SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

TITAN MACHINERY INC.

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 oYes ☒ No ☐

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 oYes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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 o☐

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☒

TITAN MACHINERY INC.

QUARTERLY REPORT ON FORM 10-Q



		Page No.
PART I.	FINANCIAL INFORMATION	3
ITEM 1.	FINANCIAL STATEMENTS	3
	Condensed Consolidated Balance Sheets ~~as of October 31, 2017 and January 31, 2017~~	3
	Condensed Consolidated Statements of Operations ~~for the three and nine months ended October 31, 2017 and 2016~~	4
	Condensed Consolidated Statements of Comprehensive Income ~~(Loss) for the three and nine months ended October 31, 2017 and 2016~~	5
	Condensed Consolidated Statements of Stockholders' Equity	6
	Condensed Consolidated Statements of Cash Flows ~~for the nine months ended October 31, 2017 and 2016~~	67
	Notes to Consolidated Financial Statements	78
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1721
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3137
ITEM 4.	CONTROLS AND PROCEDURES	3137
PART II.	OTHER INFORMATION	3238
ITEM 1.	LEGAL PROCEEDINGS	3238
ITEM 1A.	RISK FACTORS	3238
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3238
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	3238
ITEM 4.	MINE SAFETY DISCLOSURES	3238
ITEM 5.	OTHER INFORMATION	3238
ITEM 6.	EXHIBITS	3238
Exhibit Index		3339
Signatures		3440

PART I. — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share data)

See Notes to Condensed Consolidated Financial Statements

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)

Three Months Ended October 31, Nine Months Ended October 31,
2017 2016 2017 2016
Revenue
Equipment $ 215,956
$ 212,194
$ 551,752
$ 570,369
Parts 64,729
69,261
176,892
185,106
Service 31,532
33,777
90,807
96,065
Rental and other 18,124
17,034
43,879
43,919
Total Revenue 330,341
332,266
863,330
895,459
Cost of Revenue
Equipment 199,154
201,140
509,400
532,370
Parts 45,408
48,387
124,868
130,006
Service 11,139
11,828
33,377
35,473
Rental and other 13,163
12,485
32,482
32,703
Total Cost of Revenue 268,864
273,840
700,127
730,552
Gross Profit 61,477
58,426
163,203
164,907
Operating Expenses 50,374
53,143
152,884
159,132
Restructuring Costs 2,587
275
10,480
546
Income (Loss) from Operations 8,516
5,008
(161 ) 5,229
Other Income (Expense)
Interest income and other income 380
502
1,840
1,251
Floorplan interest expense (1,900 ) (3,294 ) (6,719 ) (10,843 )
Other interest expense (2,110 ) (2,160 ) (6,694 ) (5,930 )
Income (Loss) Before Income Taxes 4,886
56
(11,734 ) (10,293 )
Provision for (Benefit from) Income Taxes 2,502
(208 ) (3,000 ) (3,997 )
Net Income (Loss) Including Noncontrolling Interest $ 2,384
$ 264
$ (8,734 ) $ (6,296 )
Less: Loss Attributable to Noncontrolling Interest —
—
—
(356 )
Net Income (Loss) Attributable to Titan Machinery Inc. $ 2,384
$ 264
$ (8,734 ) $ (5,940 )
Net (Income) Loss Allocated to Participating Securities - Note 1 (56 ) (8 ) 176
120
Net Income (Loss) Attributable to Titan Machinery Inc. Common Stockholders $ 2,328
$ 256
$ (8,558 ) $ (5,820 )
Earnings (Loss) per Share - Note 1
Earnings (Loss) per Share - Basic $ 0.11
$ 0.01
$ (0.40 ) $ (0.27 )
Earnings (Loss) per Share - Diluted $ 0.11
$ 0.01
$ (0.40 ) $ (0.27 )
Weighted Average Common Shares - Basic 21,585
21,218
21,503
21,208
Weighted Average Common Shares - Diluted 21,643
21,269
21,503
21,208


	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
Revenue
Equipment	$	272,733	$	202,654	$	548,713	$	421,159
Parts	65,317		61,454		127,942		118,068
Service	29,676		27,986		57,379		53,586
Rental and other	9,904		11,371		16,300		20,860
Total Revenue	377,630		303,465		750,334		613,673
Cost of Revenue
Equipment	240,332		180,231		484,008		377,278
Parts	46,089		43,032		90,529		82,649
Service	9,771		9,665		19,065		18,010
Rental and other	6,420		7,849		10,737		14,636
Total Cost of Revenue	302,612		240,777		604,339		492,573
Gross Profit	75,018		62,688		145,995		121,100
Operating Expenses	57,074		53,079		113,516		106,137

Impairment of Intangible and Long-Lived Assets	1,498		—		1,498		216

Income from Operations	16,446		9,609		30,981		14,747
Other Income (Expense)
Interest and other income	654		562		1,320		692
Floorplan interest expense	(350)		(901)		(768)		(2,054)
Other interest expense	(1,118)		(978)		(2,222)		(1,944)
Income Before Income Taxes	15,632		8,292		29,311		11,441
Provision for Income Taxes	4,383		1,892		7,515		2,779
Net Income	$	11,249	$	6,400	$	21,796	$	8,662

Earnings per Share:
Basic	$	0.50	$	0.28	$	0.97	$	0.39
Diluted	$	0.50	$	0.28	$	0.97	$	0.39

Weighted Average Common Shares:
Basic	22,261		22,118		22,209		22,068
Diluted	22,276		22,119		22,220		22,068

See Notes to Condensed Consolidated Financial Statements

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~ (UNAUDITED)

See Notes to Condensed Consolidated Financial Statements

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

See Notes to Condensed Consolidated Financial Statements

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Six Months Ended July 31,
	2021		2020
Operating Activities
Net income	$	21,796	$	8,662
Adjustments to reconcile net income to net cash provided by (used for) operating activities
Depreciation and amortization	10,602		11,286
Impairment	1,498		216
Deferred income taxes	(1,645)		(944)
Stock-based compensation expense	1,193		1,181
Noncash interest expense	110		75
Noncash lease expense	5,073		5,717

Other, net	162		(368)
Changes in assets and liabilities
Receivables, prepaid expenses and other assets	(12,384)		3,347
Inventories	(17,166)		31,885
Manufacturer floorplan payable	56,436		(26,726)
Accounts payable, deferred revenue, accrued expenses and other and other long-term liabilities	(31,627)		(15,140)

Operating lease liabilities	(5,487)		(6,156)
Net Cash Provided by (Used for) Operating Activities	28,561		13,035
Investing Activities
Rental fleet purchases	(8,946)		(6,001)
Property and equipment purchases (excluding rental fleet)	(10,888)		(4,472)
Proceeds from sale of property and equipment	420		489
Acquisition consideration, net of cash acquired	—		(6,790)
Other, net	12		(20)
Net Cash Used for Investing Activities	(19,402)		(16,794)
Financing Activities
Net change in non-manufacturer floorplan payable	(22,731)		7,229

Proceeds from long-term debt borrowings	6,451		1,112
Principal payments on long-term debt and finance leases	(5,117)		(2,952)
Payment of debt issuance costs	—		(670)
Other, net	(976)		(200)
Net Cash Provided by (Used for) Financing Activities	(22,373)		4,519
Effect of Exchange Rate Changes on Cash	(192)		3
Net Change in Cash	(13,406)		763
Cash at Beginning of Period	78,990		43,721
Cash at End of Period	$	65,584	$	44,484
Supplemental Disclosures of Cash Flow Information
Cash paid during the period
Income taxes, net of refunds	$	17,378	$	(228)
Interest	$	2,797	$	4,103
Supplemental Disclosures of Noncash Investing and Financing Activities
Net property and equipment financed with long-term debt, finance leases, accounts payable and accrued liabilities	$	9,014	$	4,645
Long-term debt to acquire finance leases	$	7,454	$	—
Net transfer of assets from (to) property and equipment to (from) inventories	$	1,269	$	319

See Notes to Condensed Consolidated Financial Statements

TITAN MACHINERY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—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, ~~2017~~2021 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, ~~2018.~~2022. The information contained in the consolidated balance sheet as of January 31, ~~2017~~2021 was derived from the audited consolidated financial statements ~~for~~of the Company for the fiscal year then ended. These condensed 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, ~~2017~~2021 as filed with the SEC.

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, Germany, Romania, Serbia and Ukraine.

Impact of the COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, and the President of the United States declared the COVID-19 outbreak as a national emergency. The nature of COVID-19 led to worldwide shutdowns and halting of commercial and interpersonal activity as governments imposed regulations in efforts to control the spread of the pandemic, such as shelter-in-place orders and quarantines. The Company's products and services were determined to be essential in the markets we serve and accordingly operations have been allowed to continue throughout the pandemic. The extent and duration of the COVID-19 impact, on the operations and financial position of the Company and on the global economy, is uncertain. Uncertainty remains regarding emerging variant strains of COVID-19, and regarding the length of time it will take for the COVID-19 pandemic to subside.We will continue to take action as necessary as the health and safety of our employees and customers remain our top priority.

Some of the Company's supply vendors are facing production, supply chain and staffing challenges as they work to achieve production capacity and lead times consistent with pre-pandemic levels. As a result, the Company has experienced some disruptions and delays on delivery of certain inventory. The Company has assessed the impacts of the COVID-19 pandemic on its results of operations for the three and six months ended July 31, 2021 and 2020, and although there have been logistical and other challenges, no material adverse impacts were identified.

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, impairment of long-lived assets, goodwill, or indefinite lived intangible assets, collectability of receivables, and income taxes.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned ~~and majority-owned~~ subsidiaries. All 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. 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 (loss) 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 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.

Accounting Guidance Not Yet Adopted

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update ("ASU") No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU No. 2020-04”), which provides temporary optional expedients and exceptions to accounting guidance on contract modifications and hedge accounting to ease entities’ financial reporting burdens as the market transitions from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. ASU 2020-04 is effective upon issuance and can be applied through December 31, 2022. The Company is updating its credit agreements to include language regarding the successor or alternate rate to LIBOR, and a review of other contracts and agreements is on-going. The Company does not expect the guidance to have a material impact on its results of operations, financial position, cash flows, or disclosures.

NOTE 2 - EARNINGS PER SHARE

The following table sets forth the calculation of ~~the denominator for~~ basic and diluted ~~EPS:~~Earnings Per Share (EPS):


	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands, except per share data)
Numerator:
Net income	$	11,249	$	6,400	$	21,796	$	8,662
Allocation to participating securities	(156)		(101)		(334)		(129)
Net income attributable to Titan Machinery Inc. common stockholders	$	11,093	$	6,299	$	21,462	$	8,533
Denominator:
Basic weighted-average common shares outstanding	22,261		22,118		22,209		22,068
Plus: incremental shares from vesting of restricted stock units	15		1		11		—
Diluted weighted-average common shares outstanding	22,276		22,119		22,220		22,068

Earnings Per Share:
Basic	$	0.50	$	0.28	$	0.97	$	0.39
Diluted	$	0.50	$	0.28	$	0.97	$	0.39

Three Months Ended October 31,
Nine Months Ended October 31,
2017
2016
2017
2016
(in thousands, except per share data)
(in thousands, except per share data)
Basic Weighted-Average Common Shares Outstanding 21,585

21,218

21,503

21,208
Plus: Incremental Shares From Assumed Exercise of Stock Options 58

51

—

—
Diluted Weighted-Average Common Shares Outstanding 21,643

21,269

21,503

21,208

Anti-Dilutive Shares Excluded From Diluted Weighted-Average Common Shares Outstanding:
Stock Options 103
141
106
146
Shares Underlying Senior Convertible Notes (conversion price of $43.17) 1,521
2,217
1,521
2,217

Earnings (Loss) per Share - Basic $ 0.11

$ 0.01

$ (0.40 )
$ (0.27 )
Earnings (Loss) per Share - Diluted $ 0.11

$ 0.01

$ (0.40 )
$ (0.27 )

~~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 Revenues are 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~~when control 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 nine months ended October 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 )

~~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~~promised goods or services is transferred to ~~customers~~the customer, in an amount that reflects the consideration we expect to ~~which the entity expects to be entitled~~collect in exchange for those goods or services. Sales, value added and other taxes collected from our customers concurrent with our revenue activities are excluded from revenue.

The ~~guidance also requires additional disclosure about~~following tables present our revenue disaggregated by revenue source and segment:


	Three Months Ended July 31, 2021								Three Months Ended July 31, 2020
	Agriculture		Construction		International		Total		Agriculture		Construction		International		Total
	(in thousands)								(in thousands)
Equipment	$	156,408	$	54,020	$	62,305	$	272,733	$	110,601	$	48,478	$	43,575	$	202,654
Parts	40,742		11,928		12,647		65,317		37,470		13,016		10,968		61,454
Service	21,150		6,585		1,941		29,676		19,429		6,806		1,751		27,986
Other	758		490		188		1,436		829		725		119		1,673
Revenue from contracts with customers	219,058		73,023		77,081		369,162		168,329		69,025		56,413		293,767
Rental	306		7,920		242		8,468		743		8,694		261		9,698
Total revenues	$	219,364	$	80,943	$	77,323	$	377,630	$	169,072	$	77,719	$	56,674	$	303,465

Unbilled Receivables and Deferred Revenue

Unbilled receivables from contracts with customers amounted to $20.1 million and $12.9 million as of July 31, 2021 and January 31, 2021. The increase in unbilled receivables is primarily the ~~nature, amount, timing~~result of a seasonal increase in the volume of our service transactions in which we recognize revenue as our work is performed and ~~uncertainty~~prior to customer invoicing.

Deferred revenue from contracts with customers amounted to $37.1 million and $57.7 million as of July 31, 2021 and January 31, 2021. Our deferred revenue most often increases in the fourth quarter of each fiscal year due to a higher level of customer down payments or prepayments and longer time periods between customer payment and delivery of the equipment asset, and the related recognition of equipment revenue, prior to its seasonal use. During the six months ended July 31, 2021 and 2020, the Company recognized $50.8 million and $37.0 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, 2021 and ~~cash flows~~January 31, 2020, respectively. No material amount of revenue was recognized during the six months ended July 31, 2021 and 2020 from performance obligations satisfied in previous periods.

The Company has elected as a practical expedient to not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of service of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for parts installed and services performed. The contracts for which the practical expedient has been applied include (i) equipment revenue transactions, which do not have a stated contractual term but are short-term in nature, and (ii) service revenue transactions, which also do not have a stated contractual term but are generally completed within 30 days. For such service contracts we recognize revenue over time at the amount to which we have the right to invoice for services completed to date.

NOTE 4 - RECEIVABLES

The Company provides an allowance for expected credit losses on its nonrental receivables. To measure the expected credit losses, receivables have been grouped based on shared credit risk characteristics as shown in the table below.

Trade and unbilled receivables from contracts with customers have credit risk and the allowance is determined by applying expected credit loss percentages to aging categories based on historical experience that are updated each quarter. The rates may also be adjusted to the extent future events are expected to differ from historical results. In addition, the allowance is adjusted based on information obtained by continued monitoring of individual customer credit.

Trade receivables from finance companies, other receivables due from manufacturers, and other receivables have not historically resulted in any credit losses to the Company. These receivables are short-term in nature and deemed to be of good credit quality and have no need for any allowance for expected credit losses. Management continually monitors these receivables and should information be obtained that identifies potential credit risk, an adjustment to the allowance would be made if deemed appropriate.

Trade and unbilled receivables from rental contracts are primarily in the United States and are specifically excluded from the accounting guidance in determining an allowance for expected losses. The Company provides an allowance for these receivables based on historical experience and using credit information obtained from continued monitoring of customer

accounts.


	July 31, 2021		January 31, 2021
	(in thousands)
Trade and unbilled receivables from contracts with customers
Trade receivables due from customers	$	35,859	$	31,664
Unbilled receivables	20,050		12,909
Less allowance for expected credit losses	2,721		2,994
	53,188		41,579

Trade receivables due from finance companies	14,491		14,133

Trade and unbilled receivables from rental contracts
Trade receivables	5,034		4,329
Unbilled receivables	924		520
Less allowance for expected credit losses	1,843		1,939
	4,115		2,910
Other receivables
Due from manufacturers	8,642		8,720
Other	1,632		1,767
	10,274		10,487
Receivables, net of allowance for expected credit losses	$	82,068	$	69,109

Following is a summary of allowance for credit losses on trade and unbilled accounts receivable by segment:


	Agriculture		Construction		International		Total
	(in thousands)
Balance at January 31, 2021	$	228	$	1,074	$	1,690	$	2,992
Current expected credit loss provision	30		68		(2)		96
Write-offs charged against allowance	17		84		38		139
Credit loss recoveries collected	—		4		—		4
Foreign exchange impact	—		—		(50)		(50)
Balance at April 30, 2021	241		1,062		1,600		2,903
Current expected credit loss provision	84		50		(225)		(91)
Write-offs charged against allowance	33		64		21		118
Credit loss recoveries collected	7		1		—		8
Foreign exchange impact	—		—		19		19
Balance at July 31, 2021	$	299	$	1,049	$	1,373	$	2,721


	Agriculture		Construction		International		Total
	(in thousands)
Balance at February 1, 2020	$	181	$	1,016	$	1,746	$	2,943
Current expected credit loss provision	14		113		226		353
Write-offs charged against allowance	5		71		133		209
Credit loss recoveries collected	40		4		6		50
Foreign exchange impact	—		—		(29)		(29)
Balance at April 30, 2020	230		1,062		1,816		3,108
Current expected credit loss provision	16		95		265		376
Write-offs charged against allowance	47		78		98		223
Credit loss recoveries collected	9		—		—		9
Foreign exchange impact	—		—		23		23
Balance at July 31, 2020	$	208	$	1,079	$	2,006	$	3,293

The following table presents impairment losses (recoveries) on receivables arising from ~~customer~~sales contracts ~~including significant judgments~~with customers and receivables arising from rental contracts:


	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Impairment losses (recoveries) on:
Receivables from sales contracts	$	222	$	377	$	320	$	520
Receivables from rental contracts	3		13		(30)		151
	$	225	$	390	$	290	$	671

NOTE 5 - INVENTORIES


	July 31, 2021		January 31, 2021
	(in thousands)
New equipment	$	238,116	$	206,683
Used equipment	97,390		131,369
Parts and attachments	89,616		78,982
Work in process	1,987		1,424
	$	427,109	$	418,458

NOTE 6 - PROPERTY AND EQUIPMENT


	July 31, 2021		January 31, 2021
	(in thousands)
Rental fleet equipment	$	82,695	$	77,530
Machinery and equipment	23,410		23,354
Vehicles	57,638		55,884
Furniture and fixtures	43,294		43,678
Land, buildings, and leasehold improvements	103,062		90,730
	310,099		291,176
Less accumulated depreciation	147,442		144,011
	$	162,657	$	147,165

The Company reviews its long-lived assets for potential impairment whenever events or circumstances indicate that the carrying value of the long-lived asset (or asset group) may not be recoverable. During the three months ended July 31, 2021, the Company determined that a current period operating loss combined with historical losses of a certain business unit indicated that the long-lived asset group may not be recoverable. The Company performed an impairment assessment of this asset group and as a result an impairment charge of $0.4 million was recognized within its International segment for the three months ended July 31, 2021. The Company did not have any impairment charges for the three months ended July 31, 2020. For the six months ended July 31, 2021 and July 31, 2020, the Company recognized an impairment charge of $0.4 million and $0.2 million, respectively.

NOTE 7 - INTANGIBLE ASSETS

Indefinite-Lived Intangible Assets

The Company's indefinite-lived intangible assets consist of distribution rights assets. The following is a summary of the changes in ~~judgments and~~indefinite-lived intangible assets, ~~recognized from costs incurred to obtain or fulfill a contract.~~by segment, for the six months ended July 31, 2021:


	Agriculture		Construction		International		Total
	(in thousands)
January 31, 2021	$	6,265	$	72	$	1,161	$	7,498

Foreign currency translation	—		—		(22)		(22)
Impairment	—		—		(1,139)		(1,139)
July 31, 2021	$	6,265	$	72	$	—	$	6,337

The Company ~~will adopt this guidance~~performs at least an annual impairment testing of its indefinite-lived distribution rights intangible assets and, due to ongoing losses, an interim test was completed during the three months ended July 31, 2021 for our German distribution rights asset. Under the impairment test, the fair value of distribution rights intangible assets is estimated based on ~~February 1, 2018.~~

Wea multi-period excess earnings model, an income approach. This model allocates future estimated earnings of the store/complex amongst working capital, fixed assets and other intangible assets of the store/complex and any remaining earnings (the "excess earnings") are allocated to the distribution rights intangible assets. The earnings allocated to the distribution rights are then discounted to arrive at the present value of the future estimated excess earnings, which represents the estimated fair value of the distribution rights intangible asset. The discount rate applied reflects the Company's estimate of the weighted-average cost of capital of comparable companies plus an additional risk premium to reflect the additional risk inherent in the ~~process~~distribution rights asset.

The results of the ~~modified retrospective approach. In addition, we are continuing to evaluate~~Company's impairment testing for the ~~changes necessary to our business processes, systems and controls to support recognition and disclosure under~~German distribution rights intangible asset for the ~~new standard.~~

~~In February 2016,~~three months ended July 31, 2021, indicated that the ~~FASB amended authoritative guidance on leases, codified in ASC 842,~~ ~~Leases. The amended guidance requires lessees to recognize most leases on their balance sheets related to~~estimated fair value of the tested distribution rights ~~and obligations created by those leases. The new standard also requires new disclosures to help financial statement users better understand~~was below the ~~amount, timing, and uncertainty~~carrying value 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~~the asset, thus requiring an impairment to be ~~applied using a modified retrospective approach, with elective reliefs, which requires application~~recognized. Impairment charges of $1.1 million were recognized for the ~~guidance for all periods presented. We anticipate adopting~~three and six months ended July 31, 2021 and included in Impairment of Intangible and Long-Lived Assets in the 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 ourcondensed consolidated statements of ~~operations or cash flows.~~operations. This impairment removed all remaining indefinite-lived intangible assets from the balance sheet of the German reporting unit. The impairment charges arose as the result of lowered expectations of the future financial performance of this reporting unit. There were no indefinite-lived intangible impairment charges for the three and six months ended July 31, 2020.

NOTE 8 - FLOORPLAN PAYABLE/LINES OF CREDIT

On April 3, 2020, the ~~FASB~~Company entered into a Third Amended and Restated Credit Agreement (the "Bank Syndicate Agreement") with a group of banks that amended ~~authoritative guidance on modifications related~~and restated the Company's prior $200.0 million credit facility, dated October 28, 2015. The Bank Syndicate Agreement provides for a secured credit facility in an amount up to ~~stock compensation, codified in ASC 718,~~ ~~Compensation - Stock Compensation. The amendments provide guidance on determining which changes~~$250.0 million, consisting of a $185.0 million floorplan facility (the "Floorplan Loan") and a $65.0 million operating line (the "Revolver Loan"), and changed the interest rates as compared to the ~~terms~~prior credit facility, amongst other things. The amounts available under the Bank Syndicate Agreement are subject to borrowing base calculations and ~~conditions~~reduced by outstanding standby letters of ~~share-based payment awards require~~credit and certain reserves. The Bank Syndicate Agreement includes a variable interest rate on outstanding balances, charges a 0.25% non-usage fee on the average monthly unused amount, and requires monthly payments of accrued interest. The Company elects at the time of any advance to choose a Base Rate Loan or a LIBOR Rate Loan. The LIBOR Rate is based upon one month, two month, or three month LIBOR, as chosen by the Company, but in no event shall the LIBOR Rate be less than zero. The Base Rate is the greater of (a) the prime rate of interest announced, from time to time, by Bank of America, (b) the Federal Funds Rate plus 0.5%, or (c) one month LIBOR plus 1%, but in no event shall the Base Rate be less than zero. The effective interest rate on the Company's borrowings is then calculated by adding an ~~entity~~applicable margin to ~~apply modification accounting.~~the LIBOR Rate or Base Rate. The ~~guidance~~applicable margin is ~~effective~~determined based on excess availability under the Bank Syndicate Agreement and ranges from 0.5% to 1.0% for Base Rate Loans and 1.5% to 2.0% for LIBOR Rate Loans.

On June 4, 2021, the Bank Syndicate Agreement was amended to add a benchmark replacement reference rate when the LIBOR Rate is no longer published. The identified replacement reference rate is the secured overnight financing rate (SOFR).The benchmark transition event will occur at the earliest of (i) the date all available Tenors of LIBOR have been permanently ceased to be reported, (ii) June 30, 2023, or (iii) any agreement by the banks party to the Bank Syndicate agreement and the Company to replace the LIBOR Rate. The SOFR rate is based upon one month, two month, three month, six month, and 12 month SOFR plus between 11.4 basis points and 71.5 basis points depending on the available tenor used. In no event shall the SOFR Rate be less than zero. The applicable margin rate is the same as outlined above for the ~~Company as of the first quarter of its fiscal year ending January 31, 2019.~~LIBOR Rate Loans. The Company does not believe ~~the update~~implementation of this new benchmark rate will have a material ~~impact~~effect on its ~~consolidated financial statements.~~

~~In August 2017, the FASB amended authoritative guidance on hedge accounting, codified in ASC 815,~~ ~~Derivatives and Hedging.~~ ~~The amendments better align the accounting rules with a company's risk management activities; better reflects economic~~ results of ~~hedging in financial statements; and simplifies hedge accounting treatment.~~operations. In addition, the amendment reduced the current floor of the LIBOR Rate from 0.5% to 0.0%

The ~~guidance is effective for~~Bank Syndicate Agreement does not obligate the Company asto maintain financial covenants, except in the event that excess availability (as defined in the Bank Syndicate Agreement) is less than 15% of the ~~first quarter~~lower of ~~its fiscal year ending January 31, 2020. The~~the borrowing base or the size of the maximum credit line, at which point the Company is ~~evaluating the impact~~required to maintain a fixed charge coverage ratio of ~~this new standard~~at least 1.10:1.00. The Bank Syndicate Agreement includes various restrictions on the ~~financial statements.~~Company and its subsidiaries’ activities, including, under certain conditions, limitations on the Company’s ability to make certain cash payments including cash dividends and stock repurchases, issuance of equity instruments, acquisitions and divestitures, and entering into new indebtedness transactions. The Bank Syndicate Agreement matures on April 3, 2025.

~~NOTE 2—INVENTORIES~~

October 31, 2017 January 31, 2017
(in thousands)
New equipment $ 343,434
$ 235,161
Used equipment 114,499
160,503
Parts and attachments 70,170
81,734
Work in process 1,658
868
$ 529,761
$ 478,266

~~NOTE 3—PROPERTY AND EQUIPMENT~~

October 31, 2017 January 31, 2017
(in thousands)
Rental fleet equipment $ 125,533
$ 124,417
Machinery and equipment 21,701
22,255
Vehicles 37,558
36,384
Furniture and fixtures 39,334
39,875
Land, buildings, and leasehold improvements 63,652
59,481
287,778
282,412
Less accumulated depreciation (131,352 ) (125,765 )
$ 156,426
$ 156,647

~~NOTE 4—LINES OF CREDIT / FLOORPLAN PAYABLE~~

The Floorplan ~~Lines of Credit~~

~~Floorplan payable balances reflect~~Loan under the ~~amount owed for new~~Bank Syndicate Agreement is used to finance equipment inventory ~~purchased from a manufacturer~~purchases. Amounts outstanding are recorded as floorplan payable, within current liabilities on the consolidated balance sheets as the Company intends to repay amounts borrowed within one year.

The Revolver Loan under the Bank Syndicate Agreement is used to finance rental fleet equipment and for ~~used equipment inventory,~~general working capital requirements of the Company. Amounts outstanding are recorded as long-term debt, within long-term liabilities on the consolidated balance sheets, as the Company does not intend or have the obligation to repay amounts borrowed within one year.

As of July 31, 2021, the Company had floorplan lines of credit totaling $771.0 million, which is primarily ~~acquired through trade-in on equipment sales. Certain~~comprised 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's captive finance subsidiary, 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.~~

As of October 31, 2017, the Company had discretionary floorplan lines of credit for equipment inventory purchases totaling approximately $727.4 million, which includes a $140.0 million Floorplan Payable Line under its second amended and restated credit agreement with Wells Fargo (the "Wells Fargo Credit Agreement"),credit: (i) a $450.0 million credit facility with CNH Industrial, ~~Capital,~~(ii) a ~~$30.0~~$185.0 million line of credit under the Bank Syndicate Agreement, and (iii) a $60.0 million credit facility with DLL Finance LLC.

In August 2021, the Company entered into an amendment to the credit facility with DLL Finance LLC. The amendment reduced the available borrowings under this facility from $60.0 million to $50.0 million, increased the variable interest rate on outstanding balances from three-month LIBOR plus an applicable margin of 2.85% per annum to three-month

LIBOR plus an applicable margin of 3.0% per annum, and eliminated the ~~U.S. dollar equivalent~~0.15% non-utilization fee. DLL Finance LLC may terminate the facility in its sole discretion at any time.

As of $107.4 million in credit facilities related to our foreign subsidiaries. Floorplan payables relating to these credit facilities totaled approximately $306.6 million of the total floorplan payable balance of $322.4 million outstanding as of OctoberJuly 31, ~~2017~~2021 and ~~$228.3 million of the total floorplan payable balance of $233.2 million outstanding as of~~ January 31, ~~2017. The remaining~~2021, the Company's outstanding balances ~~relate to equipment inventory financing from manufacturers and non-manufacturer lenders other than the~~of floorplan lines of credit ~~described above.~~consisted of the following:


	July 31, 2021		January 31, 2021
	(in thousands)
CNH Industrial	$	133,481	$	86,792

DLL Finance	9,984		10,667
Other outstanding balances with manufacturers and non-manufacturers	42,084		64,376
	$	185,549	$	161,835

As of ~~October~~July 31, ~~2017,~~2021 and January 31, 2021, the ~~interest-bearing~~ U.S. floorplan payables ~~carried various interest rates primarily ranging from 3.74% to 6.55%, and the~~were generally all non-interest bearing. As of July 31, 2021, foreign floorplan payables carried various interest rates primarily ranging from ~~0.92%~~1.40% to ~~7.24%.~~

4.79%, compared to a range of 1.40% to 4.82% as of January 31, 2021. As of ~~October~~July 31, ~~2017,~~2021 and January 31, 2021, $148.7 million and $98.8 million, respectively, of outstanding floorplan payables were non-interest bearing. As of July 31, 2021, 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~~

AsNOTE 9 - LONG TERM DEBT

The following is a summary of ~~October 31, 2017, the Company had a $60.0 million Working Capital Line under the Wells Fargo Credit Agreement. The Company had $13.0 million and $13.0 million outstanding on this Working Capital Line~~long-term debt as of ~~October~~July 31, ~~2017~~2021 and January 31, ~~2017, respectively. As~~2021:


Description	Maturity Dates	Interest Rates	July 31, 2021		January 31, 2021
			(in thousands)
Mortgage loans, secured	Various through May 2039	2.1% to 5.1%	$	42,734	$	22,916
Sale-leaseback financing obligations	Various through December 2030	3.4% to 10.3%	15,834		16,505

Vehicle loans, secured	Various through June 2026	1.7% to 3.9%	10,511		9,999
Other	January 2021	2.6%	—		77
Total debt			69,079		49,497
Less: current maturities			5,455		4,591
Long-term debt, net			$	63,624	$	44,906

The Company purchased buildings and real estate assets of ~~October 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~~eleven of its election to reduce the maximum credit amount available under the Wells Fargo Credit Agreement from an aggregate of $275.0 million to an aggregate of $200.0 million, comprised of a $70.0 million reductionU.S. dealer locations 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~~first quarter of fiscal ~~2018, the Company wrote off $0.4 million~~2022 and financed these purchases with long term debt of ~~capitalized debt issuance costs. This charge is recorded in other interest expense in the consolidated statements of operations.~~$17.7 million. These dealer locations were previously leased from third party lessors.

~~CNH Industrial Capital Floorplan Payable Line of Credit~~

~~In October 2017, the minimum fixed charge coverage ratio that is imposed under the CNH Industrial Capital credit facility was decreased from 1.25:1.00 to 1.10:1.00.~~

~~DLL Finance Floorplan Payable Line of Credit~~

In September 2017, the Company provided notice to DLL Finance of its election to reduce the maximum credit amount available under the DLL Finance credit facility from $45.0 million to $30.0 million. Additionally, the minimum fixed charge coverage ratio that is imposed under the DLL Finance credit facility was decreased from 1.25:1.00 to 1.10:1.00.

NOTE ~~5—SENIOR CONVERTIBLE NOTES~~

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

October 31, 2017 January 31, 2017

(in thousands except conversion
rate and conversion price)
Principal value $ 65,644
$ 95,725
Unamortized debt discount (2,973 ) (6,368 )
Unamortized debt issuance costs (394 ) (856 )
Carrying value of senior convertible notes $ 62,277
$ 88,501

Carrying value of equity component, net of deferred taxes $ 14,923
$ 15,546

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

Conversion price (per share of common stock) $ 43.17

~~For the nine months ended October 31, 2017, the Company repurchased an aggregate of $30.1 million face value of its senior convertible notes with $29.1 million in cash.~~

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

Three Months Ended October 31, Nine Months Ended October 31,
2017 2016 2017 2016
(in thousands) (in thousands)
Cash Interest Expense
Coupon interest expense $ 666
$ 996
$ 2,157
$ 3,457
Noncash Interest Expense
Amortization of debt discount 517
703
1,628
2,406
Amortization of transaction costs 71
100
225
347
$ 1,254
$ 1,799
$ 4,010
$ 6,210

The senior convertible notes mature on May 1, 2019, unless purchased earlier by the Company, redeemed or converted. As of October 31, 2017, the unamortized debt discount will be amortized over a remaining period of approximately 1.5 years. As of October 31, 2017 and January 31, 2017, the if-converted value of the 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.

~~NOTE 6—~~10 - 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.

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 interest rate swap instrument was designated as a cash flow hedging instrument and accordingly changes in the effective portion of the fair value of the 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 Company's foreign currency forward contracts generally have three-month maturities, maturing on the last day of each fiscal quarter. The notional value of outstanding foreign currency contracts as of January 31, 2021 was $8.0 million. There were no outstanding foreign currency contracts as of July 31, 2021.

~~The following table sets forth~~ As of January 31, 2021, the ~~notional~~fair value of the Company's outstanding derivative ~~instruments.~~

Notional Amount as of:
October 31, 2017 January 31, 2017
(in thousands)
Cash flow hedges:
Interest rate swap $ —
$ 100,000
Derivatives not designated as hedging instruments:
Foreign currency contracts 10,000
18,021

~~The following table sets forth~~instruments was not material. Derivative instruments recognized as assets are recorded in prepaid expenses and other in the ~~fair value of the Company’s outstanding~~condensed consolidated balance sheets, and derivative ~~instruments. Liability derivatives~~instruments recognized as liabilities are ~~included~~recorded in accrued expenses and other in the condensed consolidated balance sheets.

Fair Value as of:
October 31, 2017 January 31, 2017
(in thousands)
Liability Derivatives:
Derivatives designated as hedging instruments:
Cash flow hedges:
Interest rate swap $ —
$ 1,155
Derivatives not designated as hedging instruments:
Foreign currency contracts 65
200
Total Liability Derivatives $ 65
$ 1,355

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~~from the Company’s derivative instruments for the ~~three and nine~~six months ended ~~October~~July 31, ~~2017~~2021 and ~~2016, respectively.~~

Three Months Ended October 31, Nine Months Ended October 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)
—
(98 ) 228
(333 ) 48
(1,084 ) (272 ) (1,064 )
Dervatives Not Designated as Hedging Instruments:
Foreign currency contracts ^(b)
—
78
—
126
—
(978 ) —
112
Total Derivatives $ —
$ (20 ) $ 228
$ (207 ) $ 48
$ (2,062 ) $ (272 ) $ (952 )

^(a) ~~No material hedge ineffectiveness has been recognized. The amounts shown~~2020. Gains and losses are recognized 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 interest income~~Interest and other income in the consolidated statements of ~~operations.~~operations:


	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Foreign currency contract gain (loss)	$	192	$	202	$	(159)	$	189

NOTE 11 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following is a summary of the first quarter of fiscal 2018, 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 original forecasted interest payments, which served as the hedged item underlying the interest rate swap instrument, were no longer probable of occurring during the time period over which such transactions were previously anticipated to occur. As of October 31, 2017, the Company had an immaterial amount of remaining pre-tax net unrealized losses associated with its interest rate swap cash flow hedging instrument recordedchanges in accumulated other comprehensive income (loss), by component, for the periods ended July 31, 2021 and July 31, 2020:


	Foreign Currency Translation Adjustment		Net Investment Hedging Gain		Total Accumulated Other Comprehensive Income (Loss)
	(in thousands)
Balance, January 31, 2021	$	(1,212)	$	2,711	$	1,499
Other comprehensive loss	(2,379)		—		(2,379)
Balance, April 30, 2021	(3,591)		2,711		(880)
Other comprehensive income	938		—		938
Balance, July 31, 2021	$	(2,653)	$	2,711	$	58


	Foreign Currency Translation Adjustment		Net Investment Hedging Gain		Total Accumulated Other Comprehensive Income (Loss)
	(in thousands)
Balance, January 31, 2020	$	(5,931)	$	2,711	$	(3,220)
Other comprehensive loss	(528)		—		(528)
Balance, April 30, 2020	(6,459)		2,711		(3,748)
Other comprehensive income	778		—		778
Balance, July 31, 2020	$	(5,681)	$	2,711	$	(2,970)

The Company, as lessee, leases certain of ~~which~~its dealership locations, office space, equipment and vehicles under operating and financing classified leasing arrangements. The Company has elected to not record leases with a lease term at commencement of 12 months or less on the consolidated balance sheet; these leases are expensed on a straight-line basis over the lease term. Many real estate lease agreements require the Company ~~expects will~~to pay the real estate taxes on the properties during the lease term and require that the Company maintain property insurance on each of the leased premises. These payments are deemed to be ~~reclassified into income~~variable lease payments as the amounts may change during the term of the lease. Certain leases include renewal options that can extend the lease term for periods of one to ten years. Most real estate leases grant the Company a right of first refusal or other options to purchase the real estate, generally at fair market value, either during the lease term or at its conclusion. In most cases, the Company has not included these renewal and purchase options within the measurement of the right-of-use asset and lease liability. Most often, the Company cannot readily determine the interest rate implicit in the lease and thus applies its incremental borrowing rate to capitalize the right-of-use asset and lease liability. The Company estimates its incremental borrowing rate by incorporating considerations of lease term, asset class and lease currency and geographical market. The Company's lease agreements do not contain any material non-lease components, residual value guarantees or material restrictive covenants.

The Company subleases a small number of real estate assets to third-parties, primarily dealership locations for which it has ceased operations. All sublease arrangements are classified as operating leases.

The components of lease expense were as follows:


		Three Months Ended July 31,				Six Months Ended July 31,
	Classification	2021		2020		2021		2020
		(in thousands)				(in thousands)
Finance lease cost:
Amortization of leased assets	Operating expenses	$	243	$	389	$	688	$	781
Interest on lease liabilities	Other interest expense	64		117		152		242
Operating lease cost	Operating expenses and rental and other cost of revenue	3,735		4,325		7,501		8,788
Short-term lease cost	Operating expenses	66		110		132		190
Variable lease cost	Operating expenses	639		735		1,252		1,370
Sublease income	Interest and other income	(219)		(131)		(416)		(283)
		$	4,528	$	5,545	$	9,309	$	11,088

Right-of-use lease assets and lease liabilities consist of the following:


	Classification	July 31, 2021		January 31, 2021
		(in thousands)
Assets
Operating lease assets	Operating lease assets	$	66,934	$	74,445
Finance lease assets(a)	Property and equipment, net of accumulated depreciation	3,094		12,426
Total leased assets		$	70,028	$	86,871
Liabilities
Current
Operating	Current operating lease liabilities	$	10,755	$	11,772
Finance	Accrued expenses and other	851		9,823
Noncurrent
Operating	Operating lease liabilities	66,678		73,567
Finance	Other long-term liabilities	2,288		2,911
Total lease liabilities		$	80,572	$	98,073

(a)Finance lease assets are recorded net of accumulated amortization of $1.7 million as of July 31, 2021 and $3.0 million as of January 31, 2021.

Maturities of lease liabilities as of July 31, 2021 are as follows:


	Operating		Finance
	Leases		Leases		Total
Fiscal Year Ended January 31,	(in thousands)
2022 (remainder)	$	7,688	$	553	$	8,241
2023	14,527		928		15,455
2024	13,572		607		14,179
2025	13,033		525		13,558
2026	12,955		384		13,339
2027	12,212		351		12,563
Thereafter	21,026		774		21,800
Total lease payments	95,013		4,122		99,135
Less: Interest	17,580		983		18,563
Present value of lease liabilities	$	77,433	$	3,139	$	80,572

The weighted-average lease term and discount rate as of July 31, 2021 are as follows:


	July 31, 2021
Weighted-average remaining lease term (years):
Operating leases	6.9
Financing leases	5.7
Weighted-average discount rate:
Operating leases	6.1	%
Financing leases	8.8	%

The Company rents equipment to customers, primarily in the Construction segment, on a short-term basis. Our rental arrangements generally do not include minimum, noncancellable periods as the lessee is entitled to cancel the arrangement at any time. Most often, our rental arrangements extend for periods ranging from a few days to a few months. We maintain a fleet of dedicated rental assets within our Construction segment and, within all segments, we may also provide short-term rentals of certain equipment inventory assets. Some rental arrangements may include rent-to-purchase options whereby customers are given a period of time to exercise an option to purchase the related equipment at an established price with any rental payments paid applied to reduce the purchase price.

All of the Company's leasing arrangements as lessor are classified as operating leases. Rental revenue is recognized on a straight-line basis over the ~~next 12 months.~~rental period. Rental revenue includes amounts charged for loss and damage insurance on rented equipment. In most cases, our rental arrangements include non-lease components, including delivery and pick-up services. The Company accounts for these non-lease components separate from the rental arrangement and recognizes the revenue associated with these components when the service is performed. The Company has elected to exclude from rental revenue all sales, value added and other taxes collected from our customers concurrent with our rental activities. Rental billings most often occur on a monthly basis and may be billed in advance or in arrears, thus creating unbilled rental receivables or deferred rental revenue amounts. The Company manages the residual value risk of its rented assets by (i) monitoring the quality, aging and anticipated retail market value of our rental fleet assets to determine the optimal period to remove an asset from the rental fleet, (ii) maintaining the quality of our assets through on-site parts and service support and (iii) requiring physical damage insurance of our lessee customers. We primarily dispose of our rental assets through the sale of the asset by our retail sales force.

Revenue generated from leasing activities is disclosed, by segment, in Note 3. The following is the balance of our dedicated rental fleet assets, included in Property and equipment, net of accumulated depreciation in the consolidated balance sheet, of our Construction segment as of July 31, 2021 and January 31, 2021:


	July 31, 2021		January 31, 2021
	(in thousands)
Rental fleet equipment	$	82,695	$	77,530
Less accumulated depreciation	28,373		28,916
	$	54,322	$	48,614

NOTE 7—13 - FAIR VALUE ~~OF FINANCIAL INSTRUMENTS~~MEASUREMENTS

~~The liabilities~~ As of July 31, 2021 and January 31, 2021, the fair value of the Company's foreign currency contracts, which are either assets or liabilities measured at fair value on a recurring basis, ~~as of October 31, 2017 and January 31, 2017 are as follows:~~

October 31, 2017 January 31, 2017
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
(in thousands) (in thousands)
Financial Liabilities
Interest rate swap $ —
$ —
$ —
$ —
$ —
$ 1,155
$ —
$ 1,155
Foreign currency contracts —
65
—
65
—
200
—
200
Total Financial Liabilities $ —
$ 65
$ —
$ 65
$ —
$ 1,355
$ —
$ 1,355

~~The valuation for the Company's~~was not material. These foreign currency contracts ~~and interest rate swap derivative instruments~~ were valued using a discounted cash flow ~~analyses,~~analysis, which is an income approach, utilizing readily observable market data as ~~inputs.~~inputs, which is classified as a Level 2 fair value measurement.

The Company also valued certain long-lived assets at fair value on a non-recurring basis as of January 31, ~~2017~~2021 as part of its long-lived asset impairment testing. The estimated fair value of such assets as of January 31, ~~2017~~2021 was ~~$3.6 million and consisted of real estate assets and fair~~$0.8 million. Fair value was ~~determined by utilizing market and~~estimated through an income ~~approaches~~approach 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 January 31, 2017,~~ the Company estimated the fair value of 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 were~~value to be realized upon disposition was 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 October 31, 2017.

The Company also has financial instruments that are not recorded at fair value in ~~its~~the consolidated ~~financial statements. The carrying amount of~~balance sheets, including cash, receivables, payables ~~short-term debt~~ and ~~other current liabilities approximates~~long-term debt. The carrying amounts of these financial instruments approximated their 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 valuevalues as of ~~October~~July 31, ~~2017~~2021 and January 31, ~~2017, respectively. The following table provides details on the senior convertible notes as of October 31, 2017 and January 31, 2017. The difference between the face value and the carrying~~2021. Fair 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~~financial instruments was estimated based on Level 2 fair value inputs. The estimated fair value of the Company's Level 2 long-term debt, which is provided for disclosure purposes only, is as follows:


	July 31, 2021	January 31, 2021
	(in thousands)
Carrying amount	53,245	32,992
Fair value	54,600	34,185

October 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 $ 65,000
$ 62,277
$ 65,644
$ 87,000
$ 88,501
$ 95,725

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NOTE 8—14 - INCOME TAXES

Our effective tax rate was 28.0% and 22.8% for the three months ended July 31, 2021 and 2020, respectively and was 25.6% and 24.3% for the six months ended July 31, 2021 and 2020, respectively. The effective tax rate for the six months ended July 31, 2021 was benefited by the vesting of share-based compensation but was offset by the recognition of a valuation allowance on certain of our foreign deferred tax assets including recording a valuation allowance on the remaining deferred tax assets of our Germany entity. For the six months ended July 31, 2020, the effective tax rate benefited from a weakening Ukrainian currency but was offset by increased tax expense on the vesting of share-based compensation.

NOTE 15 - BUSINESS COMBINATIONS

Fiscal 2021

In connection with the acquisition, the Company acquired from CNH Industrial and certain other manufacturers equipment and parts inventory previously owned by HorizonWest Inc. Upon acquiring those inventories, the Company was offered floorplan financing by the manufacturer. In total, the Company acquired inventory and recognized a corresponding financing liability of $2.7 million. The recognition of these inventories and the associated financing liabilities are not included as part of the accounting for the business combination.

Purchase Price Allocation

The above acquisition has been accounted for under the acquisition method of accounting, which requires the Company to estimate the acquisition date fair value of the assets acquired and liabilities assumed. The accounting for the purchase price allocation was complete as of January 31, 2021. The following table presents the aggregate purchase price allocations for all acquisitions completed as of January 31, 2021:


	January 31, 2021
	(in thousands)
Assets acquired:
Cash	$	1

Inventories	4,260
Prepaid expenses and other	48
Property and equipment	1,752
Operating lease assets	2,006
Intangible assets	245
Goodwill	484

	8,796

Liabilities assumed:


Current operating lease liabilities	159



Operating lease liabilities	1,847

	2,006
Net assets acquired	$	6,790

Goodwill recognized by segment:
Agriculture	$	484


Goodwill expected to be deductible for tax purposes	$	484

The recognition of goodwill in the above business combination arose from the acquisition of an assembled workforce and anticipated synergies expected to be realized. For the business combination occurring during the twelve months ended January 31, 2021, the Company recognized a non-competition intangible asset of $0.1 million and a distribution rights intangible asset of $0.2 million. The non-competition asset will be amortized over periods ranging from three to five years. The

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distribution rights assets are indefinite-lived intangible assets not subject to amortization. The Company estimated the fair value of the intangible assets using a multi-period excess earnings model, which is an income approach. Acquisition related costs were not material for the fiscal year ended January 31, 2021, and have been expensed as incurred and recognized as operating expenses in the consolidated statements of operations.

NOTE 16 - CONTINGENCIES

The Company is engaged in legal proceedings incidental to the normal course of business. Due to their nature, such legal proceedings involve inherent uncertainties, including but not limited to, court rulings, negotiations between affected parties and governmental intervention. Based upon the information available to the Company and discussions with legal counsel, it is the Company's opinion that the outcome of these various legal actions and claims will not have a material impact on it's financial position, results of operations or cash flows. These matters, however, are subject to many uncertainties, and the outcome of any matter is not predictable.

NOTE 17 - SEGMENT INFORMATION ~~AND OPERATING RESULTS~~

The Company has ~~three~~3 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 July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)				(in thousands)
Revenue
Agriculture	$	219,364	$	169,072	$	448,915	$	362,700
Construction	80,943		77,719		149,550		137,833
International	77,323		56,674		151,869		113,140
Total	$	377,630	$	303,465	$	750,334	$	613,673

Income (Loss) Before Income Taxes
Agriculture	$	12,067	$	6,752	$	23,292	$	12,914
Construction	2,815		1,375		2,953		(1,498)
International	430		(432)		3,238		(711)
Segment income before income taxes	15,312		7,695		29,483		10,705
Shared Resources	320		597		(172)		736
Total	$	15,632	$	8,292	$	29,311	$	11,441


	July 31, 2021		January 31, 2021
	(in thousands)
Total Assets
Agriculture	$	380,000	$	349,697
Construction	191,908		185,534
International	182,187		177,213
Segment assets	754,095		712,444
Shared Resources	85,276		103,345
Total	$	839,371	$	815,789

Three Months Ended October 31,
Nine Months Ended October 31,
2017
2016
2017
2016
(in thousands) (in thousands)
Revenue
Agriculture $ 186,546
$ 205,540
$ 488,716
$ 538,060
Construction 72,942
80,789
214,252
241,922
International 70,853
45,937
160,362
115,477
Total $ 330,341
$ 332,266
$ 863,330
$ 895,459

Income (Loss) Before Income Taxes
Agriculture $ 4,909
$ (1,798 ) $ (5,870 ) $ (9,881 )
Construction (2,373 ) (105 ) (4,076 ) (1,523 )
International 2,453
604
3,331
(88 )
Segment income (loss) before income taxes 4,989
(1,299 ) (6,615 ) (11,492 )
Shared Resources (103 ) 1,355
(5,119 ) 1,199
Total $ 4,886
$ 56
$ (11,734 ) $ (10,293 )

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October 31, 2017 January 31, 2017
(in thousands)
Total Assets
Agriculture $ 404,200
$ 411,726
Construction 244,725
221,092
International 126,706
106,899
Segment assets 775,631
739,717
Shared Resources 42,659
31,705
Total $ 818,290
$ 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 October 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 $9.0 million, $4.5 million and $1.5 million within its Agriculture, Construction and Shared Resources segments.

Restructuring costs associated with the Company's Fiscal 2018 Restructuring Plan are summarized in the following table. Such costs are included in 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, 2017 Nine Months Ended October 31, 2017 Cumulative Amount
(in thousands)
Lease accrual and termination costs $ 1,598
$ 5,920
$ 5,920
Termination benefits 943
4,667
4,667
Impairment of fixed assets, net of gains on asset disposition (55 ) (620 ) 2,337
Asset relocation and other costs 101
513
561
$ 2,587
$ 10,480
$ 13,485

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

Three Months Ended October 31, 2017 Nine Months Ended October 31, 2017 Cumulative Amount
(in thousands)
Segment
Agriculture $ 567
$ 7,239
$ 8,342
Construction 1,671
2,009
3,911
International 60
60
60
Shared Resources 289
1,172
1,172
Total $ 2,587
$ 10,480
$ 13,485

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A reconciliation of the beginning and ending exit cost liability balance, of which $4.9 million is included in other long-term liabilities and $1.3 million is included in accrued expenses and other in the consolidated balance sheets, follows:

Lease Accrual & Termination Costs Termination Benefits Asset Relocation & Other Costs Total
(in thousands)
Balance, January 31, 2017 $ —
$ —
$ —
$ —
Exit costs incurred and charged to expense 5,920
4,361
513
10,794
Exit costs paid (427 ) (3,697 ) (513 ) (4,637 )
Balance, October 31, 2017 $ 5,493
$ 664
$ —
$ 6,157

Restructuring charges recognized for the three months ended October 31, 2016 totaled $0.3 million, and for the nine months ended October 31, 2016 totaled $0.5 million. 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 nine months ended October 31, 2017, a total of $0.8 million in termination costs, consisting of $0.7 million of 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.

Effective September 8, 2017, the Company sold a real estate asset that was primarily used for field training purposes to Stiklestad LLC for $1.8 million. All consideration related to the transaction was exchanged at closing on September 8, 2017, and there are no amounts owed to either party following that date. Stiklestad LLC is owned by members of the family of David Meyer, the Company's Chief Executive Officer. No gain or loss was recognized on the transaction and the Company believes that the selling price approximated fair value.

~~NOTE 11— CONTINGENCIES~~

On October 11, 2017, the Romania Competition Council (“RCC”) initiated an administrative investigation of the Romanian Association of Manufacturers and Importers of Agricultural Machinery (“APIMAR”) and all its members, including Titan Machinery Romania. The RCC's investigation involves whether the APIMAR members engaged in anti-competitive practices in their sales of agricultural machinery not involving European Union ("EU") subvention funding programs, by referring to the published sales prices governing EU subvention funded transactions, which prices are mandatorily disclosed to and published by AFIR, a Romanian government agency that oversees the EU subvention funding programs in Romania. The investigation is in a preliminary stage and the Company is currently unable to predict its outcome or reasonably estimate any potential loss that may result from the investigation.

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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 condensed 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 fiscal year ended January 31, ~~2017.~~2021.

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, one of the largest retail ~~dealer~~dealers of Case Construction equipment in North America and ~~a major~~one of the largest retail ~~dealer~~dealers of New Holland Agriculture and New Holland Construction equipment in the U.S. We operate our business through three reportable ~~segments,~~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 low~~ Demand for agricultural equipment and, to a lesser extent, parts and service support, are impacted by agricultural commodity prices and net farm ~~income, which, among other things, have a negative effect~~income. Based 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 August 2017, theFebruary 2021 U.S. Department of Agriculture ~~("USDA") published its U.S. farm sector financial indicators. The USDA projected~~publications, the estimate of net farm income for calendar year ~~2017 to remain relatively flat~~2021 indicated an approximate 8.1% decrease as compared to calendar year ~~2016~~2020, and ~~decrease 30.4%~~an approximate 45.7% increase in net farm income for calendar year 2020 as compared to the most recent five-year average. These industry conditions have negatively impacted our customer demand, resulting in decreased equipment revenue and an oversupply of equipment inventory in our geographic footprint.

calendar year 2019. Certain areas of our ~~Construction stores, particularly those in the northern and western parts of our~~North American Agriculture footprint ~~are~~have been impacted by ~~the strength of the oil industry. Oil prices have not fully rebounded from the significant decrease that occurred during fiscal 2015~~a drought in recent months and 2016, however oil prices have increased in fiscal 2018 from fiscal 2017. The lower prices have 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 reducedthis may reduce demand for ~~equipment purchases, equipment rentals,~~parts and service ~~work and parts, and have caused an oversupply~~support in upcoming quarters.

For the second quarter of ~~equipment inventory and rental fleet equipment in these areas.~~

~~Our~~fiscal 2022, our net income ~~including noncontrolling interest~~ was ~~$2.4~~$11.2 million, or ~~$0.11~~$0.50 per diluted share, ~~for the three months ended October 31, 2017,~~ compared to a fiscal 2021 second quarter net income ~~including noncontrolling interest~~ of ~~$0.3~~$6.4 million, or ~~$0.01~~$0.28 per diluted ~~share, for the three months ended October 31, 2016. On an~~share. Our adjusted ~~basis, our~~ diluted earnings per share was ~~$0.20~~$0.57 for the ~~three months ended October 31, 2017,~~second quarter of fiscal 2022, compared to ~~an adjusted diluted loss per share of $0.01~~$0.29 for the ~~three months ended October 31, 2016.~~second quarter of fiscal 2021. See the Non-GAAP Financial Measures section below for a reconciliation of ~~these non-GAAP measures~~adjusted diluted earnings per share to diluted earnings per share, the most comparable GAAP ~~measures.~~financial measure. Significant factors impacting the quarterly comparisons were:

•Revenue ~~remained relatively flat for~~in the ~~third~~second quarter of fiscal ~~2018, as~~2022 increased compared to the third quarter last year. Revenue was negatively impacted by our store closings associated with our Fiscal 2018 Restructuring Plan, and also impacted by the incremental revenue associated with our expanded marketing of aged equipment inventory during fiscal 2017, but was largely offset by increased revenues in our International segment.

~~Total gross profit margin increased to 18.6% for the third~~second quarter of fiscal ~~2018, as~~2021. All three segments recognized an increase in revenue from the prior year. Total same store sales increased 27.0% compared to ~~17.6% for~~ the ~~third~~prior year second quarter.

•Gross profit in the second quarter of fiscal ~~2017.~~2022 increased 19.7% compared to the second quarter of fiscal 2021. The increase in gross profit ~~margin~~ was primarily the result of ~~higher~~strong equipment sales and equipment gross profit margins ~~on equipment revenues.~~that increased to 11.9% in the second quarter of fiscal 2022 from 11.1% in the second quarter of fiscal 2021.

•Intangible and long-lived asset impairments in the second quarter of fiscal 2022 were $1.5 million compared to no impairment in the second quarter of fiscal 2021. The increase was attributable to the impairment of certain intangible and long-lived assets in one of our International reporting units.

•Floorplan and other interest expense decreased ~~42.3%~~a combined 21.9% in the ~~third~~second quarter of fiscal ~~2018,~~2022, as compared to the ~~third~~second quarter last year, ~~primarily~~ due to ~~a decrease~~lower borrowings.

Impact of the COVID-19 Pandemic on the Company

As discussed in note 1 to our ~~average interest-bearing inventory~~condensed consolidated financial statements, the COVID-19 pandemic has significantly disrupted supply chains and business around the world. Uncertainty remains regarding the emerging variant strains of COVID-19 and regarding the length of time it will take for the COVID-19 pandemic to subside, including the time it will take for vaccines to be broadly distributed and accepted in the ~~third~~United States and the rest of the world, and the effectiveness of those vaccines in slowing or stopping the spread of COVID-19 and mitigating the economic effects of the pandemic.

The Company continues to effectively execute its strategy while managing the ongoing effects of the COVID-19 pandemic. The Company's products and services were determined to be essential in the markets we serve and accordingly operations have been allowed to continue throughout the pandemic. Since the beginning of the COVID-19 pandemic, the safety of our employees and customers has been, and continues to be, our top concern. At the onset of the pandemic, we organized a COVID Task Force to implement safety protocols and to quickly respond to matters related to the pandemic at our locations.

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Although there have been logistical and other challenges as a result of COVID-19, there were no material adverse impacts on the Company's results of operations for the three and six months ended July 31, 2021 and 2020. However, due to the uncertainty of the economic outlook resulting from the COVID-19 pandemic, the Company continues to monitor the situation closely.

Acquisitions

Fiscal 2021

On May 4, 2020, the Company acquired certain assets of HorizonWest Inc. This acquired Case IH agriculture dealership complex consisted of three agriculture equipment stores in Scottsbluff and Sidney, Nebraska and Torrington, Wyoming, which expanded the Company's agriculture presence in Nebraska and into Wyoming. The total consideration paid for the acquired business was $6.8 million in cash, which the Company financed through available cash resources and capacity under our existing floorplan payable and other credit facilities. The three HorizonWest dealerships are included within our Agriculture segment.

ERP Transition

The Company is in the process of converting to a new Enterprise Resource Planning ("ERP") application. The new ERP application is expected to provide data-driven and mobile-enabled sales and support tools to improve employee efficiency and deliver an enhanced customer experience. The Company integrated one pilot store on the new ERP system in the second quarter of fiscal ~~2018.~~2021; we anticipate the remaining domestic stores to be converted to the ERP within the next 12 months.

~~Restructuring costs amounted to~~ ~~$2.6 million~~ ~~in the third quarter of fiscal 2018. See the Fiscal 2018 Restructuring Plan section below for further details.~~

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~~Fiscal 2018 Restructuring Plan~~

In February 2017, to better align the Company's cost structure and business in certain markets, the Company announced a dealership restructuring plan (the "Fiscal 2018 Restructuring Plan"), which included the closure of one Construction location and 14 Agriculture locations. As of October 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 recognized $3.0 million of restructuring charges in the fourth quarter of fiscal 2017 and $10.5 million during the nine months ended October 31, 2017.

~~See also the Non-GAAP Financial Measures section below for the impact of these costs on adjusted Diluted EPS.~~

Critical Accounting Policies and Estimates

~~There have been no material changes~~ Our critical accounting policies and estimates are included in ~~our Critical Accounting Policies~~the Management's Discussion and ~~Estimates, as disclosed in~~Analysis of Financial Condition and Results of Operationssection of our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2017.~~2021. There have been no changes in our critical accounting policies since January 31, 2021.

Results of Operations

The results ~~shown~~presented below include the operating results of any ~~acquisitions~~acquisition made during these ~~periods.~~periods as well as the operating results of any stores closed or divested during these periods, up to the date of the store closure. The period-to-period comparisons included below are not necessarily indicative of future results. Segment information is provided later in ~~this~~the 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~~period in the current and preceding fiscal years. We do not distinguish between relocated or ~~newly-expanded~~recently 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~~this Results of Operations ~~section in this Quarterly Report on Form 10-Q.~~ section.

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


	Three Months Ended July 31,						Six Months Ended July 31,
	2021			2020			2021			2020
	(dollars in thousands)						(dollars in thousands)
Equipment
Revenue	$	272,733		$	202,654		$	548,713		$	421,159
Cost of revenue	240,332			180,231			484,008			377,278
Gross profit	$	32,401		$	22,423		$	64,705		$	43,881
Gross profit margin	11.9		%	11.1		%	11.8		%	10.4		%
Parts
Revenue	$	65,317		$	61,454		$	127,942		$	118,068
Cost of revenue	46,089			43,032			90,529			82,649
Gross profit	$	19,228		$	18,422		$	37,413		$	35,419
Gross profit margin	29.4		%	30.0		%	29.2		%	30.0		%
Service
Revenue	$	29,676		$	27,986		$	57,379		$	53,586
Cost of revenue	9,771			9,665			19,065			18,010
Gross profit	$	19,905		$	18,321		$	38,314		$	35,576
Gross profit margin	67.1		%	65.5		%	66.8		%	66.4		%
Rental and other
Revenue	$	9,904		$	11,371		$	16,300		$	20,860
Cost of revenue	6,420			7,849			10,737			14,636
Gross profit	$	3,484		$	3,522		$	5,563		$	6,224
Gross profit margin	35.2		%	31.0		%	34.1		%	29.8		%

Three Months Ended October 31, Nine Months Ended October 31,
2017 2016 2017 2016
(dollars in thousands) (dollars in thousands)
Equipment

Revenue $ 215,956
$ 212,194
$ 551,752
$ 570,369
Cost of revenue 199,154
201,140
509,400
532,370
Gross profit $ 16,802
$ 11,054
$ 42,352
$ 37,999
Gross profit margin 7.8 % 5.2 % 7.7 % 6.7 %
Parts
Revenue $ 64,729
$ 69,261
$ 176,892
$ 185,106
Cost of revenue 45,408
48,387
124,868
130,006
Gross profit $ 19,321
$ 20,874
$ 52,024
$ 55,100
Gross profit margin 29.8 % 30.1 % 29.4 % 29.8 %
Service
Revenue $ 31,532
$ 33,777
$ 90,807
$ 96,065
Cost of revenue 11,139
11,828
33,377
35,473
Gross profit $ 20,393
$ 21,949
$ 57,430
$ 60,592
Gross profit margin 64.7 % 65.0 % 63.2 % 63.1 %
Rental and other
Revenue $ 18,124
$ 17,034
$ 43,879
$ 43,919
Cost of revenue 13,163
12,485
32,482
32,703
Gross profit $ 4,961
$ 4,549
$ 11,397
$ 11,216
Gross profit margin 27.4 % 26.7 % 26.0 % 25.5 %

Table of Contents

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


	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
Revenue
Equipment	72.2	%	66.8	%	73.1	%	68.6	%
Parts	17.3	%	20.3	%	17.1	%	19.2	%
Service	7.9	%	9.2	%	7.6	%	8.7	%
Rental and other	2.6	%	3.7	%	2.2	%	3.4	%
Total Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Total Cost of Revenue	80.1	%	79.3	%	80.5	%	80.3	%
Gross Profit Margin	19.9	%	20.7	%	19.5	%	19.7	%
Operating Expenses	15.1	%	17.5	%	15.1	%	17.3	%

Impairment of Intangible and Long-Lived Assets	0.4	%	—	%	0.2	%	—	%
Income from Operations	4.4	%	3.2	%	4.1	%	2.4	%
Other Income (Expense)	(0.2)	%	(0.4)	%	(0.2)	%	(0.5)	%
Income Before Income Taxes	4.1	%	2.7	%	3.9	%	1.9	%
Provision for Income Taxes	1.2	%	0.6	%	1.0	%	0.5	%
Net Income	3.0	%	2.1	%	2.9	%	1.4	%

Three Months Ended October 31, Nine Months Ended October 31,
2017 2016 2017 2016
Revenue

Equipment 65.4 % 63.9 % 63.9 % 63.7 %
Parts 19.6 % 20.8 % 20.5 % 20.7 %
Service 9.5 % 10.2 % 10.5 % 10.7 %
Rental and other 5.5 % 5.1 % 5.1 % 4.9 %
Total Revenue 100.0 % 100.0 % 100.0 % 100.0 %
Total Cost of Revenue 81.4 % 82.4 % 81.1 % 81.6 %
Gross Profit Margin 18.6 % 17.6 % 18.9 % 18.4 %
Operating Expenses 15.2 % 16.0 % 17.7 % 17.7 %
Restructuring Costs 0.8 % 0.1 % 1.2 % 0.1 %
Income (Loss) from Operations 2.6 % 1.5 % — % 0.6 %
Other Income (Expense) (1.1 )% (1.5 )% (1.4 )% (1.7 )%
Income (Loss) Before Income Taxes 1.5 % — % (1.4 )% (1.1 )%
Provision for (Benefit from) Income Taxes 0.8 % (0.1 )% (0.4 )% (0.4 )%
Net Income (Loss) Including Noncontrolling Interest 0.7 % 0.1 % (1.0 )% (0.7 )%
Less: Loss Attributable to Noncontrolling Interest — % — % — % — %
Net Income (Loss) Attributable to Titan Machinery Inc. 0.7 % 0.1 % (1.0 )% (0.7 )%

Three Months Ended ~~October~~July 31, ~~2017~~2021 Compared to Three Months Ended ~~October~~July 31, ~~2016~~2020

Consolidated Results

Revenue


	Three Months Ended July 31,				Increase/		Percent
	2021		2020		(Decrease)		Change
	(dollars in thousands)
Equipment	$	272,733	$	202,654	$	70,079	34.6	%
Parts	65,317		61,454		3,863		6.3	%
Service	29,676		27,986		1,690		6.0	%
Rental and other	9,904		11,371		(1,467)		(12.9)	%
Total Revenue	$	377,630	$	303,465	$	74,165	24.4	%

Three Months Ended October 31, Increase/ Percent
2017 2016 (Decrease) Change
(dollars in thousands)
Equipment $ 215,956
$ 212,194
$ 3,762
1.8 %
Parts 64,729
69,261
(4,532 ) (6.5 )%
Service 31,532
33,777
(2,245 ) (6.6 )%
Rental and other 18,124
17,034
1,090
6.4 %
Total Revenue $ 330,341
$ 332,266
$ (1,925 ) (0.6 )%

~~The relatively flat~~ Total revenue for the ~~third~~second quarter of fiscal ~~2018~~2022 was ~~primarily~~24.4% or $74.2 million higher than the result of a decrease in Agriculture and Construction segment revenue partially offset by an increase in revenue in our International segment. Agriculture and Construction revenue decreased due to 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 in the thirdsecond quarter of fiscal ~~2017. Approximately $10.8 million of~~2021 driven primarily by increased demand for equipment, ~~revenue~~which increased equipment sales 34.6% from the prior year period. The increased equipment demand was ~~recognized~~due to higher commodity prices, higher recent net farm income, and good growing conditions in our international footprint. Company-wide same-store sales in the ~~third~~second quarter of fiscal ~~2017 as~~2022 increased 27.0% versus the ~~result of our expanded marketing plan.~~comparable period in fiscal 2021.

Table of Contents

Gross Profit


	Three Months Ended July 31,						Increase/			Percent
	2021			2020			(Decrease)			Change
	(dollars in thousands)
Gross Profit
Equipment	$	32,401		$	22,423		$	9,978		44.5	%
Parts	19,228			18,422			806			4.4	%
Service	19,905			18,321			1,584			8.6	%
Rental and other	3,484			3,522			(38)			(1.1)	%
Total Gross Profit	$	75,018		$	62,688		$	12,330		19.7	%
Gross Profit Margin
Equipment	11.9		%	11.1		%	0.8		%	7.2	%
Parts	29.4		%	30.0		%	(0.6)		%	(2.0)	%
Service	67.1		%	65.5		%	1.6		%	2.4	%
Rental and other	35.2		%	31.0		%	4.2		%	13.5	%
Total Gross Profit Margin	19.9		%	20.7		%	(0.8)		%	(3.9)	%
Gross Profit Mix
Equipment	43.2		%	35.8		%	7.4		%	20.7	%
Parts	25.6		%	29.4		%	(3.8)		%	(12.9)	%
Service	26.5		%	29.2		%	(2.7)		%	(9.2)	%
Rental and other	4.7		%	5.6		%	(0.9)		%	(16.1)	%
Total Gross Profit Mix	100.0		%	100.0		%

Three Months Ended October 31, Increase/ Percent
2017 2016 (Decrease) Change
(dollars in thousands)
Gross Profit
Equipment $ 16,802
$ 11,054
$ 5,748
52.0 %
Parts 19,321
20,874
(1,553 ) (7.4 )%
Service 20,393
21,949
(1,556 ) (7.1 )%
Rental and other 4,961
4,549
412
9.1 %
Total Gross Profit $ 61,477
$ 58,426
$ 3,051
5.2 %
Gross Profit Margin
Equipment 7.8 % 5.2 % 2.6 % 50.0 %
Parts 29.8 % 30.1 % (0.3 )% (1.0 )%
Service 64.7 % 65.0 % (0.3 )% (0.5 )%
Rental and other 27.4 % 26.7 % 0.7 % 2.6 %
Total Gross Profit Margin 18.6 % 17.6 % 1.0 % 5.7 %
Gross Profit Mix
Equipment 27.3 % 18.9 % 8.4 % 44.4 %
Parts 31.4 % 35.7 % (4.3 )% (12.0 )%
Service 33.2 % 37.6 % (4.4 )% (11.7 )%
Rental and other 8.1 % 7.8 % 0.3 % 3.8 %
Total Gross Profit Mix 100.0 % 100.0 %

Gross profit for the ~~third~~second quarter of fiscal ~~2018~~2022 increased ~~5.2%~~19.7% or $12.3 million, as compared to the same period last year. ~~Gross profit margins increased from 17.6% for the third quarter of fiscal 2017 to 18.6% for the third quarter of fiscal 2018.~~ The increase in gross profit was driven by equipment sales and equipment margin which increased from 11.1% in the prior year quarter to 11.9% in the current year quarter. The decline in total gross profit margin to 19.9% in the current quarter from 20.7% in the prior year quarter was ~~mainly~~primarily due to ~~higher~~the shift of the gross profit ~~margins~~mix to lower margin equipment sales relative to parts, service, and rental sales.

Our Company-wide absorption rate — which is calculated by dividing our gross profit from sales of parts, service and rental fleet by our operating expenses, less commission expense on equipment ~~revenue.~~

~~Our company-wide absorption~~sales, plus interest expense on floorplan payables and rental fleet debt — increased to ~~92.0%~~86.2% for the ~~third~~second quarter of fiscal ~~2018~~2022 compared to ~~90.0%~~80.9% during the same period last year as ~~our decrease~~the increase in gross profit from parts and service ~~and rental and other~~ in the second quarter of fiscal ~~2018 was~~2022 combined with lower floorplan interest expenses more than offset ~~by a reduction~~the increase in ~~our fixed~~ operating ~~costs and floorplan interest expense.~~expenses during the period.

Operating Expenses


	Three Months Ended July 31,						Increase/			Percent
	2021			2020			(Decrease)			Change
	(dollars in thousands)
Operating Expenses	$	57,074		$	53,079		$	3,995		7.5	%
Operating Expenses as a Percentage of Revenue	15.1		%	17.5		%	(2.4)		%	(13.7)	%

Three Months Ended October 31,
Percent
2017 2016 (Decrease) Change
(dollars in thousands)
Operating Expenses $ 50,374
$ 53,143
$ (2,769 ) (5.2 )%
Operating Expenses as a Percentage of Revenue 15.2 % 16.0 % (0.8 )% (5.0 )%

Our operating expenses in the ~~third~~second quarter of fiscal ~~2018 decreased $2.8 million~~2022 increased 7.5% as compared to the second quarter of fiscal 2021. The increase in operating expenses was primarily due to variable expenses associated with increased sales. Operating expenses as a percentage of revenue decreased to 15.1% in the ~~same period last year and~~second quarter of fiscal 2022 from 17.5% in the second quarter of fiscal 2021. The decrease in operating expenses as a percentage of revenue ~~decreased 5.0%~~was due to the increase in total revenue in the second quarter of fiscal 2022, as compared to the same period last year. These decreases are primarily the result of cost savings arising from our Fiscal 2018 Restructuring Plan, partially offset by an increase in our International segment operating expenses resulting from the continued build-out of our footprint and presence in our European markets.

~~Restructuring Costs~~

Three Months Ended October 31, Percent
2017 2016 Increase Change
(dollars in thousands)
Restructuring Costs $ 2,587
$ 275
$ 2,312
n/m

~~The restructuring costs recognized in the third quarters~~second quarter of fiscal ~~2018 and 2017 are charges associated with the result of~~2021, which positively affected our ~~restructuring plans and associated exit costs, including accruals for lease terminations and remaining lease obligations,~~ability to leverage our fixed operating costs.

Table of Contents

Impairment Charges


	Three Months Ended July 31,				Increase/		Percent
	2021		2020		(Decrease)		Change
	(dollars in thousands)

Impairment of Intangible and Long-Lived Assets	$	1,498	$	—	$	1,498	100.0	%

~~termination benefits, and the costs associated with relocating certain assets of our closed stores.~~ The Company ~~anticipates recognizing approximately~~recognized impairment expense of $1.5 million ~~of additional restructuring costs during~~related to certain intangible assets and and long-lived assets in its International segment in the ~~remainder of fiscal 2018.~~

~~Other Income (Expense)~~

Three Months Ended October 31,
Percent
2017 2016 (Decrease) Change
(dollars in thousands)
Interest income and other income $ 380
$ 502
$ (122 ) (24.3 )%
Floorplan interest expense (1,900 ) (3,294 ) (1,394 ) (42.3 )%
Other interest expense (2,110 ) (2,160 ) (50 ) (2.3 )%

~~The decrease in floorplan interest expense for the third~~second quarter of fiscal ~~2018,~~2022. The Company did not recognize any impairment expense in the second quarter of fiscal 2021.

Other Income (Expense)


	Three Months Ended July 31,				Increase/		Percent
	2021		2020		(Decrease)		Change
	(dollars in thousands)
Interest and other income	$	654	$	562	$	92	16.4	%
Floorplan interest expense	(350)		(901)		(551)		(61.2)	%
Other interest expense	(1,118)		(978)		140		14.3	%

Floorplan interest expense decreased 61.2% in the second quarter of fiscal 2022, as compared to the ~~third~~second quarter of fiscal ~~2017,~~2021, due to lower borrowings. The increase in other interest expense was primarily due to ~~a decrease in our average interest-bearing inventory in~~increased fixed rate long term debt from real estate purchases throughout the third quarter of fiscal 2018. Interest expense associated with our senior convertible notes, which is reflected in other interest expense, decreased $0.5 million in the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017 due to interest savings resulting from our repurchases of our senior convertible notes. Other interest expense for the third quarter of fiscal 2017 includes a $1.0 million gain related to the repurchases of our senior convertible notes partially offset by $0.6 million of expense recognized related to the write-off of capitalized debt issuance costs.year.

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


	Three Months Ended July 31,				Increase/		Percent
	2021		2020		(Decrease)		Change
	(dollars in thousands)
Provision for Income Taxes	$	4,383	$	1,892	$	2,491	131.7	%

Three Months Ended October 31, Increase/ Percent
2017 2016 (Decrease) Change
(dollars in thousands)
Provision for (Benefit from) Income Taxes $ 2,502
$ (208 ) $ (2,710 ) (1,302.9 )%

Our effective tax rate was ~~51.2%~~28.0% and 22.8% for the ~~third quarter of fiscal 2018~~three months ended July 31, 2021 and ~~(371.4)% for the same period last year.~~July 31, 2020. The ~~difference in our~~ effective tax rate ~~is primarily due to~~for the ~~change in mix~~three months ended July 31, 2021 benefited from vesting of share-based compensation but was offset by the recognition of a valuation allowance on certain of our ~~domestic and~~ foreign ~~income or losses before income taxes in relation to our total income or loss before income taxes, and the impact of valuation allowances recognized for~~ deferred tax assets including ~~net operating losses, in certain~~recording a valuation allowance on the remaining deferred tax assets of our ~~domestic and international jurisdictions.~~Germany entity. For the three months ending July 31, 2020, the effective tax rate benefited from a weakening Ukrainian currency but was offset by increased tax expense on the vesting of share-based compensation.

Table of Contents

Segment Results

Certain financial information for our Agriculture, Construction and International business segments is ~~set forth~~presented 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
	2021		2020		(Decrease)		Change
	(dollars in thousands)
Revenue
Agriculture	$	219,364	$	169,072	$	50,292	29.8	%
Construction	80,943		77,719		3,224		4.1	%
International	77,323		56,674		20,649		36.4	%
Total	$	377,630	$	303,465	$	74,165	24.4	%

Income (Loss) Before Income Taxes
Agriculture	$	12,067	$	6,752	$	5,315	78.7	%
Construction	2,815		1,375		1,440		104.7	%
International	430		(432)		862		n/m
Segment income before income taxes	15,312		7,695		7,617		99.0	%
Shared Resources	320		597		(277)		(46.4)	%
Total	$	15,632	$	8,292	$	7,340	88.5	%

Three Months Ended October 31, Increase/ Percent
2017 2016 (Decrease) Change
(dollars in thousands)
Revenue
Agriculture $ 186,546
$ 205,540
$ (18,994 ) (9.2 )%
Construction 72,942
80,789
(7,847 ) (9.7 )%
International 70,853
45,937
24,916
54.2 %
Total $ 330,341
$ 332,266
$ (1,925 ) (0.6 )%

Income (Loss) Before Income Taxes
Agriculture $ 4,909
$ (1,798 ) $ 6,707
373.0 %
Construction (2,373 ) (105 ) (2,268 ) *N/M
International 2,453
604
1,849
306.1 %
Segment income (loss) before income taxes 4,989
(1,299 ) 6,288
484.1 %
Shared Resources (103 ) 1,355
(1,458 ) (107.6 )%
Total $ 4,886
$ 56
$ 4,830
*N/M
Agriculture

~~Table of Contents~~

~~Agriculture~~

Agriculture segment revenue for the ~~third~~second quarter of fiscal ~~2018 decreased 9.2%~~2022 increased 29.8% compared to the ~~same period last year. Same-store sales increased 3.0% over the third~~second quarter of fiscal ~~2017.~~2021. The higher revenue ~~decrease~~ was driven primarily by increased equipment demand due to ~~a decrease~~higher commodity prices, higher recent net farm income. Same-store sales in ~~revenue resulting from~~our Agriculture segment increased 29.3% for the ~~impact~~second quarter of ~~our store closings associated with our Fiscal 2018 Restructuring Plan.~~fiscal 2022 as compared to the second quarter of fiscal 2021, primarily driven by an increase in equipment sales.

Agriculture segment income before income taxes was ~~$4.9~~$12.1 million for the ~~third~~second quarter of fiscal ~~2018~~2022 compared to ~~a $1.8~~$6.8 million ~~loss before income taxes~~ for the ~~third~~second quarter of fiscal ~~2017. The increased segment income before income taxes was largely the result of~~2021. Higher equipment revenue along with increased gross profit ~~margins~~margin on equipment ~~revenues, operating expense savings as a result of~~drove the ~~Fiscal 2018 Restructuring Plan, as well as a decrease~~increase in gross profit. Decreased inventory levels resulted in lower floorplan and other interest expense asfor the ~~result of a decrease in our interest-bearing inventory in the third~~second quarter of fiscal ~~2018.~~2022, as compared to the second quarter of fiscal 2021, which also contributed to the improvement in segment results.

Construction

Construction segment revenue for the ~~third~~second quarter of fiscal ~~2018 decreased 9.7%~~2022 increased 4.1% compared to the ~~same period last year.~~second quarter of fiscal 2021. The higher revenue ~~decrease~~ was driven by increases in our equipment sales, as compared to the prior year’s second quarter. This increase was partially offset by the divestiture of our Phoenix and Tucson, Arizona stores in the fourth quarter of fiscal 2021 as well as lower rental and other revenue due to a ~~same-store~~smaller rental fleet. Same-store sales ~~decrease of 8.7% over~~in our Construction segment increased 14.1% for the ~~third~~second quarter of fiscal ~~2017, and was primarily~~2022, as compared to the ~~result of decreased equipment revenue, largely resulting from the impact of the incremental revenue associated with our expanded marketing of aged equipment inventory that occurred in the third~~second quarter of fiscal ~~2017, which totaled $5.3 million.~~2021.

Our Construction segment ~~loss~~income before ~~income~~ taxes was ~~$2.4~~$2.8 million for the ~~third~~second quarter of fiscal ~~2018~~2022 compared to ~~$0.1~~$1.4 million ~~for~~in the ~~third~~second quarter of fiscal ~~2017.~~2021. The ~~decrease~~improvement in segment results was primarily due to ~~a decrease in segment revenues and gross profit~~increased construction activity as well as operational improvements within the ~~recognition of $1.7 million of restructuring costs~~segment. Decreased inventory levels resulted in lower floorplan and other interest expense for the ~~third~~second quarter of fiscal ~~2018, partially offset by decreases~~2022, as compared to the second quarter of fiscal 2021, which also contributed to the improvement in ~~operating expenses related to cost savings from our Fiscal 2018 Restructuring Plan.~~segment results. The dollar utilization — which is calculated by dividing the rental revenue earned on our rental fleet by the average gross carrying value of our rental fleet ~~decreased slightly~~(comprised of original equipment costs plus additional capitalized costs) for that period — of our rental fleet increased from ~~28.4%~~22.2% in the ~~third~~second quarter of fiscal ~~2017~~2021 to ~~27.2%~~26.6% in the ~~third~~second quarter of fiscal ~~2018.~~2022.

International

International segment revenue, for the ~~third~~second quarter of fiscal ~~2018~~2022 increased ~~54.2%~~36.4% compared to the ~~same period last year primarily due to increased equipment revenue. Equipment revenue increased in the third~~second quarter of fiscal ~~2018 primarily due to~~2021. Higher segment revenue was driven by many of the ~~build-out~~same macroeconomic factors as the Agriculture segment, as well as favorable growing condition throughout most of ~~our~~the farming footprint ~~availability~~we serve, which has improved customer sentiment and has had a positive impact on equipment sales.

Table of ~~subvention funds and positive crop conditions in certain of our markets.~~Contents

Our International segment income before income taxes was ~~$2.5~~$0.4 million for the ~~third~~second quarter of fiscal ~~2018~~2022 compared to ~~$0.6~~segment loss of $0.4 million for the same period last year. The increase in segment pre-tax income ~~before income taxes~~ was primarily ~~due to~~ the ~~increase in segment revenue as noted above, but~~result of increased equipment sales and equipment gross profit margin and was partially offset by an ~~increase in operating expenses resulting from the continued build-out~~impairment of ~~our footprint~~certain intangible and ~~presence~~fixed assets in our ~~European markets.~~German reporting unit.

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 loss~~Resources income before income taxes was ~~$0.1~~$0.3 million for the ~~third~~second quarter of fiscal ~~2018~~2022 compared to income before income taxes of ~~$1.4~~$0.6 million for the same period last year.

~~Nine~~

Table of Contents

Six Months Ended ~~October~~July 31, ~~2017~~2021 Compared to ~~Nine~~Six Months Ended ~~October~~July 31, ~~2016~~2020

Consolidated Results

Revenue


	Six Months Ended July 31,				Increase/		Percent
	2021		2020		(Decrease)		Change
	(dollars in thousands)
Equipment	$	548,713	$	421,159	$	127,554	30.3	%
Parts	127,942		118,068		9,874		8.4	%
Service	57,379		53,586		3,793		7.1	%
Rental and other	16,300		20,860		(4,560)		(21.9)	%
Total Revenue	$	750,334	$	613,673	$	136,661	22.3	%

Nine Months Ended October 31,
Percent
2017 2016 Decrease Change
(dollars in thousands)
Equipment $ 551,752
$ 570,369
$ (18,617 ) (3.3 )%
Parts 176,892
185,106
(8,214 ) (4.4 )%
Service 90,807
96,065
(5,258 ) (5.5 )%
Rental and other 43,879
43,919
(40 ) (0.1 )%
Total Revenue $ 863,330
$ 895,459
$ (32,129 ) (3.6 )%

~~Table of Contents~~

~~The decrease in~~ Total revenue for the first ~~nine~~six months of fiscal ~~2018~~2022 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 inup 22.3% or $136.7 million compared to the first ~~nine~~six months of fiscal ~~2017. Approximately $41.0 million of~~2021, and was driven by increases in revenue from our equipment, ~~revenue~~parts and service businesses. The 30.3% increase in equipment sales was ~~recognized~~the driving factor in the total sales increase from prior year and all three segments saw increases, compared to the prior year period, in equipment sales. Company-wide same-store sales increased 23.6% over the comparable prior year period.

Gross Profit


	Six Months Ended July 31,						Increase/			Percent
	2021			2020			(Decrease)			Change
	(dollars in thousands)
Gross Profit
Equipment	$	64,705		$	43,881		$	20,824		47.5	%
Parts	37,413			35,419			1,994			5.6	%
Service	38,314			35,576			2,738			7.7	%
Rental and other	5,563			6,224			(661)			(10.6)	%
Total Gross Profit	$	145,995		$	121,100		$	24,895		20.6	%
Gross Profit Margin
Equipment	11.8		%	10.4		%	1.4		%	13.5	%
Parts	29.2		%	30.0		%	(0.8)		%	(2.7)	%
Service	66.8		%	66.4		%	0.4		%	0.6	%
Rental and other	34.1		%	29.8		%	4.3		%	14.4	%
Total Gross Profit Margin	19.5		%	19.7		%	(0.2)		%	(1.0)	%
Gross Profit Mix
Equipment	44.3		%	36.2		%	8.1		%	22.4	%
Parts	25.6		%	29.2		%	(3.6)		%	(12.3)	%
Service	26.2		%	29.4		%	(3.2)		%	(10.9)	%
Rental and other	3.9		%	5.2		%	(1.3)		%	(25.0)	%
Total Gross Profit Mix	100.0		%	100.0		%

Gross profit increased 20.6% or $24.9 million for the first ~~nine~~six months of fiscal 2017 as the result of our expanded marketing plan of aged equipment inventory. The decrease in Agriculture and Construction segment revenue was partially offset by an increase in revenue in our International segment.

~~Gross Profit~~

Nine Months Ended October 31, Increase/ Percent
2017 2016 (Decrease) Change
(dollars in thousands)
Gross Profit
Equipment $ 42,352
$ 37,999
$ 4,353
11.5 %
Parts 52,024
55,100
(3,076 ) (5.6 )%
Service 57,430
60,592
(3,162 ) (5.2 )%
Rental and other 11,397
11,216
181
1.6 %
Total Gross Profit $ 163,203
$ 164,907
$ (1,704 ) (1.0 )%
Gross Profit Margin
Equipment 7.7 % 6.7 % 1.0 % 14.9 %
Parts 29.4 % 29.8 % (0.4 )% (1.3 )%
Service 63.2 % 63.1 % 0.1 % 0.2 %
Rental and other 26.0 % 25.5 % 0.5 % 2.0 %
Total Gross Profit Margin 18.9 % 18.4 % 0.5 % 2.7 %
Gross Profit Mix
Equipment 26.0 % 23.0 % 3.0 % 13.0 %
Parts 31.8 % 33.5 % (1.7 )% (5.1 )%
Service 35.2 % 36.7 % (1.5 )% (4.1 )%
Rental and other 7.0 % 6.8 % 0.2 % 2.9 %
Total Gross Profit Mix 100.0 % 100.0 %

~~The $1.7 million decrease in gross profit for the first nine months of fiscal 2018,~~2022, as compared to the same period last ~~year,~~year. The increase in gross profit was primarily the result of increased equipment sales on stronger equipment margins for the first six months of fiscal 2022, These higher sales and margins are driven by current industry conditions of lower supply and higher demand. The overall gross profit margin decreased from 19.7% to 19.5% was primarily due to a shift in gross profit mix to lower ~~revenue~~margin equipment sales relative to parts, service, and rental sales.

Our Company-wide absorption rate for the first ~~nine~~six months of fiscal 2018. The decrease in revenues was partially offset by an increase in gross profit margin percentage from 18.4% for the first nine months of fiscal 2017 to 18.9% for the first nine months of fiscal 2018, which was largely the result of improved equipment margins during the first nine months of fiscal 2018.

~~Our company-wide absorption for the first nine months of fiscal 2018~~2022 increased to ~~81.6%~~81.0% as compared to ~~79.9%~~77.0% during the same period last year as ~~our decrease~~the increase in gross profit from parts and service ~~and rental and other in fiscal 2018 was~~combined with lower floorplan interest expense more than offset ~~by a reduction in our fixed operating costs and floorplan interest expense.~~

~~Operating Expenses~~

Nine Months Ended October 31,
Percent
2017 2016 (Decrease) Change
(dollars in thousands)
Operating Expenses $ 152,884
$ 159,132
$ (6,248 ) (3.9 )%
Operating Expenses as a Percentage of Revenue 17.7 % 17.7 % — % — %

~~The $6.2 million decrease~~the increase in operating expenses during the six month period compared to that of the prior year six month period.

Table of Contents

Operating Expenses


	Six Months Ended July 31,						Increase/			Percent
	2021			2020			(Decrease)			Change
	(dollars in thousands)
Operating Expenses	$	113,516		$	106,137		$	7,379		7.0	%
Operating Expenses as a Percentage of Revenue	15.1		%	17.3		%	(2.2)		%	(12.7)	%

Our operating expenses for the first six months of fiscal 2022 increased $7.4 million as compared to the ~~same period last year,~~first six months of fiscal 2021. The increase in operating expenses was primarily due to variable expenses associated with increased sales. Operating expenses as a percentage of revenue decreased to 15.1% in the ~~result~~first six months of ~~cost savings resulting~~fiscal 2022 from ~~our Fiscal 2018 Restructuring Plan.~~17.3% in the first six months of fiscal 2021. The ~~consistent level of~~decrease in operating expenses as a percentage of total revenue was ~~primarily~~ due to the ~~decrease~~increase in total revenue in the first ~~nine~~six months of fiscal ~~2018,~~2022, as compared to the ~~same period last year,~~first six months of fiscal 2021, which ~~negatively~~positively affected our ability to leverage our fixed operating costs.

Impairment Charges

Six Months Ended July 31,

Increase/

Percent

2021

2020

(Decrease)

Change

(dollars in thousands)

Impairment of Intangible and Long-Lived Assets

1,498

216

1,282

n/m

~~Table~~ We recognized $1.5 million in impairment charges in our International segment related to certain intangible and long-lived assets and $0.2 million of ~~Contents~~

impairment charges on certain long-lived assets in our Construction segment during the first six months of fiscal 2022 and 2021, respectively.

Other Income (Expense)


	Six Months Ended July 31,				Increase/		Percent
	2021		2020		(Decrease)		Change
	(dollars in thousands)
Interest and other income	$	1,320	$	692	$	628	90.8	%
Floorplan interest expense	(768)		(2,054)		(1,286)		(62.6)	%
Other interest expense	(2,222)		(1,944)		278		14.3	%

~~Restructuring Costs~~

Nine Months Ended October 31,
Percent
2017 2016 Increase Change
(dollars in thousands)
Restructuring Costs $ 10,480
$ 546
$ 9,934
n/m

~~The restructuring costs recognized~~ Floorplan interest expense decreased 62.6% for the first ~~nine~~six months of fiscal ~~2018,~~2022, as compared to the same period last year, ~~are charges associated with the Company's restructuring plans~~primarily due to lower borrowings and ~~associated exit costs, including accruals for lease terminations and remaining lease obligations, termination benefits, and the costs associated with relocating certain assets of our closed stores.~~a lower interest rate environment. The ~~Company anticipates recognizing approximately $1.5 million of additional restructuring costs during the remainder of fiscal 2018.~~

~~Other Income (Expense)~~

Nine Months Ended October 31, Increase/ Percent
2017 2016 (Decrease) Change
(dollars in thousands)
Interest income and other income $ 1,840
$ 1,251
$ 589
47.1 %
Floorplan interest expense (6,719 ) (10,843 ) (4,124 ) (38.0 )%
Other interest expense (6,694 ) (5,930 ) 764
12.9 %

~~The decrease~~increase in ~~floorplan~~other interest expense ~~for~~in the first ~~nine~~six months of fiscal ~~2018,~~2022, as compared to the first six months of fiscal 2021, is the result of increased long term debt on real estate purchased in the past year. The increase in Interest and other income in the first six months of fiscal 2022 as compared to the same period ~~last year, was~~of fiscal 2021 is primarily due to the foreign currency remeasurement losses in Ukraine, resulting from a ~~decrease in our average interest-bearing inventory~~devaluation of the Ukrainian hryvnia in the first ~~nine months~~quarter of fiscal ~~2018. For the first nine months~~2021.

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


	Six Months Ended July 31,				Increase/		Percent
	2021		2020		Decrease		Change
	(dollars in thousands)
Provision for Income Taxes	$	7,515	$	2,779	$	4,736	n/m

Nine Months Ended October 31,
Percent
2017 2016 Increase Change
(dollars in thousands)
Provision for (Benefit from) Income Taxes $ (3,000 ) $ (3,997 ) $ (997 ) n/m

Our effective tax rate was 25.6% for the first ~~nine~~six months of fiscal ~~2018~~2022 and ~~38.8%~~24.3% for the same period last year. The ~~difference in our~~ effective tax rate ~~is primarily due to~~for the ~~change in mix~~six months ended July 31, 2021 benefited from vesting of share-based compensation but was offset by the recognition of a valuation allowance on certain of our ~~domestic and~~ foreign ~~income or losses before income taxes in relation to our total loss before income taxes, and the impact of valuation allowances recognized for~~ deferred tax assets including ~~net operating losses, in certain~~recording a valuation allowance on the remaining deferred tax assets of our ~~domestic and international jurisdictions.~~Germany entity. For the six months ended July 31, 2020, the effective tax rate benefited from a weakening Ukrainian currency but was offset by increased tax expense on the vesting of share-based compensation.


	Six Months Ended July 31,				Increase/		Percent
	2021		2020		(Decrease)		Change
	(dollars in thousands)
Revenue
Agriculture	$	448,915	$	362,700	$	86,215	23.8	%
Construction	149,550		137,833		11,717		8.5	%
International	151,869		113,140		38,729		34.2	%
Total	$	750,334	$	613,673	$	136,661	22.3	%

Income (Loss) Before Income Taxes
Agriculture	$	23,292	$	12,914	$	10,378	80.4	%
Construction	2,953		(1,498)		4,451		n/m
International	3,238		(711)		3,949		n/m
Segment income before income taxes	29,483		10,705		18,778		n/m
Shared Resources	(172)		736		(908)		n/m
Total	$	29,311	$	11,441	$	17,870	n/m

Nine Months Ended October 31, Increase/ Percent
2017 2016 (Decrease) Change
(dollars in thousands)
Revenue
Agriculture $ 488,716
$ 538,060
$ (49,344 ) (9.2 )%
Construction 214,252
241,922
(27,670 ) (11.4 )%
International 160,362
115,477
44,885
38.9 %
Total $ 863,330
$ 895,459
$ (32,129 ) (3.6 )%

Income (Loss) Before Income Taxes
Agriculture $ (5,870 ) $ (9,881 ) $ 4,011
40.6 %
Construction (4,076 ) (1,523 ) (2,553 ) (167.6 )%
International 3,331
(88 ) 3,419
*N/M
Segment income (loss) before income taxes (6,615 ) (11,492 ) 4,877
42.4 %
Shared Resources (5,119 ) 1,199
(6,318 ) (526.9 )%
Total $ (11,734 ) $ (10,293 ) $ (1,441 ) (14.0 )%

Agriculture segment revenue for the first ~~nine~~six months of fiscal ~~2018 decreased 9.2%~~2022 increased 23.8% compared to the same period last year. ~~The revenue decrease was primarily~~We experienced increases across our equipment, parts and service businesses.Equipment sales were driven by increased equipment demand due to ~~a decrease~~higher commodity prices, higher recent net farm income, as well as current and prior year government support payments.All sources of revenue in ~~revenue resulting~~this segment benefited from the ~~impact~~addition of ~~our store closings associated with our Fiscal 2018 Restructuring Plan. Agriculture same-store~~the three HorizonWest locations (acquired in May 2020) that were not in the full prior year six-month period. Same-store sales ~~decreased 0.5%~~increased 21.7% for the first six months of fiscal 2022, as compared to the same period last year.

Agriculture segment ~~loss~~income before income taxes was ~~$5.9~~$23.3 million for the first ~~nine~~six months of fiscal ~~2018~~2022 compared to ~~loss before income taxes of $9.9~~$12.9 million over the first ~~nine~~six months of fiscal ~~2017.~~2021. The ~~decrease~~improvement in segment ~~loss before income taxes~~results was ~~largely~~ the result of higher equipment revenue along with higher gross profit ~~margins~~margin on equipment ~~revenue, operating expense savings as a result~~driven by an industry environment of ~~our Fiscal 2018 Restructuring Plan~~high demand and ~~a decrease~~lower supply. Decreased inventory levels resulted in lower floorplan and other interest expense asfor the ~~result~~six months ended July 31, 2021, which also contributed to the improvement in segment results.

Construction segment revenue for the first ~~nine~~six months of fiscal ~~2018~~2022 increased 8.5% compared to the same period last year, due to a same-store sales increase of 19.3% which more than offset our divestiture of the Phoenix and Tucson, Arizona stores in the fourth quarter of fiscal year 2021. Higher equipment sales were driven by increased construction activity throughout the footprint.

Our Construction segment income before income taxes was $3.0 million for the first six months of fiscal 2022 compared to a loss of $1.5 million for the first six months of fiscal 2021. The increase in segment results was primarily due to increased construction activity as well as operational improvements within the segment. The segment also benefited from decreased ~~11.4%~~inventory levels which resulted in lower floorplan and other interest expense for the six months ended July 31, 2021. The dollar utilization of our rental fleet increased from 20.5% in the first six months of fiscal 2021 to 22.9% in the first six months of fiscal 2022.

International segment revenue for the first six months of fiscal 2022 increased 34.2% compared to the same period last year. ~~The~~Higher segment revenue ~~decrease was due to a Construction same-store sales decrease~~is being driven by many of ~~10.7% compared to~~ the same ~~period last year and was primarily~~macroeconomic factors as the result of decreased equipment revenue resulting from the impact of the incremental revenue associated with our expanded marketing of aged equipment inventory that occurred in the first nine months of fiscal 2017, which totaled approximately $19.3 million.

~~Our Construction~~Agriculture segment ~~loss before income taxes was $4.1 million~~as well as favorable growing conditions for the first nine months of fiscal 2018 compared to $1.5 million for the first nine months of fiscal 2017. The decline in segment results was primarily due to the decrease in revenue noted above and increased restructuring costs, but partially offset by decreases in operating expenses and floorplan interest expense. Restructuring costs recognized in the first nine months of fiscal 2018 were $2.0 million. The decrease in operating expenses reflects cost savings associated with our Fiscal 2018 Restructuring Plan, and the decrease in floorplan interest expense is the result of a decrease in our average interest-bearing inventory in the first nine months of fiscal 2018 as compared to the first nine months of fiscal 2017. The dollar utilizationmuch of our ~~rental fleet in the first nine months~~farming footprint which has had a positive impact on all sources of ~~fiscal 2018 was 23.8%, with the 24.4% in the first nine months of fiscal 2017.~~sales, but primarily equipment sales.

International segment revenue for the first nine months of fiscal 2018 increased 38.9% compared to the same period last year primarily due to increased equipment revenue. Equipment revenue increased in the first nine months of fiscal 2018 primarily due to the build-out of our footprint, availability of subvention funds and positive crop conditions in certain of our markets.

Our International segment income before income taxes was ~~$3.3~~$3.2 million for the first ~~nine~~six months of fiscal ~~2018~~2022 compared to ~~segment~~a loss before income taxes of ~~$0.1~~$0.7 million for the same period last year. The ~~increase~~higher segment results were the result of increased equipment sales and equipment gross profit margin. Impairment charges of $1.5 million were recognized in ~~segment income before income taxes was primarily due~~the first six months of fiscal 2022, related to the ~~increase in segment revenue as noted above, but partially offset by an increase in operating expenses resulting from the continued build-out~~impairment of certain intangible and long-lived assets of our ~~footprint and presence in our European markets.~~

German reporting unit.

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~~Resources loss before income taxes was ~~$5.1~~$0.2 million for the first ~~nine~~six months of fiscal ~~2018~~2022 compared to income before income taxes of ~~$1.2~~$0.7 million for the same period last year. ~~For the first nine months~~

Table of fiscal 2018, loss before income taxes was impacted by $1.2 million in restructuring costs related to the Fiscal 2018 Restructuring Plan and $0.6 million in floorplan interest expense related to the interest rate swap termination and reclassification. For the first nine months of fiscal 2017, income before taxes included a $3.1 million gain recognized as a result of our repurchases of $54.3 million face value of senior convertible notes.Contents

Non-GAAP Financial Measures

To supplement net income ~~(loss) including noncontrolling interest~~ and ~~our~~diluted earnings ~~(loss)~~ per share ~~- diluted~~ ("Diluted EPS"), both GAAP measures, we present adjusted net income ~~(loss) including noncontrolling interest~~ and adjusted Diluted EPS, both non-GAAP measures, which ~~exclude the impact of impairments, gains or losses on repurchases of senior convertible notes, the write-off of debt issuance~~include adjustments for items such as valuation allowances for income tax, ERP transition costs ~~restructuring costs associated with our realignment/store closings, reclassification of accumulated losses on our interest rate swap~~for fiscal year 2021, impairment charges and foreign currency remeasurement gains/losses in ~~Ukraine resulting from a devaluation of the UAH, and gains on insurance recoveries.~~Ukraine. 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 adjusted results with those of other companies.

~~Table of Contents~~

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


	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(dollars in thousands, except per share data)
Adjusted Net Income
Net Income	$	11,249	$	6,400	$	21,796	$	8,662
Adjustments
ERP transition costs	—		763		—		1,484

Impairment charges	1,498		—		1,498		216
Ukraine remeasurement (gain) / loss	(53)		(130)		(183)		635
Total Pre-Tax Adjustments	1,445		633		1,315		2,335
Less: Tax Effect of Adjustments (1)	—		466		—		1,047
Plus: Income Tax Valuation Allowance	278		—		278		—
Total Adjustments	1,723		167		1,593		1,288
Adjusted Net Income	$	12,972	$	6,567	$	23,389	$	9,950

Adjusted Diluted EPS
Diluted EPS	$	0.50	$	0.28	$	0.97	$	0.39
Adjustments (2)
ERP transition costs	—		0.03		—		0.07

Impairment charges	0.07		—		0.07		0.01
Ukraine remeasurement (gain) / loss	(0.01)		—		(0.01)		0.02
Total Pre-Tax Adjustments	0.06		0.03		0.06		0.10
Less: Tax Effect of Adjustments (1)	—		0.02		—		0.05
Plus: Income Tax Valuation Allowance	0.01		—		0.01		—
Total Adjustments	0.07		0.01		0.07		0.05
Adjusted Diluted EPS	$	0.57	$	0.29	$	1.04	$	0.44

(1) The tax effect of U.S. related adjustments was calculated using a 26% tax rate, determined based on a 21% federal statutory rate and a 5% blended state income tax rate. Included in the tax effect of the adjustments is the tax impact of foreign currency changes in Ukraine of $0.3 million for the three months ended July 31, 2020 and $0.6 million for the six months ended July 31, 2020.
(2) Adjustments are net of amounts allocated to participating securities where applicable.

Three Months Ended October 31, Nine Months Ended October 31,
2017 2016 2017 2016
(dollars in thousands, except per share data)
Net Income (Loss) Including Noncontrolling Interest

Net Income (Loss) Including Noncontrolling Interest $ 2,384

$ 264

$ (8,734 )
$ (6,296 )
Adjustments

Impairment 131

275

131

275
(Gain) Loss on Repurchase of Senior Convertible Notes 18

(1,028 )
(22 )
(3,130 )
Debt Issuance Cost Write-Off —

624

416

624
Restructuring Costs 2,456

—

10,349

271
Ukraine Remeasurement (1) —

—

—

195
Interest Rate Swap Termination & Reclassification —
—
631
—
Gain on Insurance Recoveries —

(586 )
—

(586 )
Total Pre-Tax Adjustments 2,605

(715 )
11,505

(2,351 )
Less: Tax Effect of Adjustments (2) 895

(285 )
4,010

(1,018 )
Plus: Income Tax Valuation Allowance 325

—

525

—
Total Adjustments 2,035

(430 )
8,020

(1,333 )
Adjusted Net Income (Loss) Including Noncontrolling Interest $ 4,419

$ (166 )
$ (714 )
$ (7,629 )

Earnings (Loss) per Share - Diluted

Earnings (Loss) per Share - Diluted $ 0.11

$ 0.01

$ (0.40 )
$ (0.27 )
Adjustments (3)

Impairment 0.01

0.01

0.01

0.01
(Gain) Loss on Repurchase of Senior Convertible Notes —

(0.04 )
—

(0.15 )
Debt Issuance Cost Write-Off —

0.03

0.02

0.02
Restructuring Costs 0.11

—

0.48

0.01
Ukraine Remeasurement (1) —

—

—

0.01
Interest Rate Swap Termination & Reclassification —
—
0.03
—
Gain on Insurance Recoveries —

(0.03 )
—

(0.03 )
Total Pre-Tax Adjustments 0.12

(0.03 )
0.54

(0.13 )
Less: Tax Effect of Adjustments (2) 0.04

(0.01 )
0.19

(0.04 )
Plus: Income Tax Valuation Allowance 0.01

—

0.02

—
Total Non-GAAP Adjustments 0.09

(0.02 )
0.37

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

$ (0.01 )
$ (0.03 )
$ (0.36 )

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

(2) The tax effect of adjustments was calculated using a 35% tax rate for all U.S. related items. That rate was determined based on a 35% federal statutory rate and no impact for state taxes given our valuation allowance against state deferred tax assets, including net operating losses. No tax effect was recognized for foreign related items as all adjustments occurred in foreign jurisdictions that have full valuation allowances on deferred tax assets.

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

~~Table of Contents~~

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

Table of Contents

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, ~~2017,~~2021, the Company had ~~discretionary~~ floorplan payable lines of credit for equipment purchases totaling ~~approximately $727.4~~$771.0 million, which ~~included a $140.0 million Floorplan Payable Line under the Wells Fargo Credit Agreement,~~is primarily comprised of a $450.0 million credit facility with CNH Industrial, ~~Capital,~~ a ~~$30.0~~$185.0 million floorplan payable line under the Bank Syndicate Agreement, and a $60.0 million credit facility with DLL Finance and the U.S. dollar equivalent of $107.4 million in credit facilities related to our foreign subsidiaries. Floorplan payables relating to these credit facilities totaled approximately $306.6 million of the total floorplan payable balance of $322.4 million outstanding as of October 31, 2017.Finance.

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 of $275.0 million to an aggregate of $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. Also, in September 2017, the Company also provided notice to DLL Finance of its election to reduce the maximum credit amount available under the DLL Finance credit facility from $45.0 million to $30.0 million.

In September 2017, we entered into amendments of both our DLL Finance credit facility and our CNH Industrial Capital credit facility, in each case decreasing the minimum fixed charge coverage ratio from 1.25:1.00 to 1.10:1.00.

Our equipment inventory turnover ~~was 1.7~~increased from 1.6 times for the ~~four quarters~~rolling 12 month period ended ~~October~~July 31, ~~2017~~2020 to 2.7 times for the rolling 12 month period ended July 31, 2021. The increase in equipment turnover was attributable to an increase in equipment sales and a decrease in average equipment inventory over the rolling 12 month period ended July 31, 2021 as compared to ~~1.1 for~~ the four quarters ended October 31, 2016. The improvement in our equipment inventory turnover was driven by a 10.9% reduction in equipment inventory from October 31, 2016 to October 31, 2017; however, this decrease was partially offset by lower equipment sales in the four-quartersame period ended ~~October~~July 31, ~~2017.~~2020. Our equity in equipment inventory, which reflects the portion of our equipment inventory balance that is not financed by floorplan payables, decreased to ~~29.6%~~44.7% as of ~~October~~July 31, ~~2017~~2021 from ~~41.1%~~52.1% as of January 31, ~~2017.~~2021. The decrease was due to more inventory being financed with non-interest bearing floorplan lines of credit.

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, and funding capital expenditures, including rental fleet ~~assets, and, from time to time, opportunistically repurchasing our outstanding senior convertible notes.~~assets. Based on our current operational performance, we believe our cash flow from operations, available cash and available ~~borrowings~~borrowing capacity under our existing credit facilities will adequately provide for 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 $727.4 million as of October 31, 2017, are described in Note 4 of the notes to our consolidated financial statements.

As of ~~October~~July 31, ~~2017,~~2021, we were in compliance with the financial covenants under our CNH Industrial and DLL Finance credit agreements and we were not subject to the fixed charge coverage ratio covenant under the ~~Wells Fargo Credit~~Bank Syndicate Agreement as our adjusted excess availability plus eligible cash collateral (as defined therein) was not less than 15% of the ~~total~~lesser of (i) aggregate borrowing base and (ii) maximum credit amount ~~of the credit facility~~ as of ~~October~~July 31, ~~2017.~~2021. While not expected to occur, if anticipated operating results were to 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 Byby (Used for) Operating Activities

Net cash provided by operating activities was ~~$56.0~~$28.6 million for the ~~nine~~first six months ~~ended October 31, 2017,~~of fiscal 2022, compared to ~~$74.4 million for the nine months ended October 31, 2016. Net~~net cash provided by operating activities of $13.0 million for the ~~nine month periods ending October 31, 2017 and 2016 was~~first six months of fiscal 2021. The change in net cash provided by operating activities is primarily ~~attributable to a changing mix~~the result of ~~manufacturer versus non-manufacturer~~

~~Table of Contents~~

~~floorplan financing,~~ an increase in net income and an increase in the amount of inventory financed with non-interest bearing floorplan lines of ~~$51.5 million~~credit from manufacturers which was partially offset by an increase in receivables and prepaid expenses for the ~~nine~~first six months ~~ended October 31, 2017 compared to a decrease in inventory~~ of ~~$81.8 million for the nine months ended October 31, 2016, and other changes in working capital.~~fiscal 2022.

We evaluate our cash flow from operating activities net of all floorplan activity and maintaining a constant level of equity in our equipment inventory. Taking these adjustments into account, our adjusted cash flow used byfor operating activities was ~~$10.8~~$19.0 million for the ~~nine~~first six months ~~ended October 31, 2017 and~~of fiscal 2022 compared to an adjusted cash flow provided by operating activities ~~was $34.4~~of $16.1 million for the ~~nine~~first six months ~~ended October 31, 2016.~~of fiscal 2021. The ~~decrease~~change in adjusted cash flow provided by (used for) operating activities is primarily the result of the amount of inventory financed with non-interest bearing floorplan lines of credit from manufacturers and a ~~higher stocking of new equipment inventories~~decrease in non-manufacturing floor plan payables for the first ~~nine~~six months of fiscal ~~2018 and the impact of cash generated from the sale of no trade equipment arising from our expanded marketing of aged equipment inventory in fiscal 2017.~~2022. See the Adjusted Cash Flow Reconciliation below for a reconciliation of ~~this non-GAAP financial measure~~adjusted cash flow provided by (used for) operating activities to the GAAP measure of cash flow provided by (used for) operating activities.

Cash Flow Used ~~For~~for Investing Activities

Net cash used for investing activities was ~~$18.9~~$19.4 million for the ~~nine~~first six months ~~ended October 31, 2017,~~of fiscal 2022, compared to ~~$7.0~~$16.8 million for the ~~nine~~first six months ~~ended October 31, 2016. Cash~~of fiscal 2021. The increase in cash used for investing activities was primarily ~~for~~ the ~~purchase~~result of ~~rental fleet and~~an increase in property and equipment ~~net~~purchases as the Company purchased formerly leased buildings and bought out vehicle leases in the first six months of ~~any proceeds from the sale of property and equipment.~~fiscal 2022.

Cash Flow ~~Used For~~Provided by (Used for) Financing Activities

Net cash used for financing activities was ~~$46.9~~$22.4 million for the ~~nine~~first six months ~~ended October 31, 2017~~of fiscal 2022 compared to ~~$104.6~~cash provided by financing activities of $4.5 million for the ~~nine~~first six months ~~ended October 31, 2016. For the nine months ended October 31, 2017, net~~of fiscal 2021. The decrease in cash ~~used for~~ provided by

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financing activities was primarily the result of ~~paying down our~~an increase in repayments of non-manufacturer floorplan ~~payables and~~lines of credit partially offset by proceeds from long term debt borrowings in the ~~use~~first six months of ~~$29.1 million of cash~~fiscal 2022 compared to repurchase senior convertible notes. We may, from time to time, continue to repurchase our senior convertible notes depending on prevailing market conditions, our available liquidity and other factors. These repurchases may be material to our consolidated financial statements. For the nine months ended October 31, 2016, net cash used for financing activities primarily resulted from paying down our non-manufacturer floorplan payables and the use of $46.0 million to repurchase senior convertible notes.same period last year.

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. GAAP requires the cash flows associated with non-manufacturer floorplan payables to be recognized as financing cash flows in the consolidated statement of cash flows. We consider equipment inventory financing with both manufacturers and other sources to be part of the normal operations of our ~~business and use an adjusted~~business. We also evaluate our cash flow ~~measure~~from operating activities by assuming a constant level of equity in ~~the evaluation of~~our equipment inventory. Our equity in our equipment inventory and inventory flooring needs, which we refer to as "Adjusted Cash Flow." The adjustment is equal to the net change in non-manufacturer floorplan payable, as shown on the consolidated statements of cash flows. GAAP categorizes non-manufacturer floorplan payable as financing activities in the consolidated statements of cash flows.

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

our equipment inventory balance that is not financed by floorplan payables. ~~Equity in equipment inventory decreased~~Our adjustment to 29.6% as of October 31, 2017 from 41.1% as of January 31, 2017, and increased to 27.6% as of October 31, 2016 from 24.8% as of January 31, 2016. We analyze our cash flow provided by operating activities by assumingmaintain 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~~period-end as presented onin the consolidated ~~statements of cash flows,~~balance sheets compared to the actual level of equity in equipment inventory at the beginning of the fiscal year. We refer to this measure of cash flow as Adjusted Cash Flow.

Our equity in equipment inventory decreased to 44.7% as of July 31, 2021 from 52.1% as of January 31, 2021, and decreased to 27.0% as of July 31, 2020 from 27.9% as of January 31, 2020.

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

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~~for) financing activities.~~

Net Cash Provided by (Used for) Operating Activities Net Cash Used for Financing Activities
Nine Months Ended October 31, 2017 Nine Months Ended October 31, 2016 Nine Months Ended October 31, 2017 Nine Months Ended October 31, 2016
(in thousands) (in thousands)
Cash Flow, As Reported $ 56,031
$ 74,398
$ (46,939 ) $ (104,638 )
Adjustment for Non-Manufacturer Floorplan Net Payments (14,357 ) (54,478 ) 14,357
54,478
Adjustment for Constant Equity in Equipment Inventory (52,506 ) 14,503
—
—
Adjusted Cash Flow $ (10,832 ) $ 34,423
$ (32,582 ) $ (50,160 )

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


	Net Cash Provided by (Used for) Operating Activities				Net Cash Provided by (Used for) Financing Activities
	Six Months Ended July 31, 2021		Six Months Ended July 31, 2020		Six Months Ended July 31, 2021		Six Months Ended July 31, 2020
	(in thousands)				(in thousands)
Cash Flow, As Reported	$	28,561	$	13,035	$	(22,373)	$	4,519
Adjustment for Non-Manufacturer Floorplan	(22,731)		7,229		22,731		(7,229)
Adjustment for Constant Equity in Equipment Inventory	(24,842)		(4,191)		—		—
Adjusted Cash Flow	$	(19,012)	$	16,073	$	358	$	(2,710)

~~Certain~~ Information Concerning Off-Balance Sheet Arrangements

As of ~~October~~July 31, ~~2017,~~2021, 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. WeTherefore, 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~~

Table of ~~our business activities, we lease real estate, vehicles and equipment under operating leases.~~Contents

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Forward-looking statements are contained in this Quarterly Report on Form 10-Q, including in “Management’s Discussion ~~And~~and Analysis Ofof Financial Condition ~~And~~and Results Ofof Operations,” as well as in our Annual Report on Form 10-K for the year ended January 31, ~~2017,~~2021, and in other materials filed or to be filed by the Company with the Securities and Exchange Commission (and included in oral statements or other written statements made or to be made by the Company).

Forward-looking statements are statements based on future expectations and specifically may 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'~~customer demand for agricultural equipment and services, the impact of ~~oil prices~~the COVID-19 pandemic on ~~market demand for equipment and services,~~our business, the general market conditions of the agricultural and construction industries, equipment inventory levels, discussion of the anticipated implementation date of our new ERP system, and our primary liquidity sources, and the 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~~These statements are based upon the current beliefs and expectations of our management. ~~Such~~These forward-looking ~~information involves~~statements involve important risks and uncertainties that could significantly affect anticipated results or outcomes in the future and, accordingly, ~~such~~actual results or outcomes 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, the duration, scope and impact of the COVID-19 pandemic on the Company's operations and business, 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. Although we are not aware of any other factors, aside from~~10-K. In addition to 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,matters, there may exist additional risks and uncertainties not currently known to us or that we currently deem to be immaterial that may materially adversely affect our business, financial condition ~~and/~~or ~~operating results.~~results of operations.

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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, ~~2017,~~2021, 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 ~~$1.6~~$0.4 million. Conversely, a one percentage point decrease in interest rates for the next 12-month period would result in an increase to pre-tax earnings and cash flow of approximately ~~$1.6~~$0.4 million. At ~~October~~July 31, ~~2017,~~2021, we had floorplan payables of ~~$322.4~~$185.5 million, of which approximately ~~$148.3~~$36.9 million was variable-rate floorplan payable and ~~$174.1~~$148.7 million was non-interest bearing. In addition, at ~~October~~July 31, ~~2017,~~2021, we had total long-term debt, including ~~our senior convertible notes,~~finance lease obligations, of ~~$98.2~~$72.2 million, of which ~~$13.0 million was variable-rate debt and $85.2 million~~all 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, ~~2017,~~2021, 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, ~~2017,~~2021, our Ukrainian subsidiary had ~~$2.8~~$2.1 million of net monetary assets denominated in Ukrainian hryvnia ~~(UAH)~~("UAH"). We have attempted to minimize our net monetary asset position in Ukraine through reducing overall asset levels in Ukraine and at times 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 on Form 10-Q, 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 fiscal year ended January 31, ~~2017, as supplemented in our Form 10-Q for the quarterly period ended April 30, 2017,~~2021, as filed with the Securities and Exchange Commission. ~~Those~~Among other things, 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 business, financial condition, or ~~future results. Although we are not aware~~results of ~~any other~~operations. In addition to those 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.~~results of operations.

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 31, 2017.~~None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~None.~~ On September 1st, 2021, the Company and Bryan J. Knutson, the Company’s Chief Operating Officer, entered into an amendment to Mr. Knutson’s existing employment agreement dated September 5, 2018. Under the amendment, Mr. Knutson is eligible to receive an annual restricted stock award equal to the number of shares obtained by dividing his annual base salary in effect on the grant date by the closing sale price of the Company’s common stock on that date. Under the amendment, any such award will be made in accordance with the Company’s Equity Grant Policy and subject to such terms as are recommended by the Company��s Chief Executive Officer and approved by the Compensation Committee of the Board of Directors.

ITEM 6. EXHIBITS

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

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EXHIBIT INDEX

TITAN MACHINERY INC.

FORM 10-Q


No.		Description

~~No.~~	~~Description~~


10.1	Amendment No. 71 dated June 4, 2021 to the Third Amended and Restated ~~Wholesale Financing Plan,~~Credit Agreement dated ~~as of October 5, 2017,~~April 3, 2020 by and ~~between~~among the registrant, as Borrower, the financial institutions party thereto, as lenders, Bank of America, N.A., as Administrative Agent, Bank of American, N.A., Wells Fargo Bank N.A., and ~~DLL Finance LLC (f/k/a Agricredit Acceptance LLC)~~Regions Bank, as Joint Lead Arrangers and Joint Book Runners, Wells Fargo Bank, N.A., and Regions Bank, as Joint Syndication Agents, and BBVA USE as Documentation Agent.

10.2		Amendment dated ~~October 5, 2017~~September 1, 2021 to the ~~Amended and Restated Wholesale Floor Plan Credit Facility and Security~~Executive Employment Agreement, dated ~~November 13, 2007, by~~September 5, 2018 between Bryan J. Knutson and ~~between~~ the ~~registrant and CNH Industrial Capital America LLC~~registrant. +

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~~July 31, ~~2017,~~2021, 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.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

+ Management compensatory plan or arrangement

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SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.



Dated:	~~December 7, 2017~~September 2, 2021
		TITAN MACHINERY INC.


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



Delaware						~~No.~~ 45-0357838
(State or Other Jurisdiction of Incorporation or Organization)						(IRS Employer Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.00001 par value per share	TITN	The Nasdaq Stock Market LLC



	October 31, 2017			January 31, 2017
Assets
Current Assets
Cash	$	43,861		$	53,151
Receivables (net of allowance of $3,233 and $3,630 as of October 31, 2017 and January 31, 2017, respectively)	73,605			60,082
Inventories	529,761			478,266
Prepaid expenses and other	8,363			10,989
Income taxes receivable	111			5,380
Total current assets	655,701			607,868
Noncurrent Assets
Intangible assets, net of accumulated amortization	4,944			5,001
Property and equipment, net of accumulated depreciation	156,426			156,647
Deferred income taxes	271			547
Other	948			1,359
Total noncurrent assets	162,589			163,554
Total Assets	$	818,290		$	771,422

Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	19,567		$	17,326
Floorplan payable	322,439			233,228
Current maturities of long-term debt	1,529			1,373
Customer deposits	15,111			26,366
Accrued expenses and other	27,298			30,533
Total current liabilities	385,944			308,826
Long-Term Liabilities
Senior convertible notes	62,277			88,501
Long-term debt, less current maturities	35,892			38,236
Deferred income taxes	4,806			9,500
Other long-term liabilities	10,216			5,180
Total long-term liabilities	113,191			141,417
Commitments and Contingencies
Stockholders' Equity
Common stock, par value $.00001 per share, 45,000 shares authorized; 22,042 shares issued and outstanding at October 31, 2017; 21,836 shares issued and outstanding at January 31, 2017	—			—
Additional paid-in-capital	245,140			240,615
Retained earnings	75,361			85,347
Accumulated other comprehensive loss	(1,346		)	(4,783		)
Total stockholders' equity	319,155			321,179
Total Liabilities and Stockholders' Equity	$	818,290		$	771,422



	Nine Months Ended October 31,
	2017			2016
Operating Activities
Net loss including noncontrolling interest	$	(8,734	)	$	(6,296	)
Adjustments to reconcile net loss including noncontrolling interest to net cash provided by operating activities
Depreciation and amortization	18,949			19,896
Impairment	131			275
Deferred income taxes	(3,121		)	825
Stock-based compensation expense	2,478			1,805
Noncash interest expense	2,917			4,305
Unrealized foreign currency gain on loans to international subsidiaries	(1,115		)	(44		)
Gain on repurchase of senior convertible notes	(22		)	(3,130		)
Other, net	(548		)	(980		)
Changes in assets and liabilities
Receivables, prepaid expenses and other assets	(9,784		)	(18,070		)
Inventories	(41,748		)	91,222
Manufacturer floorplan payable	97,734			(20,821		)
Accounts payable, customer deposits, accrued expenses and other and other long-term liabilities	(7,328		)	(2,546		)
Income taxes	6,222			7,957
Net Cash Provided by Operating Activities	56,031			74,398
Investing Activities
Rental fleet purchases	(11,784		)	(3,094		)
Property and equipment purchases (excluding rental fleet)	(12,129		)	(7,121		)
Proceeds from sale of property and equipment	4,564			2,285
Proceeds from insurance recoveries	—			1,431
Other, net	430			(517		)
Net Cash Used for Investing Activities	(18,919		)	(7,016		)
Financing Activities
Net change in non-manufacturer floorplan payable	(14,357		)	(54,478		)
Repurchase of senior convertible notes	(29,093		)	(46,013		)
Proceeds from long-term debt borrowings	33,000			—
Principal payments on long-term debt	(36,121		)	(1,935		)
Payment of debt issuance costs	(27		)	(31		)
Loan provided to non-controlling interest holder	—			(2,148		)
Other, net	(341		)	(33		)
Net Cash Used for Financing Activities	(46,939		)	(104,638		)
Effect of Exchange Rate Changes on Cash	537			222
Net Change in Cash	(9,290		)	(37,034		)
Cash at Beginning of Period	53,151			89,465
Cash at End of Period	$	43,861		$	52,431
Supplemental Disclosures of Cash Flow Information
Cash paid (received) during the period
Income tax refunds, net of payments	$	(5,768	)	$	(12,942	)
Interest	$	11,254		$	15,544
Supplemental Disclosures of Noncash Investing and Financing Activities
Net property and equipment financed with long-term debt, accounts payable and accrued expenses and other	$	729		$	2,818
Net transfer of assets from property and equipment to inventories	$	(3,010	)	$	(4,411	)
Acquisition of non-controlling interest through satisfaction of outstanding receivables	$	—		$	4,324



	Three Months Ended October 31,						Nine Months Ended October 31,
	2017			2016			2017			2016
Revenue
Equipment	$	215,956		$	212,194		$	551,752		$	570,369
Parts	64,729			69,261			176,892			185,106
Service	31,532			33,777			90,807			96,065
Rental and other	18,124			17,034			43,879			43,919
Total Revenue	330,341			332,266			863,330			895,459
Cost of Revenue
Equipment	199,154			201,140			509,400			532,370
Parts	45,408			48,387			124,868			130,006
Service	11,139			11,828			33,377			35,473
Rental and other	13,163			12,485			32,482			32,703
Total Cost of Revenue	268,864			273,840			700,127			730,552
Gross Profit	61,477			58,426			163,203			164,907
Operating Expenses	50,374			53,143			152,884			159,132
Restructuring Costs	2,587			275			10,480			546
Income (Loss) from Operations	8,516			5,008			(161		)	5,229
Other Income (Expense)
Interest income and other income	380			502			1,840			1,251
Floorplan interest expense	(1,900		)	(3,294		)	(6,719		)	(10,843		)
Other interest expense	(2,110		)	(2,160		)	(6,694		)	(5,930		)
Income (Loss) Before Income Taxes	4,886			56			(11,734		)	(10,293		)
Provision for (Benefit from) Income Taxes	2,502			(208		)	(3,000		)	(3,997		)
Net Income (Loss) Including Noncontrolling Interest	$	2,384		$	264		$	(8,734	)	$	(6,296	)
Less: Loss Attributable to Noncontrolling Interest	—			—			—			(356		)
Net Income (Loss) Attributable to Titan Machinery Inc.	$	2,384		$	264		$	(8,734	)	$	(5,940	)
Net (Income) Loss Allocated to Participating Securities - Note 1	(56		)	(8		)	176			120
Net Income (Loss) Attributable to Titan Machinery Inc. Common Stockholders	$	2,328		$	256		$	(8,558	)	$	(5,820	)
Earnings (Loss) per Share - Note 1
Earnings (Loss) per Share - Basic	$	0.11		$	0.01		$	(0.40	)	$	(0.27	)
Earnings (Loss) per Share - Diluted	$	0.11		$	0.01		$	(0.40	)	$	(0.27	)
Weighted Average Common Shares - Basic	21,585			21,218			21,503			21,208
Weighted Average Common Shares - Diluted	21,643			21,269			21,503			21,208


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
	Shares Outstanding	Amount
BALANCE, January 31, 2020	22,335	$	—	$	250,607	$	97,717	$	(3,220)	$	345,104
Cumulative-effect adjustment of adopting ASC 326, Financial Instruments - Credit Losses	—	—		—		(204)		—		(204)
Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	(21)	—		(201)		—		—		(201)
Stock-based compensation expense	—	—		645		—		—		645
Net Income	—	—		—		2,262		—		2,262
Other comprehensive loss	—	—		—		—		(528)		(528)
BALANCE, April 30, 2020	22,314	—		251,051		99,775		(3,748)		347,078
Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	239	—		—		—		—		—
Stock-based compensation expense	—	—		536		—		—		536
Net Income	—	—		—		6,400		—		6,400
Other comprehensive income	—	—		—		—		778		778
BALANCE, July 31, 2020	22,553	$	—	$	251,587	$	106,175	$	(2,970)	$	354,792



	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	)



	October 31, 2017			January 31, 2017
	(in thousands except conversion rate and conversion price)
Principal value	$	65,644		$	95,725
Unamortized debt discount	(2,973		)	(6,368		)
Unamortized debt issuance costs	(394		)	(856		)
Carrying value of senior convertible notes	$	62,277		$	88,501

Carrying value of equity component, net of deferred taxes	$	14,923		$	15,546

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



	Notional Amount as of:
	October 31, 2017		January 31, 2017
	(in thousands)
Cash flow hedges:
Interest rate swap	$	—	$	100,000
Derivatives not designated as hedging instruments:
Foreign currency contracts	10,000		18,021



	Fair Value as of:
	October 31, 2017		January 31, 2017
	(in thousands)
Liability Derivatives:
Derivatives designated as hedging instruments:
Cash flow hedges:
Interest rate swap	$	—	$	1,155
Derivatives not designated as hedging instruments:
Foreign currency contracts	65		200
Total Liability Derivatives	$	65	$	1,355



	October 31, 2017								January 31, 2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)								(in thousands)
Financial Liabilities
Interest rate swap	$	—	$	—	$	—	$	—	$	—	$	1,155	$	—	$	1,155
Foreign currency contracts	—		65		—		65		—		200		—		200
Total Financial Liabilities	$	—	$	65	$	—	$	65	$	—	$	1,355	$	—	$	1,355



	October 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	$	65,000	$	62,277	$	65,644	$	87,000	$	88,501	$	95,725



	Three Months Ended October 31, 2017			Nine Months Ended October 31, 2017			Cumulative Amount
	(in thousands)
Lease accrual and termination costs	$	1,598		$	5,920		$	5,920
Termination benefits	943			4,667			4,667
Impairment of fixed assets, net of gains on asset disposition	(55		)	(620		)	2,337
Asset relocation and other costs	101			513			561
	$	2,587		$	10,480		$	13,485



	Lease Accrual & Termination Costs			Termination Benefits			Asset Relocation & Other Costs			Total
	(in thousands)
Balance, January 31, 2017	$	—		$	—		$	—		$	—
Exit costs incurred and charged to expense	5,920			4,361			513			10,794
Exit costs paid	(427		)	(3,697		)	(513		)	(4,637		)
Balance, October 31, 2017	$	5,493		$	664		$	—		$	6,157