	%	19.6	%	19.0	%	19.1	%	18.9	%
Operating Expenses	16.0	%	15.5	%	17.8	%	16.2	%	18.7	%	18.5	%	19.2	%	18.9	%
Impairment and Realignment Costs	0.1	%	—	%	—	%	0.1	%
Income from Operations	1.5	%	4.0	%	0.6	%	2.1	%
Restructuring Costs									2.1	%	—	%	1.5	%	—	%
Income (Loss) from Operations									(1.2	)%	0.5	%	(1.6	)%	—	%
Other Income (Expense)	(1.5	)%	(2.3	)%	(1.7	)%	(2.4	)%	(1.5	)%	(2.1	)%	(1.5	)%	(1.8	)%
Income (Loss) Before Income Taxes	—	%	1.7	%	(1.1	)%	(0.3	)%
Provision for (Benefit from) Income Taxes	(0.1	)%	0.7	%	(0.4	)%	—	%
Net Income (Loss) Including Noncontrolling Interest	0.1	%	1.0	%	(0.7	)%	(0.3	)%
Less: Net Income (Loss) Attributable to Noncontrolling Interest	—	%	—	%	—	%	—	%
Net Income (Loss) Attributable to Titan Machinery Inc.	0.1	%	1.0	%	(0.7	)%	(0.3	)%
Loss Before Income Taxes									(2.7	)%	(1.6	)%	(3.1	)%	(1.8	)%
Benefit from Income Taxes									(0.8	)%	(0.6	)%	(1.0	)%	(0.6	)%
Net Loss Including Noncontrolling Interest									(1.9	)%	(1.0	)%	(2.1	)%	(1.2	)%
Less: Loss Attributable to Noncontrolling Interest									—	%	(0.1	)%	—	%	(0.1	)%
Net Loss Attributable to Titan Machinery Inc.									(1.9	)%	(0.9	)%	(2.1	)%	(1.1	)%

Three Months Ended ~~October~~July 31, ~~2016~~2017 Compared to Three Months Ended ~~October~~July 31, ~~2015~~2016

Consolidated Results

Revenue


	Three Months Ended October 31,							Percent		Three Months Ended July 31,							Percent
	2016		2015		(Decrease)			Change		2017		2016		(Decrease)			Change
	(dollars in thousands)									(dollars in thousands)
Equipment	$	212,194	$	215,692	$	(3,498	)	(1.6	)%	$	167,881	$	173,301	$	(5,420	)	(3.1	)%
Parts	69,261		73,838		(4,577		)	(6.2	)%	55,580		58,336		(2,756		)	(4.7	)%
Service	33,777		34,116		(339		)	(1.0	)%	30,509		31,296		(787		)	(2.5	)%
Rental and other	17,034		21,329		(4,295		)	(20.1	)%	14,901		15,400		(499		)	(3.2	)%
Total Revenue	$	332,266	$	344,975	$	(12,709	)	(3.7	)%	$	268,871	$	278,333	$	(9,462	)	(3.4	)%

The decrease in revenue for the ~~third~~second quarter of fiscal 2018 was primarily the result of our store closings associated with our Fiscal 2018 Restructuring Plan and the impact of incremental revenue associated with our expanded marketing of aged equipment inventory within our Agriculture and Construction segments in the second quarter of fiscal 2017. Approximately $29.8 million of equipment revenue was recognized in the second quarter of fiscal 2017 was driven by a decrease in same-store sales of 3.6% over the comparable prior year period. A decrease in same-stores sales occurred in each of our Agriculture, Construction and International segments and wasas the result of ~~the challenging industry conditions discussed~~our expanded marketing plan. The decrease in ~~the Overview section above.~~Agriculture and Construction segment revenue was partially offset by an increase in revenue in our International segment.

Table of Contents

Gross Profit


	Three Months Ended October 31,						Increase/			Percent		Three Months Ended July 31,						Increase/			Percent
	2016			2015			(Decrease)			Change		2017			2016			(Decrease)			Change
	(dollars in thousands)											(dollars in thousands)
Gross Profit
Equipment	$	11,054		$	17,597		$	(6,543	)	(37.2	)%	$	13,152		$	12,395		$	757		6.1	%
Parts	20,874			22,165			(1,291		)	(5.8	)%	16,477			17,218			(741		)	(4.3	)%
Service	21,949			21,667			282			1.3	%	19,065			19,251			(186		)	(1.0	)%
Rental and other	4,549			5,712			(1,163		)	(20.4	)%	4,113			4,069			44			1.1	%
Total Gross Profit	$	58,426		$	67,141		$	(8,715	)	(13.0	)%	$	52,807		$	52,933		$	(126	)	(0.2	)%
Gross Profit Margin
Equipment	5.2		%	8.2		%	(3.0		)%	(36.6	)%	7.8		%	7.2		%	0.6		%	8.3	%
Parts	30.1		%	30.0		%	0.1		%	0.3	%	29.6		%	29.5		%	0.1		%	0.3	%
Service	65.0		%	63.5		%	1.5		%	2.4	%	62.5		%	61.5		%	1.0		%	1.6	%
Rental and other	26.7		%	26.8		%	(0.1		)%	(0.4	)%	27.6		%	26.4		%	1.2		%	4.5	%
Total Gross Profit Margin	17.6		%	19.5		%	(1.9		)%	(9.7	)%	19.6		%	19.0		%	0.6		%	3.2	%
Gross Profit Mix
Equipment	18.9		%	26.2		%	(7.3		)%	(27.9	)%	24.9		%	23.4		%	1.5		%	6.4	%
Parts	35.7		%	33.0		%	2.7		%	8.2	%	31.2		%	32.5		%	(1.3		)%	(4.0	)%
Service	37.6		%	32.3		%	5.3		%	16.4	%	36.1		%	36.4		%	(0.3		)%	(0.8	)%
Rental and other	7.8		%	8.5		%	(0.7		)%	(8.2	)%	7.8		%	7.7		%	0.1		%	1.3	%
Total Gross Profit Mix	100.0		%	100.0		%						100.0		%	100.0		%

~~The $8.7 million decrease in gross~~Gross profit for the ~~third~~second quarter of fiscal ~~2017,~~2018 was flat with the comparable period last year. The decrease in revenue in the second quarter of fiscal 2018 was offset by higher gross profit margins on equipment revenue as compared to the same period last year, was primarily due to a decrease in revenue and a decrease in equipment gross profit margins resulting from our aggressive pricing and retailing of used equipment inventories to accelerate our used inventory reduction efforts in the third quarter of fiscal 2017.year. The ~~decrease~~increase in total gross profit margin from ~~19.5%~~19.0% for the ~~third quarter of fiscal 2016 to 17.6% for the third~~second quarter of fiscal 2017 to 19.6% for the second quarter of fiscal 2018 was mainly due to ~~the~~higher gross profit margins on equipment gross margin compression noted above as well as a changing mix of equipment revenue in the third quarter of fiscal 2017 with a more heavy weighting towards used equipment sales versus new equipment sales.revenue.

Our company-wide absorption ~~improved~~increased to ~~90.0%~~80.1% for the ~~third~~second quarter of fiscal ~~2017~~2018 compared to ~~86.6%~~77.8% during the same period last year as our decrease in gross profit from parts, service and rental and other in fiscal ~~2017~~2018 was ~~exceeded~~more than offset by a reduction in our fixed operating costs and ~~lower~~ floorplan interest expense.

Operating Expenses


	Three Months Ended October 31,						Increase/			Percent		Three Months Ended July 31,						Increase/			Percent
	2016			2015			(Decrease)			Change		2017			2016			(Decrease)			Change
	(dollars in thousands)											(dollars in thousands)
Operating Expenses	$	53,143		$	53,484		$	(341	)	(0.6	)%	$	50,523		$	51,487		$	(964	)	(1.9	)%
Operating Expenses as a Percentage of Revenue	16.0		%	15.5		%	0.5		%	3.2	%	18.7		%	18.5		%	0.2		%	1.1	%

Our operating expenses in the ~~third~~second quarter of fiscal ~~2017 were consistent~~2018 decreased $1.0 million as compared with the same period last ~~year.~~year, which primarily are the result of cost savings arising from our Fiscal 2018 Restructuring Plan. The ~~slight~~ increase in operating expenses as a percentage of total revenue was primarily due to the decrease in total revenue in the ~~third~~second quarter of fiscal ~~2017,~~2018, as compared to the ~~third~~second quarter of fiscal ~~2016,~~2017, which negatively affected our ability to leverage our fixed operating costs.

~~Impairment and Realignment~~Restructuring Costs

Three Months Ended October 31, Percent
2016 2015 Increase Change
(dollars in thousands)
Impairment and Realignment Costs $ 275
$ 22
$ 253
n/m



	Three Months Ended July 31,						Percent
	2017		2016		Increase		Change
	(dollars in thousands)
Restructuring Costs	$	5,549	$	24	$	5,525	n/m

Table of Contents

The ~~impairment and realignment~~restructuring costs recognized in the ~~third~~second quarters of fiscal ~~2017~~2018 and ~~2016~~2017 are charges associated with the ~~impairment of certain long-lived assets and the~~ result of our ~~realignment~~restructuring plans and associated exit costs, including accruals for lease terminations and remaining lease obligations, ~~employee severance costs, the impairment of certain fixed assets,~~termination benefits, and the costs associated with relocating certain assets of our closed stores. ~~See~~The Company anticipates recognizing approximately $4.0 million of additional restructuring costs during the ~~Realignment Costs section above for further details on our store realignment plans and associated exit costs, and the Non-GAAP Financial Measures section below for the impact~~remainder of ~~these amounts on adjusted net income (loss) and adjusted Diluted EPS.~~fiscal 2018.

Other Income (Expense)


	Three Months Ended October 31,						Increase/			Percent		Three Months Ended July 31,						Increase/			Percent
	2016			2015			(Decrease)			Change		2017			2016			(Decrease)			Change
	(dollars in thousands)											(dollars in thousands)
Interest income and other income (expense)	$	502		$	722		$	(220	)	(30.5	)%
Interest income and other income												$	682		$	612		$	70		11.4	%
Floorplan interest expense	(3,294		)	(4,602		)	(1,308		)	(28.4	)%	(2,163		)	(3,806		)	(1,643		)	(43.2	)%
Other interest expense	(2,160		)	(4,041		)	(1,881		)	(46.5	)%	(2,464		)	(2,777		)	(313		)	(11.3	)%

The decrease in floorplan interest expense for the ~~third~~second quarter of fiscal ~~2017,~~2018, as compared to the ~~third~~second quarter of fiscal ~~2016,~~2017, was primarily due to a decrease in our average interest-bearing inventory in the ~~third~~second quarter of fiscal ~~2017. The decrease~~2018. Interest expense associated with our senior convertible notes, which is reflected in other interest expense, ~~is primarily due to a $1.0~~decreased $0.7 million ~~gain recognized~~ in the ~~third~~second quarter of fiscal 2018 compared to the second quarter of fiscal 2017 ~~related to repurchases of $24.2 million of our Senior Convertible Notes, and~~due to interest savings resulting from ~~that repurchase and the repurchase of $30.1~~our repurchases. Other interest expense includes $0.4 million of ~~Senior Convertible Notes in April 2016. The gain on the repurchases and the associated interest savings are partially offset by $0.6 million of expense~~debt issuance cost write-offs recognized in the ~~third~~second quarter of fiscal ~~2017 related to the write-off of capitalized debt issuance costs recognized~~2018 as a result of our election to reduce the maximum available credit ~~amount available~~ under our Wells Fargo Credit Agreement. ~~See the Non-GAAP Financial Measures section below for the impact of these amounts on adjusted net income (loss) and adjusted Diluted EPS.~~

~~Provision for (Benefit from)~~Benefit from Income Taxes

Three Months Ended October 31,
Percent
2016 2015 Increase Change
(dollars in thousands)
Provision for (Benefit from) Income Taxes $ (208 ) $ 2,231
$ 2,439
109.3 %



	Three Months Ended July 31,								Percent
	2017			2016			Increase		Change
	(dollars in thousands)
Benefit from Income Taxes	$	(2,024	)	$	(1,847	)	$	177	9.6	%

Our effective tax rate was ~~(371.4)%~~28.1% for the ~~third~~second quarter of fiscal ~~2017~~2018 and ~~39%~~40.6% for the same period last year. The difference in our effective tax rate is primarily due to the change in mix of our domestic and foreign income or losses before income taxes in relation to our total loss before income ~~taxes. In addition, as~~taxes, and the ~~majority~~impact of ~~our foreign operations have full~~ valuation allowances onrecognized for deferred tax assets, including net operating losses, ~~they do not recognize any income tax expense or benefit. See Note 10 to~~in certain of our ~~consolidated financial statements for further details on our effective tax rate~~domestic and ~~the components of income (loss) before income taxes.~~international jurisdictions.

Segment Results

Certain financial information for our Agriculture, Construction and International business segments is set forth below. “Shared Resources” in the table below refers to the various unallocated income/(expense) items that we have retained at the general corporate level. Revenue between segments is immaterial.



	Three Months Ended July 31,						Increase/			Percent
	2017			2016			(Decrease)			Change
	(dollars in thousands)
Revenue
Agriculture	$	138,545		$	153,713		$	(15,168	)	(9.9	)%
Construction	77,890			83,132			(5,242		)	(6.3	)%
International	52,436			41,488			10,948			26.4	%
Total	$	268,871		$	278,333		$	(9,462	)	(3.4	)%

Income (Loss) Before Income Taxes
Agriculture	$	(6,882	)	$	(4,325	)	$	(2,557	)	(59.1	)%
Construction	930			626			304			48.6	%
International	283			(175		)	458			261.7	%
Segment income (loss) before income taxes	(5,669		)	(3,874		)	(1,795		)	(46.3	)%
Shared Resources	(1,541		)	(675		)	(866		)	(128.3	)%
Total	$	(7,210	)	$	(4,549	)	$	(2,661	)	(58.5	)%

Table of Contents

Three Months Ended October 31, Increase/ Percent
2016 2015 (Decrease) Change
(dollars in thousands)
Revenue
Agriculture $ 205,540
$ 211,302
$ (5,762 ) (2.7 )%
Construction 80,789
87,023
(6,234 ) (7.2 )%
International 45,937
46,650
(713 ) (1.5 )%
Total $ 332,266
$ 344,975
$ (12,709 ) (3.7 )%

Income (Loss) Before Income Taxes
Agriculture $ (1,798 ) $ 4,219
$ (6,017 ) (142.6 )%
Construction (105 ) 1,413
(1,518 ) (107.4 )%
International 604
351
253
72.1 %
Segment income (loss) before income taxes (1,299 ) 5,983
(7,282 ) (121.7 )%
Shared Resources 1,355
(269 ) 1,624
603.7 %
Total $ 56
$ 5,714
$ (5,658 ) (99.0 )%

Agriculture

Agriculture segment revenue for the ~~third~~second quarter of fiscal ~~2017~~2018 decreased ~~2.7%~~9.9% compared to the same period last year. Same-store sales decreased 0.2% over the second quarter of fiscal 2017. The revenue decrease was primarily due to a decrease in revenue resulting from the impact of our store closings associated with our Fiscal 2018 Restructuring Plan.

Agriculture segment loss before income taxes was $6.9 million for the second quarter of fiscal 2018 compared to a $4.3 million loss before income taxes for the second quarter of fiscal 2017. The increased segment loss before income taxes was largely the result of restructuring charges incurred under our Fiscal 2018 Restructuring Plan, which amounted to $5.2 million in the second quarter of fiscal 2018, but partially offset by operating expense savings as a result of this plan and a decrease in floorplan interest expense as the result of a decrease in our interest-bearing inventory in the second quarter of fiscal 2018. The decrease in segment revenue was largely offset by a higher gross profit margin.

Construction

Construction segment revenue for the second quarter of fiscal 2018 decreased 6.3% compared to the same period last year. The revenue decrease was due to a same-store sales decrease of ~~2.4%~~5.8% over the ~~third~~second quarter of fiscal ~~2016,~~2017, and ~~included decreases in~~was primarily the result of decreased equipment ~~parts, service and rental and other revenues,~~revenue, largely resulting from the ~~challenging industry conditions discussed~~impact of the incremental revenue associated with our expanded marketing of aged equipment inventory that occurred in the ~~Overview section above.~~second quarter of fiscal 2017, which totaled $14.0 million, but was partially offset by positive end user demand.

~~Agriculture~~Our Construction segment ~~loss~~income before income taxes was ~~$1.8~~$0.9 million for the ~~third~~second quarter of fiscal ~~2017~~2018 compared to ~~$4.2~~$0.6 million ~~of income before income taxes~~ for the ~~third~~second quarter of fiscal ~~2016.~~2017. The ~~decline~~increase in segment results iswas primarily due to equipment gross margin compression resulting from our aggressive retailing of used equipment inventories in the third quarter of fiscal 2017 to accelerate our used inventory reduction efforts. The decrease in equipment gross profit was partially offset by decreases in operating expenses and floorplan interest expense. The decrease in operating expenses is the result of cost saving measures implemented in light of the challenging industry conditions, while the thea decrease in floorplan interest expense isthat was the result of a decrease in our average interest-bearing inventory in the ~~third~~second quarter of fiscal ~~2017.~~

~~Construction~~

~~Construction segment revenue for the third quarter of fiscal 2017 decreased 7.2% compared to the same period last year. The revenue decrease was due to~~2018 and a same-store sales decrease of 7.7% over the third quarter of fiscal 2016, and included decreases in equipment, parts and rental and other revenues, largely resulting from the challenging industry conditions discussed in the Overview section above.

Our Construction segment loss before income taxes was $0.1 million for the third quarter of fiscal 2017 compared to income before income taxes of $1.4 million for the third quarter of fiscal 2016. The decline in segment results was primarily due to the decrease in ~~revenue noted above, but~~operating expenses related to cost savings from our restructuring plan. The decrease in expenses was partially offset by decreases in ~~operating expenses~~equipment revenues and floorplan interest expense. The decrease in operating expenses reflects cost savings from various measures implemented in light of the challenging industry conditions, and the decrease in floorplan interest expense is the result of a decrease in our average interest-bearing inventory in the third quarter of fiscal 2017.gross profit. The dollar utilization of our rental fleet decreased slightly from ~~29.6%~~25.3% in the ~~third~~second quarter of fiscal ~~2016~~2017 to ~~28.4%~~24.9% in the ~~third~~second quarter of fiscal ~~2017.~~2018.

International

International segment revenue for the ~~third~~second quarter of fiscal ~~2017 remained relatively flat~~2018 increased 26.4% compared to the same period last ~~year.~~ year primarily due to increased equipment revenue. Equipment revenue increased in the second quarter of fiscal 2018 primarily due to the build-out of our footprint, availability of subvention funds and positive crop conditions in certain of our markets.

Our International segment income before income taxes was ~~$0.6~~$0.3 million for the ~~third~~second quarter of fiscal ~~2017~~2018 compared to ~~income~~loss before income taxes of ~~$0.4~~$0.2 million for the same period last year. The increase in segment income before income taxes was primarily due to the increase in segment revenue as noted above, but partially offset by an increase in operating expenses resulting from the continued build-out of our footprint and presence in our European markets.

Shared Resources/Eliminations

We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments. Since these allocations are set early in the year, and a portion is planned to be unallocated, unallocated balances may occur. Shared Resource segment loss before income taxes was $1.5 million for the second quarter of fiscal 2018 compared to loss before income taxes of $0.7 million for the same period last year. For the second quarter of fiscal 2018, loss before income taxes was impacted by $0.4 million in debt issuance cost write-offs as a result of our election to reduce the maximum available credit under our Wells Fargo Credit Agreement.

Table of Contents

~~Nine~~Six Months Ended ~~October~~July 31, ~~2016~~2017 Compared to ~~Nine~~Six Months Ended ~~October~~July 31, ~~2015~~2016

Consolidated Results

Revenue


	Nine Months Ended October 31,							Percent		Six Months Ended July 31,							Percent
	2016		2015		Decrease			Change		2017		2016		Decrease			Change
	(dollars in thousands)									(dollars in thousands)
Equipment	$	570,369	$	681,691	$	(111,322	)	(16.3	)%	$	335,796	$	358,175	$	(22,379	)	(6.2	)%
Parts	185,106		197,439		(12,333		)	(6.2	)%	112,163		115,845		(3,682		)	(3.2	)%
Service	96,065		99,860		(3,795		)	(3.8	)%	59,275		62,288		(3,013		)	(4.8	)%
Rental and other	43,919		53,371		(9,452		)	(17.7	)%	25,755		26,885		(1,130		)	(4.2	)%
Total Revenue	$	895,459	$	1,032,361	$	(136,902	)	(13.3	)%	$	532,989	$	563,193	$	(30,204	)	(5.4	)%

The decrease in revenue for the first ~~nine~~six months of fiscal 2017 was primarily due to a decrease in same-store sales of 12.9% over the comparable prior year period. The same-store sales decrease was mainly driven by a decrease in Agriculture same-store sales of 18.1%, which primarily resulted from a decrease in equipment revenue. This decrease in same-store sales2018 was primarily the result of our store closings associated with our Fiscal 2018 Restructuring Plan and the ~~challenging industry conditions facing~~impact of incremental revenue associated with our expanded marketing of aged equipment inventory within our Agriculture ~~segment discussed~~and Construction segments in the ~~Overview section above.~~second quarter of fiscal 2017. Approximately $46.8 million of equipment revenue was recognized in the first six months of fiscal 2017 as the result of our expanded marketing plan. The ~~industry conditions present~~decrease in Agriculture and Construction segment revenue was partially offset by an increase in revenue in our ~~Construction segment have led to lower rental and other revenue, particularly in our Construction stores in oil production areas.~~International segment.

Gross Profit


	Nine Months Ended October 31,						Increase/			Percent		Six Months Ended July 31,						Increase/			Percent
	2016			2015			(Decrease)			Change		2017			2016			(Decrease)			Change
	(dollars in thousands)											(dollars in thousands)
Gross Profit
Equipment	$	37,999		$	53,411		$	(15,412	)	(28.9	)%	$	25,550		$	26,945		$	(1,395	)	(5.2	)%
Parts	55,100			58,813			(3,713		)	(6.3	)%	32,703			34,226			(1,523		)	(4.4	)%
Service	60,592			63,724			(3,132		)	(4.9	)%	37,037			38,643			(1,606		)	(4.2	)%
Rental and other	11,216			13,697			(2,481		)	(18.1	)%	6,436			6,667			(231		)	(3.5	)%
Total Gross Profit	$	164,907		$	189,645		$	(24,738	)	(13.0	)%	$	101,726		$	106,481		$	(4,755	)	(4.5	)%
Gross Profit Margin
Equipment	6.7		%	7.8		%	(1.1		)%	(14.1	)%	7.6		%	7.5		%	0.1		%	1.3	%
Parts	29.8		%	29.8		%	—		%	—	%	29.2		%	29.5		%	(0.3		)%	(1.0	)%
Service	63.1		%	63.8		%	(0.7		)%	(1.1	)%	62.5		%	62.0		%	0.5		%	0.8	%
Rental and other	25.5		%	25.7		%	(0.2		)%	(0.8	)%	25.0		%	24.8		%	0.2		%	0.8	%
Total Gross Profit Margin	18.4		%	18.4		%	—		%	—	%	19.1		%	18.9		%	0.2		%	1.1	%
Gross Profit Mix
Equipment	23.0		%	28.2		%	(5.2		)%	(18.4	)%	25.1		%	25.3		%	(0.2		)%	(0.8	)%
Parts	33.4		%	31.0		%	2.4		%	7.7	%	32.2		%	32.1		%	0.1		%	0.3	%
Service	36.7		%	33.6		%	3.1		%	9.2	%	36.4		%	36.3		%	0.1		%	0.3	%
Rental and other	6.9		%	7.2		%	(0.3		)%	(4.2	)%	6.3		%	6.3		%	—		%	—	%
Total Gross Profit Mix	100.0		%	100.0		%						100.0		%	100.0		%

The ~~$24.7~~$4.8 million decrease in gross profit for the first ~~nine~~six months of fiscal ~~2017,~~2018, as compared to the same period last year, was primarily due to lower revenue for the first ~~nine~~sixth months of fiscal 2018. The decrease in revenues was partially offset by an increase in gross profit margin percentage from 18.9% for the first six months of fiscal 2017 ~~and compressed equipment gross margins during the third quarter of fiscal 2017 as a result of aggressively retailing used equipment~~ to ~~accelerate our used inventory reduction efforts. The reduction in equipment gross profit margin during~~19.1% for the first ~~nine~~six months of fiscal 2017 was offset by the increased proportion of sales in our higher-margin parts and service businesses, resulting in our total gross profit margin percentage of 18.4% for the first nine months of fiscal 2017 remaining consistent with the comparable prior year period.

~~Table of Contents~~

2018.

Our company-wide absorption for the first ~~nine~~six months of fiscal ~~2017 was 79.9%~~2018 increased to 76.6% as compared to ~~79.2%~~74.9% during the same period last ~~year. The~~year, as our decrease in gross profit from parts, service and rental and other in fiscal ~~2017~~2018 was more than offset by a reduction in our fixed operating costs ~~from savings associated with our realignment plan implemented in the first quarter of fiscal 2016~~ and ~~a reduction in our~~ floorplan interest ~~expense due to a decrease in our average interest-bearing inventory.~~expense.

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Operating Expenses


	Nine Months Ended October 31,						Increase/			Percent		Six Months Ended July 31,						Increase/			Percent
	2016			2015			(Decrease)			Change		2017			2016			(Decrease)			Change
	(dollars in thousands)											(dollars in thousands)
Operating Expenses	$	159,132		$	165,979		$	(6,847	)	(4.1	)%	$	102,510		$	105,989		$	(3,479	)	(3.3	)%
Operating Expenses as a Percentage of Revenue	17.8		%	16.2		%	1.6		%	9.9	%	19.2		%	18.9		%	0.3		%	1.6	%

The ~~$6.8~~$3.5 million decrease in operating expenses, as compared to the same period last year, was primarily the result of ~~our realignment plan implemented in the first quarter of fiscal 2016 in which we reduced our headcount by 14% and generated additional~~ cost savings associated with the closing of four stores in that quarter. In addition, commission expense for the first nine months of fiscal 2017 decreased relative to the same period last year due to the decrease in equipment gross profit.resulting from our Fiscal 2018 Restructuring Plan. The increase in operating expenses as a percentage of total revenue was primarily due to the decrease in total revenue in the first ~~nine~~six months of fiscal ~~2017,~~2018, as compared to the same period last year, which negatively affected our ability to leverage our fixed operating costs.

~~Realignment~~Restructuring Costs

Nine Months Ended October 31,
Percent
2016 2015 Decrease Change
(dollars in thousands)
Impairment and Realignment Costs $ 546
$ 1,519
$ (973 ) (64.1 )%



	Six Months Ended July 31,						Percent
	2017		2016		Increase		Change
	(dollars in thousands)
Restructuring Costs	$	7,893	$	271	$	7,622	n/m

The ~~impairment and realignment~~restructuring costs recognized in ~~each of~~ the ~~first nine months~~second quarters of fiscal ~~2017~~2018 and ~~fiscal 2016~~2017 are charges associated with the ~~impairment of certain long-lived assets and the~~ result of our ~~store realignment~~restructuring plans and associated exit costs, including accruals for lease terminations and remaining lease obligations, ~~employee severance costs, the impairment of certain fixed assets,~~termination benefits, and the costs associated with relocating certain assets of our closed stores. ~~See Note 9 to our consolidated financial statements for further details on our store realignment plans and associated exit~~The Company anticipates recognizing approximately $4.0 million of additional restructuring costs ~~and~~during the ~~Non-GAAP Financial Measures section below for impact~~remainder of ~~these amounts on adjusted net income (loss) and adjusted Diluted EPS.~~fiscal 2018.

Other Income (Expense)


	Nine Months Ended October 31,						Increase/			Percent		Six Months Ended July 31,						Increase/			Percent
	2016			2015			(Decrease)			Change		2017			2016			(Decrease)			Change
	(dollars in thousands)											(dollars in thousands)
Interest income and other income (expense)	$	1,251		$	(565	)	$	1,816		321.4	%
Interest income and other income												$	1,460		$	749		$	711		94.9	%
Floorplan interest expense	(10,843		)	(13,945		)	(3,102		)	(22.2	)%	(4,819		)	(7,549		)	(2,730		)	(36.2	)%
Other interest expense	(5,930		)	(11,228		)	(5,298		)	(47.2	)%	(4,584		)	(3,770		)	814			21.6	%

The improvement in interest income and other income (expense) is primarily due to a decrease in foreign currency remeasurement losses in Ukraine, resulting from changes in the valuation of the Ukrainian hryvnia, which totaled $0.2 million and $2.3 million for the first nine months of fiscal 2017 and 2016, respectively. See the Non-GAAP Financial Measures section below for impact of the Ukraine foreign currency remeasurement losses on adjusted net income (loss) and adjusted Diluted EPS.

The decrease in floorplan interest expense for the first ~~nine~~six months of fiscal ~~2017,~~2018, as compared to the same period last year, was primarily due to a decrease in our average interest-bearing inventory in the first ~~nine~~six months of fiscal ~~2017. The decrease~~2018. For the first six months of fiscal 2017, other interest expense includes a $2.1 million gain recognized as a result of our repurchase of $30.1 million face value of senior convertible notes. Interest expense associated with our senior convertible notes, which is reflected in other interest expense, ~~is the result of the recognition of repurchase gains of $3.1~~decreased $1.7 million ~~recognized~~ in the first ~~nine~~six months of fiscal 2018 compared to the first six months of fiscal 2017 ~~related~~due to ~~the repurchase of $54.3~~interest savings resulting from our repurchases. Other interest expense also includes $0.4 million of debt issuance cost write-offs recognized in the second quarter of fiscal 2018 as a result of our ~~Senior Convertible Notes and~~election to reduce the interest savings subsequent to the repurchases. See the Non-GAAP Financial Measures section below for the impact of the gain on repurchase of Senior Convertible Notes on adjusted net income (loss) and adjusted Diluted EPS.

~~Table of Contents~~

maximum available credit under our Wells Fargo Credit Agreement.

~~Provision for (Benefit from)~~Benefit from Income Taxes

Nine Months Ended October 31,
Percent
2016 2015 Increase Change
(dollars in thousands)
Provision for (Benefit from) Income Taxes $ (3,997 ) $ (354 ) $ 3,643
n/m



	Six Months Ended July 31,								Percent
	2017			2016			Increase		Change
	(dollars in thousands)
Benefit from Income Taxes	$	(5,502	)	$	(3,789	)	$	1,713	n/m

Our effective tax rate was ~~38.8%~~33.1% for the first ~~nine~~six months of fiscal ~~2017~~2018 and ~~9.9%~~36.6% for the same period last year. The difference in our effective tax rate is primarily due to the change in mix of our domestic and foreign income or losses before income taxes in relation to our total loss before income ~~taxes. In addition, as~~taxes, and the ~~majority~~impact of ~~our foreign operations have full~~ valuation allowances onrecognized for deferred tax assets, including net operating losses, ~~they do not recognize any income tax expense or benefit. See Note 10 to~~in certain of our ~~consolidated financial statements for further details on our effective tax rate~~domestic and ~~the components~~international jurisdictions.

Table of ~~income (loss) before income taxes.~~Contents

Segment Results


	Nine Months Ended October 31,						Increase/			Percent		Six Months Ended July 31,						Increase/			Percent
	2016			2015			(Decrease)			Change		2017			2016			(Decrease)			Change
	(dollars in thousands)											(dollars in thousands)
Revenue
Agriculture	$	538,060		$	660,606		$	(122,546	)	(18.6	)%	$	302,170		$	332,520		$	(30,350	)	(9.1	)%
Construction	241,922			249,601			(7,679		)	(3.1	)%	141,310			161,133			(19,823		)	(12.3	)%
International	115,477			122,154			(6,677		)	(5.5	)%	89,509			69,540			19,969			28.7	%
Total	$	895,459		$	1,032,361		$	(136,902	)	(13.3	)%	$	532,989		$	563,193		$	(30,204	)	(5.4	)%

Income (Loss) Before Income Taxes
Agriculture	$	(9,881	)	$	693		$	(10,574	)	*N/M		$	(10,779	)	$	(8,083	)	$	(2,696	)	(33.4	)%
Construction	(1,523		)	(3,089		)	1,566			50.7	%	(1,703		)	(1,418		)	(285		)	(20.1	)%
International	(88		)	(3,074		)	2,986			97.1	%	878			(692		)	1,570			226.9	%
Segment income (loss) before income taxes	(11,492		)	(5,470		)	(6,022		)	(110.1	)%	(11,604		)	(10,193		)	(1,411		)	(13.8	)%
Shared Resources	1,199			1,879			(680		)	(36.2	)%	(5,016		)	(156		)	(4,860		)	n/m
Total	$	(10,293	)	$	(3,591	)	$	(6,702	)	(186.6	)%	$	(16,620	)	$	(10,349	)	$	(6,271	)	(60.6	)%

Agriculture

Agriculture segment revenue for the first ~~nine~~six months of fiscal ~~2017~~2018 decreased ~~18.6%~~9.1% compared to the same period last year. The revenue decrease was primarily due to a decrease in revenue resulting from the impact of our store closings associated with our Fiscal 2018 Restructuring Plan. Agriculture same-store sales decreased 2.6% compared to the same period last year.

Agriculture segment loss before income taxes was $10.8 million for the first six months of fiscal 2018 compared to loss before income taxes of $8.1 million over the first six months of fiscal 2017. The increased segment loss before income taxes was largely the result of restructuring charges incurred under our Fiscal 2018 Restructuring Plan, which amounted to $6.7 million for the first six months of fiscal 2018, but partially offset by operating expense savings as a result of this plan and a decrease in floorplan interest expense as the result of a decrease in our interest-bearing inventory in the first six months of fiscal 2018. The decrease in segment revenue was partially offset by a higher gross profit margin.

Construction

Construction segment revenue for the first six months of fiscal 2018 decreased 12.3% compared to the same period last year. The revenue decrease was due to an Agriculture same-store sales decrease of 18.1% compared to the same period last year, which was primarily caused by a decrease in equipment revenue, largely resulting from the challenging industry conditions discussed in the Overview section above.

Agriculture segment loss before income taxes was $9.9 million for the first nine months of fiscal 2017 compared to income before income taxes of $0.7 million over the first nine months of fiscal 2016. The decline in segment income is primarily due to the aforementioned decrease in equipment revenue and equipment gross profit margin but partially offset by decreases in operating expenses and floorplan interest expense. The decrease in operating expenses is the result of the cost savings associated with our realignment plan implemented in the first quarter of fiscal 2016 and lower commission expense resulting from the decrease in equipment gross profit. The decrease in floorplan interest expense is the result of a decrease in our average interest-bearing inventory during the first nine months of fiscal 2017 compared to the first nine months of fiscal 2016.

~~Table of Contents~~

~~Construction~~

~~Construction segment revenue for the first nine months of fiscal 2017 decreased 3.1% compared to the same period last year. The revenue decrease was due~~ a Construction same-store sales decrease of ~~2.9%~~11.7% compared to the same period last year and ~~largely~~ was primarily the result of ~~lower rental and other~~decreased equipment revenue ~~particularly~~resulting from the impact of the incremental revenue associated with our expanded marketing of aged equipment inventory that occurred in ~~our Construction stores in oil production areas.~~the first six months of fiscal 2017, which totaled approximately $22.7 million, but partially offset by positive end user demand.

Our Construction segment loss before income taxes was ~~$1.5~~$1.7 million for the first ~~nine~~six months of fiscal ~~2017~~2018 compared to ~~$3.1~~$1.4 million for the first ~~nine~~six months of fiscal ~~2016. This improvement~~2017. The decline in segment results was primarily due to the decrease in revenue noted above, but partially offset by decreases in operating expenses and floorplan interest expense. The decrease in operating expenses reflects cost savings associated with our ~~realignment~~restructuring plan, ~~implemented in the first quarter of fiscal 2016~~ and the decrease in floorplan interest expense is the result of a decrease in our average interest-bearing inventory ~~during~~in the first ~~nine~~six months of fiscal ~~2017~~2018 as compared to the first ~~nine~~six months of fiscal ~~2016.~~2017. The dollar utilization of our rental fleet in the first ~~nine~~six months of fiscal ~~2017~~2018 was ~~24.4%~~22.0%, consistent with the ~~24.8%~~22.4% in the first ~~nine~~six months of fiscal ~~2016.~~2017.

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International

International segment revenue for the first ~~nine~~six months of fiscal ~~2017 decreased 5.5%~~2018 increased 28.7% compared to the same period last ~~year. The~~year primarily due to increased equipment revenue. Equipment revenue ~~decrease, which was~~increased in the first six months of fiscal 2018 primarily ~~caused by a decrease~~due to the build-out of our footprint, availability of subvention funds and positive crop conditions in ~~equipment revenue, was largely the result~~certain of ~~continued low global commodity prices affecting customer demand.~~our markets.

Our International segment income before income taxes was $0.9 million for the first six months of fiscal 2018 compared to segment loss before income taxes ~~was $0.1 million for the first nine months~~ of ~~fiscal 2017 compared to $3.1~~$0.7 million for the same period last year. The ~~reduction~~increase in segment ~~loss~~income before income taxes was primarily the result of a decrease in foreign currency remeasurement losses in Ukraine, which totaled $0.2 million and $2.3 million for the first nine months of fiscal 2017 and 2016, respectively. The reduction in revenue during the first nine months of fiscal 2017 compareddue to the ~~same period last year was~~increase in segment revenue as noted above, but partially offset by ~~lower floorplan~~an increase in operating expenses resulting from the continued build-out of our footprint and ~~other interest expense.~~presence in our European markets.

Shared Resources/Eliminations

We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments. Since these allocations are set early in the year, and a portion is planned to be unallocated, unallocated balances may occur. Shared Resource segment loss before income taxes was $5.0 million for the first six months of fiscal 2018 compared to loss before income taxes of $0.2 million for the same period last year. For the first six months of fiscal 2018, loss before income taxes was impacted by $0.9 million in restructuring costs related to the Fiscal 2018 Restructuring Plan and $0.6 million in floorplan interest expense related to the interest rates swap termination and reclassification. For the first six months of fiscal 2017, income before taxes included a $2.1 million gain recognized as a result of our repurchase of $30.1 million face value of senior convertible notes.

Non-GAAP Financial Measures

To supplement ~~our~~ net income (loss) including noncontrolling interest and our earnings (loss) per share - diluted ("Diluted EPS"), both GAAP measures, we use adjusted net income (loss) including noncontrolling interest and adjusted Diluted EPS, both non-GAAP measures, which exclude the impact of the gain on repurchase of ~~Senior Convertible Notes,~~senior convertible notes, the write-off of debt issuance costs, ~~long-lived asset impairment charges,~~restructuring costs associated with our realignment/store closings, ~~the gain recognized~~and reclassification of accumulated losses on ~~insurance recoveries,~~our interest rate swap and foreign currency remeasurement losses in Ukraine resulting from a devaluation of the UAH. We believe that the presentation of adjusted net income (loss) including noncontrolling interest and adjusted Diluted EPS is relevant and useful to our management and investors because it provides a measurement of earnings on activities that we consider to occur in the ordinary course of our business. Adjusted net income (loss) including noncontrolling interest and adjusted Diluted EPS should be evaluated in addition to, and not considered a substitute for, or superior to, the most comparable GAAP measure. In addition, other companies may calculate these non-GAAP measures in a different manner, which may hinder comparability of our results with those of other companies.

Beginning in the second quarter of fiscal 2017, we discontinued incorporating foreign currency remeasurement losses in Ukraine into our non-GAAP calculations. The UAH remained relatively stable subsequent to April 30, 2016 and therefore did not significantly impact our consolidated statement of operations during this period. Absent any future significant UAH volatility and resulting financial statement impact, we will not include Ukraine foreign currency remeasurement losses in our non-GAAP calculations in future periods. Any Ukraine remeasurement amounts included below occurred in periods prior to the second quarter of fiscal 2017.

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The following tables reconcile (i) net income (loss) including noncontrolling interest, a GAAP measure, to adjusted net income (loss) including noncontrolling interest and (ii) Diluted EPS, a GAAP measure, to adjusted Diluted EPS:

Three Months Ended October 31, Nine Months Ended October 31,
2016 2015 2016 2015
(dollars in thousands, except per share data)
Net Income (Loss) Including Noncontrolling Interest

Net Income (Loss) Including Noncontrolling Interest $ 264

$ 3,483

$ (6,296 )
$ (3,237 )
Non-GAAP Adjustments

Impairment 275

—

275

—
Gain on Repurchase of Senior Convertible Notes (1,028 )
—

(3,130 )
—
Debt Issuance Cost Write-Off 624

1,019

624

1,558
Realignment / Store Closing Costs —

22

271

1,519
Ukraine Remeasurement (1) —

185

195

2,288
Gain on Insurance Recoveries (586 )
—

(586 )
—
Total Pre-Tax Income (Loss) Non-GAAP Adjustments (715 )
1,226

(2,351 )
5,365
Less: Tax Effect of Non-GAAP Adjustments (2) (285 )
416

(1,018 )
1,231
Total Non-GAAP Adjustments (430 )
810

(1,333 )
4,134
Adjusted Net Income (Loss) Including Noncontrolling Interest $ (166 )
$ 4,293

$ (7,629 )
$ 897

Earnings (Loss) per Share - Diluted

Earnings (Loss) per Share - Diluted $ 0.01

$ 0.16

$ (0.27 )
$ (0.13 )
Non-GAAP Adjustments (3)

Impairment 0.01

—

0.01

—
Gain on Repurchase of Senior Convertible Notes (0.04 )
—

(0.15 )
—
Debt Issuance Cost Write-Off 0.03

0.05

0.02

0.07
Realignment / Store Closing Costs —

—

0.01

0.07
Ukraine Remeasurement (1) —

0.01

0.01

0.11
Gain on Insurance Recoveries (0.03 )
—

(0.03 )
—
Total Pre-Tax Income (Loss) Non-GAAP Adjustments (0.03 )
0.06

(0.13 )
0.25
Less: Tax Effect of Non-GAAP Adjustments (2) (0.01 )
0.02

(0.04 )
0.06
Total Non-GAAP Adjustments (0.02 )
0.04

(0.09 )
0.19
Adjusted Earnings (Loss) per Share - Diluted $ (0.01 )
$ 0.20

$ (0.36 )
$ 0.06



	Three Months Ended July 31,						Six Months Ended July 31,
	2017			2016			2017			2016
	(dollars in thousands, except per share data)
Net Loss Including Noncontrolling Interest
Net Loss Including Noncontrolling Interest	$	(5,186	)	$	(2,702	)	$	(11,118	)	$	(6,560	)
Adjustments
Gain on Repurchase of Senior Convertible Notes	—			—			(40		)	(2,102		)
Debt Issuance Cost Write-Off	416			—			416			—
Restructuring Costs	5,549			24			7,893			271
Ukraine Remeasurement (1)	—			—			—			195
Interest Rate Swap Termination & Reclassification	—			—			631			—
Total Pre-Tax Adjustments	5,965			24			8,900			(1,636		)
Less: Tax Effect of Adjustments (2)	1,941			9			3,116			(733		)
Plus: Income Tax Valuation Allowance	200			—			200			—
Total Adjustments	4,224			15			5,984			(903		)
Adjusted Net Loss Including Noncontrolling Interest	$	(962	)	$	(2,687	)	$	(5,134	)	$	(7,463	)

Earnings (Loss) per Share - Diluted
Loss per Share - Diluted	$	(0.24	)	$	(0.12	)	$	(0.51	)	$	(0.29	)
Adjustments (3)
Gain on Repurchase of Senior Convertible Notes	—			—			—			(0.10		)
Debt Issuance Cost Write-Off	0.02			—			0.02			—
Restructuring Costs	0.25			—			0.36			0.01
Ukraine Remeasurement (1)	—			—			—			0.01
Interest Rate Swap Termination & Reclassification	—			—			0.03			—
Total Pre-Tax Adjustments	0.27			—			0.41			(0.08		)
Less: Tax Effect of Adjustments (2)	0.08			—			0.14			(0.04		)
Plus: Income Tax Valuation Allowance	0.01			—			0.01			—
Total Non-GAAP Adjustments	0.20			—			0.28			(0.04		)
Adjusted Loss per Share - Diluted	$	(0.04	)	$	(0.12	)	$	(0.23	)	$	(0.33	)

(1) Beginning in the second quarter of fiscal 2017 we discontinued incorporating Ukraine remeasurement losses into our ~~Non-GAAP~~adjusted income (loss) and earnings (loss) per share calculations. The ~~UAH~~Ukrainian hryvnia (UAH) remained relatively stable subsequent to April 30, 2016 and therefore did not significantly impact our consolidated statement of operations during this period. Absent any future significant ~~hryvnia~~UAH volatility and resulting financial statement impact, we will not include Ukraine remeasurement losses in our ~~Non-GAAP calculations~~adjusted amounts in future periods.

(2) The tax effect of ~~Non-GAAP Adjustments~~adjustments was calculated using a ~~40%~~35% tax rate for all U.S. related ~~items that~~items. That rate was determined based on a 35% federal statutory rate and ~~a blended~~no impact for state ~~statutory rate of 5% and no~~taxes given our valuation allowance against state deferred tax assets, including net operating losses. No tax effect was recognized for foreign related items as all ~~of our~~adjustments occurred in foreign ~~operations~~jurisdictions that have full valuation allowances on deferred tax ~~assets including net operating losses, therefore we are not recognizing any income tax expense or benefit.~~assets.

(3) Adjustments are net of the impact of amounts attributable to noncontrolling interests and allocated to participating securities.

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Liquidity and Capital Resources

Sources of Liquidity

Our primary sources of liquidity are cash reserves, cash generated from operations, and borrowings under our floorplan payable and other credit facilities. We expect these sources of liquidity to be sufficient to fund our working capital requirements, acquisitions, capital expenditures and other investments in our business, service our debt, pay our tax and lease obligations and other commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future, provided, however, that our borrowing capacity under our credit agreements is dependent on compliance with various covenants as further described in the "Risk Factors" section of our Annual Report on Form 10-K.

Equipment Inventory and Floorplan Payable Credit Facilities

As of ~~October~~July 31, ~~2016,~~2017, the Company had discretionary floorplan payable lines of credit for equipment purchases totaling approximately ~~$856~~$741.0 million, which included a ~~$210.0~~$140.0 million Floorplan Payable Line with Wells Fargo, a $450.0 million credit facility with CNH Industrial Capital, a ~~$90.0~~$45.0 million credit facility with DLL Finance and the U.S. dollar equivalent of ~~$106.2~~$106.0 million in credit facilities related to our foreign subsidiaries. Floorplan payables relating to these credit facilities totaled approximately ~~$362.8~~$296.2 million of the total floorplan payable balance of ~~$372.1~~$308.0 million outstanding as of ~~October~~July 31, ~~2016.~~2017.

In May 2017, as a result of the Company's ongoing equipment inventory reduction and related reduction in floorplan financing needs, the Company provided notice to Wells Fargo of its election to reduce the maximum credit amount available under the Wells Fargo Credit Agreement from an aggregate $275.0 million to an aggregate $200.0 million, comprised of a $70.0 million reduction in the Floorplan Payable Line, from $210.0 million to $140.0 million, and a $5.0 million reduction in the Working Capital Line, from $65.0 million to $60.0 million.

Our equipment inventory turnover was ~~1.1~~1.6 for the four quarters ended ~~October~~July 31, ~~2016~~2017 compared to ~~1.3~~1.2 for the four quarters ended ~~October~~July 31, ~~2015. While~~2016. The improvement in our equipment ~~inventories, including amounts classified as held for sale, decreased 28.2%~~inventory turnover was driven by a 24.3% reduction in equipment inventory from ~~October 31, 2015 to October~~July 31, 2016 ~~the~~to July 31, 2017; however, this decrease ~~in turnover~~ was ~~the result of the~~partially offset by lower equipment sales in the four-quarter period ended ~~October~~July 31, ~~2016.~~2017. Our equity in equipment inventory, which reflects the portion of our equipment inventory balance that is not financed by floorplan payables, ~~increased~~decreased to ~~27.6%~~30.1% as of ~~October~~July 31, ~~2016~~2017 from ~~24.8%~~41.1% as of January 31, ~~2016.~~2017.

Adequacy of Capital Resources

Our primary uses of cash have been to fund our operating activities, including the purchase of inventories and providing for other working capital needs, meeting our debt service requirements, making payments due under our various leasing arrangements, funding capital expenditures, including rental fleet assets, and, from time to time, opportunistically repurchasing our outstanding ~~Senior Convertible Notes.~~senior convertible notes. Based on our current operational performance, we believe our cash flow from operations, available cash and available borrowings under our existing credit facilities will adequately provide our liquidity needs for, at a minimum, the next 12 months. Our main financing arrangements, in which we had discretionary floorplan lines of credit totaling approximately ~~$856~~$741.0 million as of ~~October~~July 31, ~~2016,~~2017, are described in Note 4 of the notes to our consolidated financial statements. As of ~~October~~July 31, ~~2016,~~2017, the Company was in compliance with the financial covenants under these agreements, and was not subject to the fixed charge coverage ratio covenant under the Wells Fargo Credit Agreement as our adjusted excess availability plus eligible cash collateral (as ~~defined)~~defined therein) was not less than 15% of the total amount of the credit facility as of ~~October~~July 31, ~~2016. If~~2017. While not expected to occur, if anticipated operating results create the likelihood of a future covenant violation, we would expect to work with our lenders on an appropriate modification or amendment to our financing arrangements.

Cash Flow

Cash Flow Provided By Operating Activities

Net cash provided by operating activities was ~~$74.4~~$66.9 million for the ~~nine~~six months ended ~~October~~July 31, ~~2016,~~2017, compared to ~~net cash provided by operating activities of $198.8~~$60.4 million for the ~~nine~~six months ended ~~October~~July 31, ~~2015.~~2016. Net cash provided by operating activities for the ~~nine~~six month ~~period~~periods ending ~~October~~July 31, 2017 and 2016 was primarily the result of decreased inventories levels, but partially offset by a reduction in our manufacturer floorplan payables. Net cash provided by operating activities for the nine month period ending October 31, 2015 was primarily attributable to a changing mix of manufacturer versus non-manufacturer floorplan financing, and other changes in ~~which we increased our outstanding borrowings under our manufacturer financing facilities and decreased our amount outstanding under our non-manufacturer facilities.~~working capital.

We evaluate our cash flow from operating activities net of all floorplan activity and maintaining a constant level of equity in our equipment inventory. Taking these adjustments into account, our ~~non-GAAP~~adjusted cash flow used by operating activities was $19.3 million for the six months ended July 31, 2017 and adjusted cash flow provided by operating activities was ~~$34.4 million and $32.9~~$1.1 million for the ~~nine~~six months ended ~~October~~July 31, ~~2016~~2016. The decrease in adjusted cash flow is primarily the result of a higher level of seasonal stocking of new equipment inventories in the first six months of fiscal 2018 and ~~2015, respectively.~~the impact of cash generated from the

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sale of no trade equipment arising from our expanded marketing of aged equipment inventory in fiscal 2017. See the ~~Non-GAAP~~Adjusted Cash Flow Reconciliation below for a reconciliation of this non-GAAP financial measure to the GAAP measure of cash flow provided by operating activities.

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Cash Flow Used For Investing Activities

Net cash used for investing activities was ~~$7.0~~$15.4 million for the ~~nine~~six months ended ~~October~~July 31, ~~2016,~~2017, compared to ~~net cash used for investing activities of $0.4~~$3.6 million for the ~~nine~~six months ended ~~October~~July 31, ~~2015.~~2016. Cash used for investing activities was primarily for the purchase of rental fleet and property and equipment, net of any proceeds from the sale of property and equipment.

Cash Flow Used For Financing Activities

Net cash used for financing activities was ~~$104.6~~$47.6 million for the ~~nine~~six months ended ~~October~~July 31, ~~2016~~2017 compared to ~~net cash used for financing activities of $246.9~~$95.4 million for the ~~nine~~six months ended ~~October~~July 31, ~~2015.~~2016. For the ~~nine~~six months ended ~~October~~July 31, ~~2016,~~2017, net cash used for financing activities was the result of paying down our non-manufacturer floorplan payables, ~~and~~ the ~~$46.0~~use of $19.3 million of cash ~~used~~ to repurchase ~~Senior Convertible Notes.~~senior convertible notes, but partially offset by increased net borrowings under our working capital line under our Wells Fargo Credit Agreement. We may, from time to time, continue to repurchase our ~~Senior Convertible Notes~~senior convertible notes depending on prevailing market conditions, our available liquidity and other factors. ~~Such~~These repurchases may be material to our consolidated financial statements. For the ~~nine~~six months ended ~~October~~July 31, ~~2015,~~2016, net cash used for financing activities primarily resulted from ~~the aforementioned change in financing mix, in which we increased our outstanding borrowings under our manufacturer financing facilities and decreased our amount outstanding under~~paying down our non-manufacturer ~~facilities, as well as an overall net reduction~~floorplan payables and the use of ~~long-term debt.~~$25.0 million to repurchase senior convertible notes.

~~Non-GAAP~~Adjusted Cash Flow Reconciliation

We consider our cash flow from operating activities to include all equipment inventory financing activity regardless of

whether we obtain the financing from a manufacturer or other source. We consider equipment inventory financing with both manufacturers and other sources to be part of the normal operations of our business and use ~~the~~an adjusted cash flow ~~analysis~~measure in the evaluation of our equipment inventory and inventory flooring ~~needs.~~needs, which we refer to as "Adjusted Cash Flow." The adjustment is equal to the net change in non-manufacturer floorplan payable, as shown on the consolidated statements of cash flows. GAAP categorizes non-manufacturer floorplan payable as financing activities in the consolidated statements of cash flows.

~~Our non-GAAP cash flow provided by operating activities~~

Adjusted Cash Flow is also impacted by the change in our equity in equipment inventory, which reflects the portion of

our equipment inventory balance that is not financed by floorplan payables. Equity in equipment inventory decreased to 30.1% as of July 31, 2017 from 41.1% as of January 31, 2017, and increased to ~~27.6%~~26.1% as of ~~October~~July 31, 2016 from 24.8% as of January 31, ~~2016, and increased to 23.8% as of October 31, 2015 from 18.7% as of January 31, 2015.~~2016. We analyze our cash flow provided by operating activities by assuming a constant level of equipment inventory financing throughout each respective fiscal year. The adjustment eliminates the impact of this fluctuation of equity in our equipment inventory, and is equal to the difference between our actual level of equity in equipment inventory at each period end presented on the consolidated statements of cash flows, compared to the actual level of equity in equipment inventory at the beginning of the fiscal year.

~~Non-GAAP cash flow provided by operating activities~~

Adjusted Cash Flow is a non-GAAP financial ~~measure which is adjusted for changes in non-manufacturer floorplan payables and changes in the level of equity in equipment inventory.~~measure. We believe that the presentation of ~~non-GAAP cash flow provided by operating activities~~Adjusted Cash Flow is relevant and useful to our investors because it provides information on activities we consider to be the normal ~~operations~~operation of our business, regardless of financing source and level of financing for our equipment inventory. The following table reconciles net cash provided by (used for) operating activities, a GAAP measure, to ~~non-GAAP~~adjusted net cash ~~flow~~ provided by (used for) operating activities and net cash ~~used for~~provided by (used for) financing activities, a GAAP measure, to ~~non-GAAP cash flow used for financing activities.~~

Net Cash Provided by Operating Activities Net Cash Used for Financing Activities
Nine Months Ended October 31, 2016 Nine Months Ended October 31, 2015 Nine Months Ended October 31, 2016 Nine Months Ended October 31, 2015
(in thousands) (in thousands)
Cash Flow, As Reported $ 74,398
$ 198,761
$ (104,638 ) $ (246,935 )
Net Change in Non-Manufacturer Floorplan Payable (54,478 ) (201,320 ) 54,478
201,320
Adjustment for Constant Equity in Equipment Inventory 14,503
35,452
—
—
Adjusted Cash Flow $ 34,423
$ 32,893
$ (50,160 ) $ (45,615 )

~~Non-GAAP~~adjusted cash flow provided by (used for) financing activities.



	Net Cash Provided by (Used for) Operating Activities						Net Cash Used for Financing Activities
	Six Months Ended July 31, 2017			Six Months Ended July 31, 2016			Six Months Ended July 31, 2017			Six Months Ended July 31, 2016
	(in thousands)						(in thousands)
Cash Flow, As Reported	$	66,877		$	60,435		$	(47,435	)	$	(95,392	)
Adjustment for Non-Manufacturer Floorplan Net Payments	(38,030		)	(66,856		)	38,030			66,856
Adjustment for Constant Equity in Equipment Inventory	(48,116		)	7,520			—			—
Adjusted Cash Flow	$	(19,269	)	$	1,099		$	(9,405	)	$	(28,536	)

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Adjusted net cash flow provided by (used for) operating activities and ~~non-GAAP~~adjusted net cash used for financing activities should be evaluated in addition to, and not considered a substitute for, or superior to, the GAAP measures of net cash provided by (used for) operating and financing activities.

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Certain Information Concerning Off-Balance Sheet Arrangements

As of ~~October~~July 31, ~~2016,~~2017, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We are, therefore, not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships. In the normal course of our business activities, we lease real estate, vehicles and equipment under operating leases.

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. ~~Such “forward-looking” information is~~“Forward-looking” statements are included in this Quarterly Report on Form 10-Q, including in “Management’s Discussion And Analysis Of Financial Condition And Results Of Operations,” as well as in our Annual Report on Form 10-K for the year ended January 31, ~~2016,~~2017, and in other materials filed or to be filed by the Company with the Securities and Exchange Commission ~~(as well as information~~(and included in oral statements or other written statements made or to be made by the Company).

Forward-looking statements ~~include all~~are statements based on future expectations and specifically include, among other things, all statements relating to our expectations regarding exchange rate and interest rate impact on our business, the impact of farm income levels on our customers' demand for agricultural equipment and services, the impact of oil prices on market demand for equipment and services, the general market conditions of the agricultural and construction industries, equipment inventory levels, and our primary liquidity sources and adequacy of our capital resources. Any statements that are not based upon historical facts, including the outcome of events that have not yet occurred and our expectations for future performance, are forward-looking statements. The words “potential,” “believe,” “estimate,” “expect,” “intend,” “may,” “could,” “will,” “plan,” “anticipate,” and similar words and expressions are intended to identify forward-looking statements. Such statements are based upon the current beliefs and expectations of our management. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, adverse market conditions in the agricultural and construction equipment industries, and those matters identified and discussed under the section titled “Risk Factors” in our Annual Report on Form 10-K and this Quarterly Report on Form 10-Q.

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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 our interest-bearing balances and interest rates as of ~~October~~July 31, ~~2016,~~2017, 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 ~~$1.7~~$2.0 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 ~~$1.7~~$2.0 million. At ~~October~~July 31, ~~2016,~~2017, we had floorplan payables of ~~$372.1~~$308.0 million, of which approximately ~~$157.8~~$169.7 million was variable-rate floorplan payable ~~$114.2~~and $138.3 million was non-interest ~~bearing and $100.0 million was effectively fixed rate floorplan payable due to our interest rate swap instrument.~~bearing. In addition, at ~~October~~July 31, ~~2016,~~2017, we had total long-term debt, including our ~~Senior Convertible Notes,~~senior convertible notes, of ~~$128.6~~$120.1 million, of which ~~$13.9~~$26.0 million was variable-rate debt and ~~$114.7~~$94.1 million was fixed rate debt.

Foreign Currency Exchange Rate Risk

Our foreign currency exposures arise as the result of our foreign operations. We are exposed to transactional foreign currency exchange rate risk through our foreign entities’ holding assets and liabilities denominated in currencies other than their functional currency. In addition, the Company is exposed to foreign currency transaction risk as a result of certain intercompany financing transactions. The Company attempts to manage its transactional foreign currency exchange rate risk through the use of derivative financial instruments, primarily foreign exchange forward contracts, or through natural hedging instruments. Based upon balances and exchange rates as of ~~October~~July 31, ~~2016,~~2017, holding other variables constant, we believe that a hypothetical 10% increase or decrease in all applicable foreign exchange rates would not have a material impact on our results of operations or cash flows. As of ~~October~~July 31, ~~2016,~~2017, our Ukrainian subsidiary had ~~$4.7~~$2.5 million of net monetary assets denominated in Ukrainian hryvnia (UAH). We have attempted to minimize our net monetary asset position in Ukraine through reducing overall asset levels in Ukraine and through borrowing in UAH which serves as a natural hedging instrument offsetting our net UAH denominated assets. At certain times, currency and payment controls imposed by the National Bank of Ukraine have limited our ability to manage our net monetary asset position. The UAH devalued significantly during the six month period ended July 31, 2015, but has remained relatively stable since that time. Continued and significant devaluation of the UAH could have a material impact on our results of operations and cash flows.

In addition to transactional foreign currency exchange rate risk, we are also exposed to translational foreign currency exchange rate risk as we translate the results of operations and assets and liabilities of our foreign operations from their functional currency to the U.S. dollar. As a result, our results of operations, cash flows and net investment in our foreign operations may be adversely impacted by fluctuating foreign currency exchange rates. We believe that a hypothetical 10% increase or decrease in all applicable foreign exchange rates, holding all other variables constant, 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.

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PART II. - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are, from time to time, subject to claims and suits arising in the ordinary course of business. Such claims have, in the past, generally been covered by insurance. There can be no assurance that our insurance will be adequate to cover all liabilities that may arise out of claims brought against us, or that our insurance will cover all claims. We are not currently a party to any material litigation.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report, including the important information in “Forward-Looking Statements,” you should carefully consider the “Risk Factors” discussed in our Form 10-K for the year ended January 31, ~~2016~~2017, as supplemented in our Form 10-Q for the quarterly period ended April 30, 2017, 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 may 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 may materially adversely affect our business, financial condition and/or operating results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We did not have any unregistered sales of equity securities during the fiscal quarter ended ~~October~~July 31, ~~2016.~~2017.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibits - See “Exhibit Index” on page ~~following~~immediately prior to signatures.

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EXHIBIT INDEX

TITAN MACHINERY INC.

FORM 10-Q



No.		Description

10.1		Amendment No. 4 to the Amended and Restated Inventory Security Agreement, dated as of September 1, 2017, by and between the registrant and DLL Finance LLC (f/k/a Agricredit Acceptance LLC)

10.2		Amendment No. 6 to the Amended and Restated Wholesale Financing Plan, dates as of September 1, 2017, by and between the registrant and DLL Finance LLC (f/k/a Agricredit Acceptance LLC)

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 July 31, 2017, 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.

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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:	~~December 8, 2016~~September 7, 2017
		TITAN MACHINERY INC.


		By	/s/ Mark Kalvoda
			Mark Kalvoda
			Chief Financial Officer
			(Principal Financial Officer)

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~~EXHIBIT INDEX~~

~~TITAN MACHINERY INC.~~

~~FORM 10-Q~~



~~No.~~		~~Description~~

~~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 October 31, 2016, 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.

3734



	Common Stock									Accumulated Other Comprehensive Income (Loss)
	Shares Outstanding	Amount		Additional Paid-In Capital			Retained Earnings			Foreign Currency Translation Adjustments			Unrealized Gains (Losses) on Net Investment Hedges		Unrealized Gains (Losses) on Interest Rate Swap Cash Flow Hedges			Unrealized Gains (Losses) on Foreign Currency Contract Cash Flow Hedges			Total			Total Titan Machinery Inc. Stockholders' Equity			Noncontrolling Interest			Total Stockholders' Equity
Balance, January 31, 2015	21,406	$	—	$	240,180		$	137,418		$	(1,632	)	$	2,510	$	(1,940	)	$	(37	)	$	(1,099	)	$	376,499		$	1,860		$	378,359
Common stock issued on grant of restricted stock (net of forfeitures and shares withheld for income taxes), exercise of stock options, and tax benefits of equity awards	170	—		170			—			—			—		—			—			—			170			—			170
Stock-based compensation expense	—	—		1,799			—			—			—		—			—			—			1,799			—			1,799
Comprehensive loss:
Net loss	—	—		—			(2,842		)	—			—		—			—			—			(2,842		)	(395		)	(3,237		)
Other comprehensive income (loss)	—	—		—			—			(3,178		)	200		362			10			(2,606		)	(2,606		)	(651		)	(3,257		)
Total comprehensive loss	—	—		—			—			—			—		—			—			—			(5,448		)	(1,046		)	(6,494		)
Balance, October 31, 2015	21,576	$	—	$	242,149		$	134,576		$	(4,810	)	$	2,710	$	(1,578	)	$	(27	)	$	(3,705	)	$	373,020		$	814		$	373,834

Balance, January 31, 2016	21,604	$	—	$	242,491		$	99,526		$	(5,500	)	$	2,711	$	(1,672	)	$	—		$	(4,461	)	$	337,556		$	793		$	338,349
Common stock issued on grant of restricted stock (net of forfeitures and shares withheld for income taxes), exercise of stock options, and tax benefits of equity awards	215	—		(357		)	—			—			—		—			—			—			(357		)	—			(357		)
Stock-based compensation expense	—	—		1,805			—			—			—		—			—			—			1,805			—			1,805
Repurchase of Senior Convertible Notes	—	—		1,746			—			—			—		—			—			—			1,746			—			1,746
Acquisition of non-controlling interest	—	—		(3,666		)	—			(198		)	—		—			—			(198		)	(3,864		)	(460		)	(4,324		)
Comprehensive loss:
Net loss	—	—		—			(5,940		)	—			—		—			—			—			(5,940		)	(356		)	(6,296		)
Other comprehensive income (loss)	—	—		—			—			922			—		475			—			1,397			1,397			23			1,420
Total comprehensive loss	—	—		—			—			—			—		—			—			—			(4,543		)	(333		)	(4,876		)
Balance, October 31, 2016	21,819	$	—	$	242,019		$	93,586		$	(4,776	)	$	2,711	$	(1,197	)	$	—		$	(3,262	)	$	332,343		$	—		$	332,343



	Net Cash Provided by Operating Activities						Net Cash Used for Financing Activities
	Nine Months Ended October 31, 2016			Nine Months Ended October 31, 2015			Nine Months Ended October 31, 2016			Nine Months Ended October 31, 2015
	(in thousands)						(in thousands)
Cash Flow, As Reported	$	74,398		$	198,761		$	(104,638	)	$	(246,935	)
Net Change in Non-Manufacturer Floorplan Payable	(54,478		)	(201,320		)	54,478			201,320
Adjustment for Constant Equity in Equipment Inventory	14,503			35,452			—			—
Adjusted Cash Flow	$	34,423		$	32,893		$	(50,160	)	$	(45,615	)