UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~July 31, ~~2020~~2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File No. 001-33866

TITAN MACHINERY INC.

(Exact name of registrant as specified in its charter)


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

644 East Beaton Drive

West Fargo, ND 58078-2648

(Address of Principal Executive Offices)

Registrant’s telephone number (701) 356-0130

Securities registered pursuant to Section 12(b) of the Act:


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

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ 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.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

As of ~~November~~August 30, ~~2020, 22,555,832~~2021, 22,595,524 shares of Common Stock, $0.00001 par value, of the registrant were outstanding.

Table of Contents

TITAN MACHINERY INC.

QUARTERLY REPORT ON FORM 10-Q

Table of Contents


		Page No.
PART I.	FINANCIAL INFORMATION	3
ITEM 1.	FINANCIAL STATEMENTS	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Stockholders' Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements	8
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2421
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	4037
ITEM 4.	CONTROLS AND PROCEDURES	4037
PART II.	OTHER INFORMATION	4138
ITEM 1.	LEGAL PROCEEDINGS	4138
ITEM 1A.	RISK FACTORS	4138
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	4138
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	4138
ITEM 4.	MINE SAFETY DISCLOSURES	4138
ITEM 5.	OTHER INFORMATION	4138
ITEM 6.	EXHIBITS	4138
Exhibit Index		4239
Signatures		4340

Table of Contents

PART I. — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share data)

October 31, 2020 January 31, 2020
Assets
Current Assets
Cash $ 41,808 $ 43,721
Receivables, net of allowance for expected credit losses 73,531 72,776
Inventories 532,746 597,394
Prepaid expenses and other 8,737 13,655
Total current assets 656,822 727,546
Noncurrent Assets
Property and equipment, net of accumulated depreciation 148,520 145,562
Operating lease assets 81,401 88,281
Deferred income taxes 3,787 2,147
Goodwill 1,433 2,327
Intangible assets, net of accumulated amortization 7,764 8,367
Other 1,129 1,113
Total noncurrent assets 244,034 247,797
Total Assets $ 900,856 $ 975,343
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 23,433 $ 16,976
Floorplan payable 287,837 371,772
Current maturities of long-term debt 4,423 13,779
Current operating lease liabilities 12,373 12,259
Deferred revenue 14,708 40,968
Accrued expenses and other 38,433 38,409
Total current liabilities 381,207 494,163
Long-Term Liabilities
Long-term debt, less current maturities 55,109 37,789
Operating lease liabilities 80,782 88,387
Deferred income taxes 5,814 2,055
Other long-term liabilities 10,376 7,845
Total long-term liabilities 152,081 136,076
Commitments and Contingencies
Stockholders' Equity
Common stock, par value $.00001 per share, 45,000 shares authorized; 22,555 shares issued and outstanding at October 31, 2020; 22,335 shares issued and outstanding at January 31, 2020 0 0
Additional paid-in-capital 252,270 250,607
Retained earnings 116,087 97,717
Accumulated other comprehensive loss (789) (3,220)
Total stockholders' equity 367,568 345,104
Total Liabilities and Stockholders' Equity $ 900,856 $ 975,343


	July 31, 2021		January 31, 2021

Assets
Current Assets
Cash	$	65,584	$	78,990
Receivables, net of allowance for expected credit losses	82,068		69,109
Inventories	427,109		418,458
Prepaid expenses and other	20,684		13,677


Total current assets	595,445		580,234
Noncurrent Assets
Property and equipment, net of accumulated depreciation	162,657		147,165
Operating lease assets	66,934		74,445
Deferred income taxes	5,265		3,637
Goodwill	1,433		1,433
Intangible assets, net of accumulated amortization	6,558		7,785
Other	1,079		1,090
Total noncurrent assets	243,926		235,555
Total Assets	$	839,371	$	815,789

Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	20,649	$	20,045
Floorplan payable	185,549		161,835

Current maturities of long-term debt	5,455		4,591
Current operating lease liabilities	10,755		11,772
Deferred revenue	37,977		59,418
Accrued expenses and other	47,751		48,791
Income taxes payable	2,335		11,048
Total current liabilities	310,471		317,500
Long-Term Liabilities
Long-term debt, less current maturities	63,624		44,906
Operating lease liabilities	66,678		73,567

Other long-term liabilities	6,746		8,535
Total long-term liabilities	137,048		127,008
Commitments and Contingencies (Note 15)	0		0
Stockholders' Equity
Common stock, par value $.00001 per share, 45,000 shares authorized; 22,596 shares issued and outstanding at July 31, 2021; 22,553 shares issued and outstanding at January 31, 2021	—		—
Additional paid-in-capital	253,129		252,913
Retained earnings	138,665		116,869
Accumulated other comprehensive income	58		1,499
Total stockholders' equity	391,852		371,281
Total Liabilities and Stockholders' Equity	$	839,371	$	815,789

See Notes to Condensed Consolidated Financial Statements

Table of Contents

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,
2020 2019 2020 2019
Revenue
Equipment $ 240,901 $ 245,986 $ 662,060 $ 654,376
Parts 76,778 70,788 194,846 181,928
Service 30,696 27,553 84,282 77,215
Rental and other 12,497 16,609 33,357 40,688
Total Revenue 360,872 360,936 974,545 954,207
Cost of Revenue
Equipment 215,770 219,484 593,048 583,345
Parts 53,556 49,834 136,205 128,380
Service 10,254 8,950 28,263 25,170
Rental and other 8,741 10,894 23,379 27,612
Total Cost of Revenue 288,321 289,162 780,895 764,507
Gross Profit 72,551 71,774 193,650 189,700
Operating Expenses 54,115 58,184 160,252 165,594
Impairment of Goodwill 1,453 — 1,453 —
Impairment of Intangible and Long-Lived Assets 1,102 51 1,318 186
Income from Operations 15,881 13,539 30,627 23,920
Other Income (Expense)
Interest and other income (expense) (360) 1,273 333 2,687
Floorplan interest expense (757) (1,448) (2,811) (3,724)
Other interest expense (940) (955) (2,884) (3,562)
Income Before Income Taxes 13,824 12,409 25,265 19,321
Provision for Income Taxes 3,912 4,195 6,691 6,041
Net Income $ 9,912 $ 8,214 $ 18,574 $ 13,280
Earnings per Share:
Basic $ 0.44 $ 0.37 $ 0.83 $ 0.60
Diluted $ 0.44 $ 0.37 $ 0.83 $ 0.60
Weighted Average Common Shares:
Basic 22,132 21,973 22,089 21,936
Diluted 22,137 21,976 22,091 21,942


	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

Table of Contents

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

Three Months Ended October 31, Nine Months Ended October 31,
2020 2019 2020 2019
Net Income $ 9,912 $ 8,214 $ 18,574 $ 13,280
Other Comprehensive Income (Loss)
Foreign currency translation adjustments 2,181 (2,650) 2,431 (2,409)
Comprehensive Income $ 12,093 $ 5,564 $ 21,005 $ 10,871


	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
Net Income	$	11,249	$	6,400	$	21,796	$	8,662
Other Comprehensive Income (Loss)
Foreign currency translation adjustments	937		778		(1,441)		250
Comprehensive Income	$	12,186	$	7,178	$	20,355	$	8,912

See Notes to Condensed Consolidated Financial Statements

Table of Contents

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

(in thousands)


	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

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity
Shares Outstanding Amount
BALANCE, January 31, 2019 22,218 $ — $ 248,423 $ 89,228 $ (2,340) $ 335,311
Cumulative-effect adjustment of adopting ASC 842, Leases — — — (5,464) — (5,464)
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 (34) — (492) — — (492)
Stock-based compensation expense — — 603 — — 603
Net loss — — — (445) — (445)
Other comprehensive loss — — — — (771) (771)
BALANCE, April 30, 2019 22,184 — 248,534 83,319 (3,111) 328,742
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 170 — — — — —
Stock-based compensation expense — — 694 — — 694
Net Income — — — 5,511 — 5,511
Other comprehensive income — — — — 1,012 1,012
BALANCE, July 31, 2019 22,354 — 249,228 88,830 (2,099) 335,959
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 (2) — (17) — — (17)
Stock-based compensation expense — — 773 — — 773
Net Income — — — 8,214 — 8,214
Other comprehensive loss — — — — (2,650) (2,650)
BALANCE, October 31, 2019 22,352 $ — $ 249,984 $ 97,044 $ (4,749) $ 342,279


		Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)				Total Stockholders' Equity				Common Stock					Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
		Shares Outstanding	Amount							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)
BALANCE, January 31, 2021																		BALANCE, January 31, 2021	22,553			$	—		$	252,913		$	116,869		$	1,499		$	371,281
Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	(21)	—		(201)			—			—				(201)			Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	(33)			—		(975)			—			—			(975)
Stock-based compensation expense	Stock-based compensation expense	—	—		645			—			—				645			Stock-based compensation expense	—			—		609			—			—			609
Net income	Net income	—	—		—			2,262			—				2,262			Net income	—			—		—			10,547			—			10,547
Other comprehensive loss	Other comprehensive loss	—	—		—			—			(528)				(528)			Other comprehensive loss	—			—		—			—			(2,379)			(2,379)
BALANCE, April 30, 2020		22,314	—		251,051			99,775			(3,748)				347,078
BALANCE, April 30, 2021																		BALANCE, April 30, 2021	22,520			—		252,547			127,416			(880)			379,083
Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	239	—		—			—			—				—			Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	76			—		(2)			—			—			(2)
Stock-based compensation expense	Stock-based compensation expense	—	—		536			—			—				536			Stock-based compensation expense	—			—		584			—			—			584
Net income	Net income	—	—		—			6,400			—				6,400			Net income	—			—		—			11,249			—			11,249
Other comprehensive income	Other comprehensive income	—	—		—			—			778				778			Other comprehensive income	—			—		—			—			938			938
BALANCE, July 31, 2020		22,553	—		251,587			106,175			(2,970)				354,792
Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax		2	—		(8)			—			—				(8)
Stock-based compensation expense		—	—		691			—			—				691
Net income		—	—		—			9,912			—				9,912
Other comprehensive income		—	—		—			—			2,181				2,181
BALANCE, October 31, 2020		22,555	$	—	252,270			$	116,087		$	(789)			$	367,568
BALANCE, July 31, 2021																		BALANCE, July 31, 2021	22,596			$	—	$	253,129		$	138,665		$	58		$	391,852

See Notes to Condensed Consolidated Financial Statements

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

Nine Months Ended October 31,
2020 2019
Operating Activities
Net income $ 18,574 $ 13,280
Adjustments to reconcile net income to net cash provided by (used for) operating activities
Depreciation and amortization 17,731 21,061
Impairment 2,771 186
Deferred income taxes 2,117 629
Stock-based compensation expense 1,872 2,070
Noncash interest expense 125 394
Noncash lease expense 8,613 9,251
Other, net (694) (63)
Changes in assets and liabilities
Receivables, prepaid expenses and other assets 4,479 (4,630)
Inventories 76,495 (133,929)
Manufacturer floorplan payable (46,466) 113,632
Accounts payable, deferred revenue, accrued expenses and other and other long-term liabilities (15,555) (20,697)
Operating lease liabilities (9,248) (9,473)
Net Cash Provided by (Used for) Operating Activities 60,814 (8,289)
Investing Activities
Rental fleet purchases (6,799) (12,765)
Property and equipment purchases (excluding rental fleet) (9,406) (7,637)
Proceeds from sale of property and equipment 795 1,386
Acquisition consideration, net of cash acquired (6,790) (11,752)
Other, net (16) 13
Net Cash Used for Investing Activities (22,216) (30,755)
Financing Activities
Net change in non-manufacturer floorplan payable (40,779) 62,387
Principal payments on senior convertible notes — (45,644)
Proceeds from long-term debt borrowings 5,326 21,865
Principal payments on long-term debt and finance leases (4,417) (3,197)
Payment of debt issuance costs (700) —
Other, net (209) (509)
Net Cash Provided by (Used for) Financing Activities (40,779) 34,902
Effect of Exchange Rate Changes on Cash 268 (183)
Net Change in Cash (1,913) (4,325)
Cash at Beginning of Period 43,721 56,745
Cash at End of Period $ 41,808 $ 52,420
Supplemental Disclosures of Cash Flow Information
Cash paid during the period
Income taxes, net of refunds $ 31 $ 4,934
Interest $ 5,813 $ 7,162
Supplemental Disclosures of Noncash Investing and Financing Activities
Net property and equipment financed with long-term debt, finance leases, accounts payable and accrued liabilities $ 8,555 $ 7,652
Net transfer of assets from (to) property and equipment to (from) inventories $ 2,731 $ (2,179)


	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

Table of Contents

TITAN MACHINERY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 - BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. The quarterly operating results for Titan Machinery Inc. (the “Company”) are subject to fluctuation due to varying weather patterns, which may impact the timing and amount of equipment purchases, rentals, and after-sales parts and service purchases by the Company’s Agriculture, Construction and International customers. Therefore, operating results for the ~~nine-month~~six-month period ended ~~October~~July 31, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, ~~2021.~~2022. The information contained in the consolidated balance sheet as of January 31, ~~2020~~2021 was derived from the audited consolidated financial statements 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, ~~2020~~2021 as filed with the SEC.

Nature of Business

The Company is engaged in the retail sale, service and rental of agricultural and construction machinery through its stores in the United States and Europe. The Company’s North American stores are located in ~~Arizona,~~ Colorado, Iowa, Minnesota, Montana, Nebraska, 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 ~~pandemic is a highly fluid~~Company's products and ~~rapidly evolving situation, and we cannot anticipate with any certainty the length, scope, or severity of such restrictions~~services were determined to be essential in ~~each of~~ the markets ~~that~~ we ~~operate.~~

~~Since~~serve and accordingly operations have been allowed to continue throughout the ~~beginning~~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 ~~has been and continues to be~~remain our top ~~concern. At the onset~~priority.

Some of the ~~pandemic, we organized~~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 ~~COVID Task Force to implement safety protocols~~result, the Company has experienced some disruptions and ~~to quickly respond to matters, in~~delays on delivery of certain inventory. The Company has assessed the ~~event~~impacts of ~~positive cases at any of our locations.~~

~~Even though we are considered an essential business, in response to~~ the COVID-19 pandemic on its results of operations for the ~~Company closed its U.S. stores to the public in March~~three and six months ended July 31, 2021 and 2020, ~~but continued operations through social distancing means in all areas: equipment, parts, service~~ and ~~rental. Beginning in May 2020, we began fully reopening our stores to the public, following pandemic safety protocols,~~although there have been logistical and ~~by June 2020 all of our locations~~other challenges, no material adverse impacts were once again open to the public. Additionally, our International stores have also been following pandemic safety protocols set forth by each country and local government authority, which at times have included border shutdowns and curfew regulations.identified.

Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates, particularly related to realization of inventory, 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 subsidiaries. All material accounts, transactions and profits between the consolidated companies have been eliminated in consolidation.

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~~Recently Adopted Accounting Guidance~~

~~In June 2016, the Financial Accounting Standards Board ("FASB") issued a new standard, codified in Accounting Standard Codification ("ASC") 326,~~ ~~Financial Instruments - Credit Losses~~, that modifies how entities measure credit losses on most financial instruments. The new standard replaced the "incurred loss" model with an "expected credit loss" model that requires consideration of a broader range of information to estimate expected credit losses over the lifetime of the asset. The guidance impacts the Company on its accounts receivable portfolio but specifically excluded receivables from operating lease arrangements and, therefore, the Company’s receivables from rental contracts were not impacted. The guidance also requires new disclosures to allow the users of the financial statements to understand the credit risk inherent in a portfolio and how management monitors the credit quality of the portfolio, management’s estimate of expected credit losses, and changes in the estimate of expected credit losses that have taken place during the reporting period.

The Company adopted the new guidance on February 1, 2020 using a modified retrospective approach and recognized an immaterial cumulative-effect adjustment to retained earnings as of the effective date. The Company identified and updated existing internal controls and procedures to ensure compliance with the new guidance, but such modifications were not deemed to be material to the Company's overall system of internal control. While the adoption of this standard did not have a material impact on the Company's consolidated financial statements, it required changes to the Company's process of estimating expected credit losses on trade receivables. See footnote 4 for further discussion of our accounts receivables.

~~In February 2018, the FASB issued guidance on the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract, codified in ASC 350-40,~~ ~~Internal Use Software~~. This guidance aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The Company adopted this standard on February 1, 2020, using the prospective transition approach. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Accounting Guidance Not Yet Adopted

In March 2020, the ~~FASB~~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 ~~currently evaluating~~updating its credit agreements to include language regarding the successor or alternate rate to LIBOR, and a review of other contracts and ~~hedging relationships that reference LIBOR~~agreements is on-going. The Company does not expect the guidance to ~~determine if the Company will adopt the new guidance.~~have a material impact on its results of operations, financial position, cash flows, or disclosures.

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NOTE 2 - EARNINGS PER SHARE

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

Three Months Ended October 31, Nine Months Ended October 31,
2020 2019 2020 2019
(in thousands, except per share data)
Numerator:
Net income $ 9,912 $ 8,214 $ 18,574 $ 13,280
Allocation to participating securities (186) (140) (301) (207)
Net income attributable to Titan Machinery Inc. common stockholders $ 9,726 $ 8,074 $ 18,273 $ 13,073
Denominator:
Basic weighted-average common shares outstanding 22,132 21,973 22,089 21,936
Plus: incremental shares from vesting of restricted stock units 5 3 2 6
Diluted weighted-average common shares outstanding 22,137 21,976 22,091 21,942
Earnings Per Share:
Basic $ 0.44 $ 0.37 $ 0.83 $ 0.60
Diluted $ 0.44 $ 0.37 $ 0.83 $ 0.60
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

NOTE 3 - REVENUE

Revenues are recognized when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration we expect to 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 following tables present our revenue disaggregated by revenue source and segment:

Three Months Ended October 31, 2020 Three Months Ended October 31, 2019
Agriculture Construction International Total Agriculture Construction International Total
(in thousands) (in thousands)
Equipment $ 146,410 $ 47,766 $ 46,725 $ 240,901 $ 148,680 $ 43,299 $ 54,007 $ 245,986
Parts 50,528 14,072 12,179 76,779 44,923 13,586 12,279 70,788
Service 22,316 6,497 1,883 30,696 18,885 6,674 1,994 27,553
Other 823 628 102 1,553 835 826 50 1,711
Revenue from contracts with customers 220,077 68,963 60,889 349,929 213,323 64,385 68,330 346,038
Rental 548 10,067 328 10,943 750 13,646 502 14,898
Total revenues $ 220,625 $ 79,030 $ 61,217 $ 360,872 $ 214,073 $ 78,031 $ 68,832 $ 360,936


		Nine Months Ended October 31, 2020								Nine Months Ended October 31, 2019									Three Months Ended July 31, 2021								Three Months Ended July 31, 2020
		Agriculture		Construction		International		Total		Agriculture		Construction		International		Total			Agriculture		Construction		International		Total		Agriculture		Construction		International		Total
		(in thousands)								(in thousands)									(in thousands)								(in thousands)
Equipment	Equipment	$	396,759	$	130,497	$	134,804	$	662,060	$	367,754	$	137,742	$	148,880	$	654,376	Equipment	$	156,408	$	54,020	$	62,305	$	272,733	$	110,601	$	48,478	$	43,575	$	202,654
Parts	Parts	123,078		38,548		33,221		194,847		109,952		39,356		32,620		181,928		Parts	40,742		11,928		12,647		65,317		37,470		13,016		10,968		61,454
Service	Service	59,466		19,514		5,302		84,282		51,869		20,163		5,183		77,215		Service	21,150		6,585		1,941		29,676		19,429		6,806		1,751		27,986
Other	Other	2,385		1,871		325		4,581		2,248		2,238		202		4,688		Other	758		490		188		1,436		829		725		119		1,673
Revenue from contracts with customers	Revenue from contracts with customers	581,688		190,430		173,652		945,770		531,823		199,499		186,885		918,207		Revenue from contracts with customers	219,058		73,023		77,081		369,162		168,329		69,025		56,413		293,767
Rental	Rental	1,638		26,432		705		28,775		1,715		33,314		971		36,000		Rental	306		7,920		242		8,468		743		8,694		261		9,698
Total revenues	Total revenues	$	583,326	$	216,862	$	174,357	$	974,545	$	533,538	$	232,813	$	187,856	$	954,207	Total revenues	$	219,364	$	80,943	$	77,323	$	377,630	$	169,072	$	77,719	$	56,674	$	303,465

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	Six Months Ended July 31, 2021								Six Months Ended July 31, 2020
	Agriculture		Construction		International		Total		Agriculture		Construction		International		Total
	(in thousands)								(in thousands)
Equipment	$	325,664	$	98,832	$	124,217	$	548,713	$	250,349	$	82,732	$	88,078	$	421,159
Parts	80,425		24,036		23,481		127,942		72,550		24,476		21,042		118,068
Service	40,904		12,954		3,521		57,379		37,150		13,017		3,419		53,586
Other	1,478		855		281		2,614		1,562		1,243		223		3,028
Revenue from contracts with customers	448,471		136,677		151,500		736,648		361,611		121,468		112,762		595,841
Rental	444		12,873		369		13,686		1,089		16,365		378		17,832
Total revenues	$	448,915	$	149,550	$	151,869	$	750,334	$	362,700	$	137,833	$	113,140	$	613,673

Unbilled Receivables and Deferred Revenue

Unbilled receivables from contracts with customers amounted to ~~$16.8~~$20.1 million and ~~$13.9~~$12.9 million as of ~~October~~July 31, ~~2020~~2021 and January 31, ~~2020.~~2021. The increase in unbilled receivables is primarily the result of a seasonal increase in the volume of our service transactions in which we recognize revenue as our work is performed and prior to customer invoicing.

Deferred revenue from contracts with customers amounted to ~~$13.7~~$37.1 million and ~~$39.5~~$57.7 million as of ~~October~~July 31, ~~2020~~2021 and January 31, ~~2020.~~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 ~~three~~six months ended ~~October~~July 31, ~~2020~~2021 and ~~2019,~~2020, the Company recognized ~~$3.9~~$50.8 million and ~~$2.5~~$37.0 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, ~~2020~~2021 and January 31, ~~2019, respectively. During the nine months ended October 31,~~ 2020, ~~and 2019, the Company recognized $40.9 million and $43.7 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, 2020 and January 31, 2019,~~ respectively. No material amount of revenue was recognized during the ~~three and nine~~six months ended ~~October~~July 31, ~~2020~~2021 and ~~2019~~2020 from performance obligations satisfied in previous periods.

~~The following is a summary of deferred revenue as of October 31, 2020 and January 31, 2020:~~

October 31, 2020 January 31, 2020
(in thousands)
Deferred revenue from contracts with customers $ 13,687 $ 39,512
Deferred revenue from rental and other contracts 1,021 1,456
$ 14,708 $ 40,968

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 and for~~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. ~~Given that the credit terms for these receivables are short-term, changes in credit loss percentages due to future events may not occur on a frequent basis.~~ 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 ~~does provide~~provides an allowance for these receivables based on historical experience and using credit information obtained from continued monitoring of customer

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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

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October 31, 2020 January 31, 2020
(in thousands)
Trade and unbilled receivables from contracts with customers
Trade receivables due from customers $ 31,606 $ 36,400
Unbilled receivables 16,796 13,944
Less allowance for expected credit losses 3,053 2,943
45,349 47,401
Trade receivables due from finance companies 11,967 12,352
Trade and unbilled receivables from rental contracts
Trade receivables 6,060 7,381
Unbilled receivables 1,130 861
Less allowance for expected credit losses 1,957 2,180
5,233 6,062
Other receivables
Due from manufacturers 9,992 5,763
Other 990 1,198
10,982 6,961
Receivables, net of allowance for expected credit losses $ 73,531 $ 72,776

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


		Agriculture		Construction		International		Total			Agriculture		Construction		International		Total
Balance at February 1, 2020		$	181	$	1,016	$	1,746	$	2,943
											(in thousands)
Balance at January 31, 2021										Balance at January 31, 2021	$	228	$	1,074	$	1,690	$	2,992
Current expected credit loss provision	Current expected credit loss provision	14		113		226		353		Current expected credit loss provision	30		68		(2)		96
Write-offs charged against allowance	Write-offs charged against allowance	5		71		133		209		Write-offs charged against allowance	17		84		38		139
Credit loss recoveries collected	Credit loss recoveries collected	40		4		6		50		Credit loss recoveries collected	—		4		—		4
Foreign exchange impact	Foreign exchange impact	—		—		(29)		(29)		Foreign exchange impact	—		—		(50)		(50)
Balance at April 30, 2020		230		1,062		1,816		3,108
Balance at April 30, 2021										Balance at April 30, 2021	241		1,062		1,600		2,903
Current expected credit loss provision	Current expected credit loss provision	16		95		265		376		Current expected credit loss provision	84		50		(225)		(91)
Write-offs charged against allowance	Write-offs charged against allowance	47		78		98		223		Write-offs charged against allowance	33		64		21		118
Credit loss recoveries collected	Credit loss recoveries collected	9		—		—		9		Credit loss recoveries collected	7		1		—		8
Foreign exchange impact	Foreign exchange impact	—		—		23		23		Foreign exchange impact	—		—		19		19
Balance at July 31, 2020		208		1,079		2,006		3,293
Current expected credit loss provision		30		12		(256)		(215)
Write-offs charged against allowance		44		21		48		114
Credit loss recoveries collected		2		18		—		20
Foreign exchange impact		—		—		67		67
Balance at October 31, 2020		$	196	$	1,088	$	1,769	$	3,053
Balance at July 31, 2021										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

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The following table presents impairment losses (recoveries) on receivables arising from sales contracts 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

Three Months Ended October 31, Nine Months Ended October 31,
2020 2019 2020 2019
(in thousands)
Impairment losses (recoveries) on:
Receivables from sales contracts $ (213) $ 75 $ 307 $ 1,061
Receivables from rental contracts (59) 282 92 779
$ (272) $ 357 $ 399 $ 1,840

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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 5 - INVENTORIES~~

October 31, 2020 January 31, 2020
(in thousands)
New equipment $ 322,207 $ 358,339
Used equipment 127,605 157,535
Parts and attachments 81,302 79,813
Work in process 1,632 1,707
$ 532,746 $ 597,394

NOTE 6 - PROPERTY AND EQUIPMENT

October 31, 2020 January 31, 2020
(in thousands)
Rental fleet equipment $ 94,220 $ 104,133
Machinery and equipment 23,478 22,682
Vehicles 55,416 51,850
Furniture and fixtures 43,169 41,720
Land, buildings, and leasehold improvements 79,761 70,408
296,044 290,793
Less accumulated depreciation 147,524 145,231
$ 148,520 $ 145,562


	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 ~~October~~July 31, ~~2020,~~2021, the Company determined ~~based on changing expectations regarding the future use~~that a current period operating loss combined with historical losses of a certain ~~long-lived assets,~~business unit indicated that the ~~$0.8 million carrying value of these assets,~~long-lived asset group may not be recoverable. The Company performed an impairment assessment of this asset group and as a result ~~recognized~~ an impairment charge of ~~$0.2~~$0.4 million was recognized within its ~~Agriculture~~International segment for the three months ended ~~October~~July 31, ~~2020.~~ 2021. The Company did not have any impairment charges for the three months ended July 31, 2020. For the ~~nine~~six months ended ~~October~~July 31, ~~2020, the Company recognized a total impairment charge of $0.2 million within its Construction segment~~2021 and ~~a $0.2 million impairment charge within its Agriculture segment. For the~~ ~~three and nine~~ ~~months ended October~~July 31, ~~2019,~~2020, the Company recognized an impairment charge of ~~$0.1~~$0.4 million and $0.2 million, ~~respectively, within its Construction segment.~~respectively.

~~In March 2019, the Company completed~~ an assessment of its Enterprise Resource Planning ("ERP") application and concluded that the Company would begin the process to prepare for conversion to a new ERP application. The Company integrated one pilot store on the new ERP system in the second quarter of the fiscal 2021 and expects all domestic stores to be on the new ERP application during the second or third quarter of fiscal 2022. We have prospectively adjusted the useful life of our current ERP application such that it will be fully amortized upon its estimated replacement date. The net book value of the current ERP asset of $0.8 million as of October 31, 2020 will be amortized on a straight-line basis over the estimated remaining period of use.

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NOTE 7 - INTANGIBLE ASSETS ~~AND GOODWILL~~

~~Goodwill~~

~~The following is a summary of the changes in goodwill, by segment, for the period ended October 31, 2020:~~

Agriculture Construction International Total
(in thousands)
January 31, 2020 $ 949 $ — $ 1,378 $ 2,327
Arising from business combinations 484 — — 484
Foreign currency translation — — 75 75
Impairment — — (1,453) (1,453)
October 31, 2020 $ 1,433 $ — $ 0 $ 1,433

The Company performs at least an annual impairment testing of goodwill and, due to ongoing losses and the impact of COVID-19, an interim impairment test was performed in the third quarter of fiscal 2021 for our Germany reporting unit. Under the impairment test, the fair value of the reporting unit is estimated using an income approach in which a discounted cash flow analysis is utilized, which includes a five-year forecast of future operating performance for the reporting unit and a terminal value that estimates sustained long-term growth. The discount rate applied to the estimated future cash flows reflects an estimate of the weighted-average cost of capital of comparable companies.

~~The quantitative goodwill impairment analysis for the Germany reporting unit indicated that the estimated fair value of the reporting unit was less than the carrying value. The implied fair value of the goodwill associated with the reporting unit approximated zero, thus requiring a full impairment charge of the goodwill carrying value of the reporting unit. A~~s such, a goodwill impairment charge of $1.5 million was recognized for the three and nine months ended October 31, 2020, which is included in the impairment of goodwill amount in the consolidated statements of operations. The impairment charges arose as the result of lowered expectations of the future financial performance of this reporting unit. The Company's assumptions about future financial performance were impacted by the current year operating performance of this reporting unit and by the anticipated impact that challenging industry conditions, including COVID-19, may have on the future financial performance of this reporting unit. There were no goodwill impairment charges for the three and nine months ended ~~October 31, 2019~~.

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 indefinite-lived intangible assets, by segment, for the ~~period~~six months ended ~~October~~July 31, ~~2020:~~

Agriculture Construction International Total
(in thousands)
January 31, 2020 $ 6,070 $ 72 $ 1,870 $ 8,012
Arising from business combinations 195 — — 195
Foreign currency translation — — 97 97
Impairment — — (858) (858)
October 31, 2020 $ 6,265 $ 72 $ 1,109 $ 7,446

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 performs at least an annual impairment testing of its indefinite-lived distribution rights intangible assets and, due to ongoing losses, ~~and the impact of COVID-19,~~ an interim test was completed induring the ~~third quarter of fiscal~~three months ended July 31, 2021 for our ~~Germany assets.~~German distribution rights asset. Under the impairment test, the fair value of distribution rights intangible assets is estimated based on a 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 distribution ~~right~~rights asset.

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The results of the Company's impairment testing for the ~~Germany~~German distribution rights intangible ~~assets~~asset for the ~~quarter~~three months ended ~~October~~July 31, ~~2020,~~2021, indicated that the estimated fair value of the tested distribution rights was below the carrying value of ~~such assets,~~the asset, thus requiring an impairment to be recognized. Impairment charges of ~~$0.9~~$1.1 million were recognized for the three and ~~nine~~six months ended ~~October~~July 31, ~~2020~~2021 and included in ~~the~~ Impairment of ~~Intangibles~~Intangible and ~~Long-lived assets amount~~Long-Lived Assets in the condensed consolidated statements of 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. The Company's assumptions about future financial performance were impacted by the current year operating performance of this reporting unit and by the anticipated impact that challenging industry conditions, including COVID-19, may have on the future financial performance of this reporting unit. There were no indefinite-lived intangible impairment charges for the three and ~~nine~~six months ended ~~October~~July 31, ~~2019~~.2020.

NOTE 8 - FLOORPLAN PAYABLE/LINES OF CREDIT

On April 3, 2020, the Company entered into a Third Amended and Restated Credit Agreement (the "Bank Syndicate Agreement") with a group of banks that amended 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 $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 prior credit facility, amongst other things. The amounts available under the Bank Syndicate Agreement are subject to borrowing base calculations and reduced by outstanding standby letters of 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 ~~0.50%.~~zero. The Base Rate is the greater of (a) the prime rate of interest announced, from time to time, by Bank of ~~America;~~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 applicable margin ~~rate~~to the LIBOR Rate or Base Rate. The applicable margin is 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 LIBOR Rate Loans. The Company does not believe implementation of this new benchmark rate will have a material effect on its results of operations. In addition, the amendment reduced the current floor of the LIBOR Rate from 0.5% to 0.0%

The Bank Syndicate Agreement does not obligate the Company to maintain financial covenants, except in the event that excess availability ~~(each as~~(as defined in the Bank Syndicate Agreement) is less than 15% of the lower of the borrowing base or the size of the maximum credit line, at which point the Company is required to maintain a fixed charge coverage ratio of at least 1.10:1.00. The Bank Syndicate Agreement includes various restrictions on the 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.

The Floorplan Loan under the Bank Syndicate Agreement is used to finance equipment inventory 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 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 ~~intention or~~ obligation to repay amounts borrowed within one year.

As of ~~October~~July 31, ~~2020,~~2021, the Company had floorplan lines of credit totaling ~~$765.0~~$771.0 million, which is primarily comprised of three significant floorplan lines of credit: (i) a $450.0 million credit facility with CNH Industrial, (ii) a $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

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

As of ~~October~~July 31, ~~2020~~2021 and January 31, ~~2020,~~2021, the Company's outstanding balances of floorplan lines of credit consisted of the following:

October 31, 2020 January 31, 2020
(in thousands)
CNH Industrial $ 138,588 $ 187,690
Bank Syndicate Agreement Floorplan Loan 49,750 —
Wells Fargo Floorplan Payable Line — 82,700
DLL Finance 19,348 30,657
Other outstanding balances with manufacturers and non-manufacturers 80,151 70,725
$ 287,837 $ 371,772

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	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, ~~2020,~~2021 and January 31, 2021, the ~~interest-bearing~~ U.S. floorplan payables ~~carried various interest rates ranging primarily from 2.25% to 3.07%, compared to a range of 4.05% to 4.81% as of January 31, 2020.~~were generally all non-interest bearing. As of ~~October~~July 31, ~~2020,~~2021, foreign floorplan payables carried various interest rates primarily ranging from ~~1.20%~~1.40% to ~~4.84%~~4.79%, compared to a range of ~~0.86%~~1.40% to ~~7.66%~~4.82% as of January 31, ~~2020.~~2021. As of ~~October~~July 31, ~~2020~~2021 and January 31, ~~2020, $164.6~~2021, $148.7 million and ~~$205.2~~$98.8 million, respectively, of outstanding floorplan payables were non-interest bearing. As of ~~October~~July 31, ~~2020,~~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.

NOTE 9 - ~~SENIOR CONVERTIBLE NOTES~~

The Company's senior convertible notes matured, and the outstanding principal balance of $45.6 million was repaid in full, on May 1, 2019, and as such there was no interest expense for the three and nine months ended October 31, 2020 and three months ended October 31, 2019. For the nine months ended October 31, 2019, the Company recognized $0.8 million in interest expense associated with its senior convertible notes.

~~NOTE 10 -~~ LONG TERM DEBT

The following is a summary of long-term debt as of ~~October~~July 31, ~~2020~~2021 and January 31, ~~2020:~~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

Description Maturity Dates Interest Rates October 31, 2020 January 31, 2020
(in thousands)
Mortgage loans, secured Various through May 2039 2.09% to 5.1% $ 23,015 $ 15,252
Sale-leaseback financing obligations Various through December 2030 3.4% to 10.3% 16,832 17,781
Bank Syndicate Agreement - Revolver Loan April 2025 2.25% 10,000 10,000
Vehicle loans, secured Various through June 2026 1.7% to 3.94% 9,538 7,468
Other January 2021 2.6% 147 1,067
Total debt 59,532 51,568
Less: current maturities 4,423 13,779
Long-term debt, net $ 55,109 $ 37,789

The Company purchased buildings and real estate assets of eleven of its U.S. dealer locations in the first quarter of fiscal 2022 and financed these purchases with long term debt of $17.7 million. These dealer locations were previously leased from third party lessors.

NOTE 1110 - DERIVATIVE INSTRUMENTS

The Company holds derivative instruments for the purpose of minimizing exposure to fluctuations in foreign currency exchange rates to which the Company is exposed in the normal course of its operations.

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. ~~No foreign currency contracts were outstanding as of January 31, 2020.~~ The notional value of outstanding foreign currency contracts as of ~~October~~January 31, ~~2020~~2021 was ~~$7.0~~$8.0 million. There were no outstanding foreign currency contracts as of July 31, 2021.

As of ~~October~~January 31, ~~2020,~~2021, the fair value of the Company's outstanding derivative instruments was not material. Derivative instruments recognized as assets are recorded in prepaid expenses and other in the condensed consolidated balance sheets, and derivative instruments recognized as liabilities are recorded in accrued expenses and other in the condensed consolidated balance sheets.

The following table sets forth the gains and losses recognized in income from the Company’s derivative instruments for the ~~three and nine~~six months ended ~~October~~July 31, ~~2020~~2021 and ~~2019.~~2020. Gains and losses are recognized in Interest and other income ~~(expense)~~ in the consolidated statements of operations:

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Three Months Ended October 31, Nine Months Ended October 31,
2020 2019 2020 2019
(in thousands)
Foreign currency contract gain (loss) $ 471 $ (3) $ 660 $ 365


	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 1211 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following is a summary of the changes in accumulated other comprehensive income (loss), by component, for the periods ended ~~October~~July 31, ~~2020~~2021 and ~~October~~July 31, ~~2019:~~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)
Other comprehensive income 2,181 — 2,181
Balance, October 31, 2020 $ (3,500) $ 2,711 $ (789)

Foreign Currency Translation Adjustment Net Investment Hedging Gain Total Accumulated Other Comprehensive Income (Loss)
(in thousands)
Balance, January 31, 2019 $ (5,051) $ 2,711 $ (2,340)
Other comprehensive loss (771) — (771)
Balance, April 30, 2019 (5,822) 2,711 (3,111)
Other comprehensive income 1,012 — 1,012
Balance, July 31, 2019 (4,810) 2,711 (2,099)
Other comprehensive loss (2,650) — (2,650)
Balance, October 31, 2019 $ (7,460) $ 2,711 $ (4,749)


	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)

NOTE 1312 - LEASES

As Lessee

The Company, as lessee, leases certain of 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; ~~such~~these leases are expensed on a straight-line basis over the lease term. Many real estate lease agreements require the Company 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. ~~Such~~These payments are deemed to be 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.

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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 October 31, Nine Months Ended October 31,
Classification 2020 2019 2020 2019
(in thousands) (in thousands)
Finance lease cost:
Amortization of leased assets Operating expenses $ 395 $ 373 $ 1,176 $ 1,080
Interest on lease liabilities Other interest expense 108 143 351 421
Operating lease cost Operating expenses and rental and other cost of revenue 4,541 4,613 13,329 14,154
Short-term lease cost Operating expenses 81 41 270 201
Variable lease cost Operating expenses 739 689 2,109 2,024
Sublease income Interest and other income (expense) (136) (146) (419) (468)
$ 5,728 $ 5,713 $ 16,816 $ 17,412

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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 October 31, 2020 January 31, 2020
(in thousands)
Assets
Operating lease assets Operating lease assets $ 81,401 $ 88,281
Finance lease assets(a)
Property and equipment, net of accumulated depreciation 5,478 6,297
Total leased assets $ 86,879 $ 94,578
Liabilities
Current
Operating Current operating lease liabilities $ 12,373 $ 12,259
Finance Accrued expenses and other 1,712 1,708
Noncurrent
Operating Operating lease liabilities 80,782 88,387
Finance Other long-term liabilities 3,121 4,103
Total lease liabilities $ 97,988 $ 106,457


	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 ~~$2.6~~$1.7 million as of ~~October~~July 31, ~~2020~~2021 and ~~$1.5~~$3.0 million as of January 31, ~~2020.~~2021.

Maturities of lease liabilities as of ~~October~~July 31, ~~2020~~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

Operating Finance
Leases Leases Total
Fiscal Year Ended January 31, (in thousands)
2021 (remainder) $ 4,481 $ 548 $ 5,029
2022 17,307 1,923 19,230
2023 16,248 1,269 17,517
2024 15,150 530 15,680
2025 13,998 424 14,422
2026 13,835 312 14,147
Thereafter 34,720 1,084 35,804
Total lease payments 115,739 6,090 121,829
Less: Interest 22,584 1,257 23,841
Present value of lease liabilities $ 93,155 $ 4,833 $ 97,988

The weighted-average lease term and discount rate as of ~~October~~July 31, ~~2020~~2021 are as follows:


	~~October~~July 31, ~~2020~~2021
Weighted-average remaining lease term (years):
Operating leases	~~7.4~~6.9
Financing leases	~~5.0~~5.7
Weighted-average discount rate:
Operating leases	~~6.0~~6.1	%
Financing leases	~~9.5~~8.8	%

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As Lessor

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. ~~Certain~~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 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

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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 ~~October~~July 31, ~~2020~~2021 and January 31, ~~2020:~~

October 31, 2020 January 31, 2020
(in thousands)
Rental fleet equipment $ 94,220 $ 104,133
Less accumulated depreciation 34,970 42,076
$ 59,250 $ 62,057

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 1413 - FAIR VALUE MEASUREMENTS

As of ~~October~~July 31, ~~2020~~2021 and January 31, ~~2020,~~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, was not material. These foreign currency contracts were valued using a discounted cash flow analysis, which is an income approach, utilizing readily observable market data as 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 ~~October 31, 2020, April 30, 2020, and~~ January 31, ~~2020~~2021 as part of its long-lived asset impairment testing. The estimated fair value of such assets as of ~~October 31, 2020,~~ ~~April 30, 2020, and~~ January 31, ~~2020~~2021 was ~~$0.5 million, $0.4 million, and $2.8 million, respectively.~~$0.8 million. Fair value was estimated through an income approach incorporating both observable and unobservable inputs, and are deemed to be Level 3 fair value inputs. The most significant unobservable inputs include forecasted net cash generated from the use of the assets and the discount rate applied to such cash flows to arrive at a fair value estimate. In addition, in certain instances 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 value to be realized upon disposition was deemed to be nominal.

The Company also has financial instruments that are not recorded at fair value in the consolidated balance sheets, including cash, receivables, payables and long-term debt. The carrying amounts of these financial instruments approximated their fair values as of ~~October~~July 31, ~~2020~~2021 and January 31, ~~2020.~~2021. Fair value of these 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

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NOTE 1514 - INCOME TAXES

Our effective tax rate was ~~28.3%~~28.0% and ~~33.8%~~22.8% for the three months ended ~~October~~July 31, 2021 and 2020, ~~and October 31, 2019~~respectively and was ~~26.5%~~25.6% and ~~31.3%~~24.3% for the ~~nine~~ six months ended ~~October~~July 31, 2021 and 2020, ~~and October 31, 2019. Our~~respectively. The effective tax rate ~~differs from~~for the ~~domestic federal statutory tax rate due to~~six months ended July 31, 2021 was benefited by the ~~impact~~vesting of ~~state taxes, the mix of domestic and foreign income or losses, the impact of~~share-based compensation but was offset by the recognition of a valuation allowance on certain of our foreign deferred tax assets including ~~net operating losses,~~recording a valuation allowance on the ~~impact~~remaining deferred tax assets of ~~foreign~~our Germany entity. For the six months ended July 31, 2020, the effective tax rate benefited from a weakening Ukrainian currency ~~fluctuations~~but was offset by increased tax expense on ~~our Ukrainian business and discrete events that take place throughout~~ the ~~year, primarily the tax impact~~vesting of ~~share based payments.~~share-based compensation.

NOTE 1615 - 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 ~~such~~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.

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~~Fiscal 2020~~

On January 1, 2019, the Company, through its German subsidiary, acquired certain assets of ESB Agrartechnik GmbH ("ESB"). ESB is a full-service agriculture equipment dealership in Eastern Germany. Our acquisition of ESB further expanded our presence in the German market. The total consideration transferred for the acquired business was $3.0 million paid in cash. This acquisition was recognized in the fiscal year ended January 31, 2020 as the acquisition occurred within our International segment in which all entities maintain a calendar year reporting period.

On October 1, 2019, the Company acquired certain assets of Uglem-Ness Co. The acquired business consisted of one Case IH agriculture equipment store in Northwood, North Dakota. The service area is contiguous to the Company's existing locations in Grand Forks and Casselton, North Dakota and Ada, Minnesota. The total consideration transferred for the acquired business was $10.9 million paid in cash.

In connection with the acquisition, the Company acquired from CNH Industrial and certain other manufacturers equipment and parts inventory previously owned by Uglem-Ness Co. Upon acquiring such inventories, the Company was offered floorplan financing by the manufacturer. In total, the Company acquired inventory and recognized a corresponding financing liability of $7.4 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

~~Each of the~~ The above ~~acquisitions~~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 ~~all business combinations~~the purchase price allocation was complete as of ~~October~~January 31, ~~2020.~~

2021. The following table presents the aggregate purchase price allocations for all acquisitions completed ~~during the nine months ended October 31, 2020 and twelve months ended~~as of January 31, ~~2020:~~

October 31, 2020 January 31, 2020
(in thousands)
Assets acquired:
Cash $ 1 $ —
Receivables — 440
Inventories 4,260 6,466
Prepaid expenses and other 48 —
Property and equipment 1,752 3,810
Operating lease assets 2,006 —
Intangible assets 245 1,973
Goodwill 484 1,198
8,796 13,887
Liabilities assumed:
Current operating lease liabilities 159 —
Operating lease liabilities 1,847 —
2,006 —
Net assets acquired $ 6,790 $ 13,887
Goodwill recognized by segment:
Agriculture $ 484 $ 699
Construction — —
International — 499
Goodwill expected to be deductible for tax purposes $ 484 $ 1,198
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 ~~combinations~~combination arose from the acquisition of an assembled workforce and anticipated synergies expected to be realized. For the business ~~combinations~~combination occurring during the twelve months ended January 31, ~~2020, the Company recognized a customer relationship intangible asset of $0.2 million, a non-competition~~

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~~intangible asset of $0.1 million, and a distribution rights intangible asset of $1.6 million. For the business combinations occurring during the nine months ended October 31, 2020,~~2021, the Company recognized a non-competition intangible asset of $0.1 million and a distribution rights intangible asset of $0.2 million. The ~~customer relationship and~~ non-competition ~~assets~~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 ~~nine months~~fiscal year ended ~~October~~January 31, ~~2020 or 2019,~~2021, and have been expensed as incurred and recognized as operating expenses in the consolidated statements of operations.

NOTE 1716 - 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.

The Company is ~~also~~ engaged in ~~other~~ 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 ~~the~~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 with assurance.~~predictable.

NOTE 1817 - SEGMENT INFORMATION

The Company has 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

Three Months Ended October 31, Nine Months Ended October 31,
2020 2019 2020 2019
(in thousands) (in thousands)
Revenue
Agriculture $ 220,625 $ 214,073 $ 583,326 $ 533,538
Construction 79,030 78,031 216,862 232,813
International 61,217 68,832 174,357 187,856
Total $ 360,872 $ 360,936 $ 974,545 $ 954,207
Income (Loss) Before Income Taxes
Agriculture $ 13,575 $ 10,259 $ 26,490 $ 18,312
Construction 1,448 347 (50) (541)
International (2,424) 2,061 (3,136) 2,783
Segment income before income taxes 12,599 12,667 23,304 20,554
Shared Resources 1,225 (258) 1,961 (1,233)
Total $ 13,824 $ 12,409 $ 25,265 $ 19,321

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		October 31, 2020		January 31, 2020			July 31, 2021		January 31, 2021
		(in thousands)					(in thousands)
Total Assets	Total Assets					Total Assets
Agriculture	Agriculture	$	421,556	$	444,942	Agriculture	$	380,000	$	349,697
Construction	Construction	232,236		275,645		Construction	191,908		185,534
International	International	189,239		191,513		International	182,187		177,213
Segment assets	Segment assets	843,031		912,100		Segment assets	754,095		712,444
Shared Resources	Shared Resources	57,825		63,243		Shared Resources	85,276		103,345
Total	Total	$	900,856	$	975,343	Total	$	839,371	$	815,789

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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, ~~2020.~~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: 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.

Demand for agricultural equipment and, to a lesser extent, parts and service support, are impacted by agricultural commodity prices and net farm income. Based on ~~September 2020~~February 2021 U.S. Department of Agriculture publications, the estimate of net farm income for calendar year ~~2020~~2021 indicated an approximate ~~22.7% increase~~8.1% decrease as compared to calendar year ~~2019,~~2020, and an approximate ~~3.0%~~45.7% increase in net farm income for calendar year ~~2019,~~2020 as compared to calendar year ~~2018.~~2019. Certain areas of our North American Agriculture footprint have been impacted by a drought in recent months and this may reduce demand for parts and service support in upcoming quarters.

For the ~~third~~second quarter of fiscal ~~2021,~~2022, our net income was ~~$9.9~~$11.2 million, or ~~$0.44~~$0.50 per diluted share, compared to a fiscal ~~2020 third~~2021 second quarter net income of ~~$8.2~~$6.4 million, or ~~$0.37~~$0.28 per diluted share. Our adjusted diluted earnings per share was ~~$0.58~~$0.57 for the ~~third~~second quarter of fiscal ~~2021,~~2022, compared to ~~$0.48~~$0.29 for the ~~third~~second quarter of fiscal ~~2020.~~2021. See the Non-GAAP Financial Measures section below for a reconciliation of adjusted diluted earnings per share to diluted earnings per share, the most comparable GAAP financial measure. Significant factors impacting the quarterly comparisons were:

•Revenue in the ~~third~~second quarter of fiscal ~~2021 was flat~~2022 increased compared to the ~~third~~second quarter of fiscal ~~2020. Increased~~2021. All three segments recognized an increase in revenue from ~~parts and service was offset by lower equipment and rental and other revenue.~~the prior year. Total same store sales ~~were down 2.1%~~increased 27.0% compared to the prior year ~~third quarter as the Northwood (ND) location was acquired late in the third quarter of fiscal 2020 and the Scottsbluff (NE), Sidney (NE) and Torrington (WY) locations were acquired~~second quarter.

•Gross profit in the second quarter of fiscal ~~2021. Parts and service revenue within our Agriculture segment in~~2022 increased 19.7% compared to the ~~third~~second quarter of fiscal ~~2020~~2021. The increase in gross profit was ~~positively impacted by good harvest conditions throughout most~~primarily the result of ~~our footprint.~~strong equipment sales and equipment gross profit margins that increased to 11.9% in the second quarter of fiscal 2022 from 11.1% in the second quarter of fiscal 2021.

•~~Impairments~~Intangible and long-lived asset impairments in the ~~third~~second quarter of fiscal ~~2021~~2022 were ~~$2.6~~$1.5 million compared to ~~$0.1 million~~no impairment in the ~~third~~second quarter of fiscal ~~2020.~~2021. The increase was attributable to the impairment of ~~goodwill~~certain intangible and ~~other intangible~~long-lived assets in one of our International reporting units.

•Operating expenses decreased 7.0% compared to the third quarter of fiscal 2020 despite adding the four acquired locations. This was achieved through managed expense reductions, primarily in the Construction and International segments, and lower expenses in all segments due to the COVID-19 pandemic such as reduced travel and fuel expenses.

•Floorplan and other interest expense decreased a combined ~~29.4%~~21.9% in the ~~third~~second quarter of fiscal ~~2021,~~2022, as compared to the ~~third~~second quarter last year, due to ~~an overall~~ lower ~~interest rate environment, a lower interest rate spread under our new five-year Bank Syndicate Agreement that was finalized in April 2020, and a lower borrowings on our line of credit.~~borrowings.

Impact of the COVID-19 Pandemic on the Company

~~In March 2020,~~ As discussed in note 1 to our condensed consolidated financial statements, the ~~World Health Organization declared~~COVID-19 pandemic has significantly disrupted supply chains and business around the ~~outbreak~~world. Uncertainty remains regarding the emerging variant strains of COVID-19 aand 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 ~~the President of~~accepted in the United States ~~declared~~and the ~~COVID-19 outbreak as a national emergency. The nature~~rest of ~~COVID-19 led to worldwide shutdowns~~the world, and ~~halting~~the effectiveness of ~~commercial and interpersonal activity as governments imposed regulations~~those vaccines in ~~efforts to control~~slowing or stopping the spread of COVID-19 and mitigating the pandemic, such as shelter-in-place orders and quarantines. The pandemic is a highly fluid and rapidly evolving situation, and we cannot anticipate with any certainty the length, scope, or severity of such restrictions in eacheconomic 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 ~~that~~ we ~~operate. See Item 1A. Risk Factors for more information on possible impacts.~~

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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.

~~Even though we~~

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Some of the Company's supply vendors are ~~considered an essential business, in response~~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 materials.

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 ~~closed its U.S. stores~~continues to monitor the public in March 2020 but continued operations through social distancing means in all areas: equipment, parts, service and rental. Beginning in May 2020, we began fully reopening our stores to the public, following pandemic safety protocols, and by June 2020 all of our locations were once again open to the public. Additionally, our International stores have also been following pandemic safety protocols set forth by each country and local government authority, which at times have included border shutdowns and curfew regulations.

With the number of cases within our footprint on the rise throughout the third quarter of fiscal 2021, we continue to follow the requirements of the local authorities for each of our locations to determine mandates and social distancing policies. As a result of some of the improvements we have made since the beginning of the pandemic, such as physical barriers, cleaning policies, social distancing, and mask mandates, the Company has no plans to close all of its U.S. stores to the public as we did in the spring of fiscal 2021. Any such decision to close a U.S. store to the public, if it is made, will be determined on a location by location basis so as to protect our employees and customers while continuing to provide customers with the service expected from the Company.

We believe that each of our business segments, has been and will continue to be, impacted by the COVID-19 pandemic to varying degrees, although the actual ultimate impact has been and will continue to be subject to many variables and uncertainties many of which are currently unknown or outside of our control.

~~Agriculture~~

Overall, we believe COVID-19 has created challenging industry conditions resulting in supply chain disruptions affecting areas such as ethanol, livestock and international trade. These conditions impacted agricultural commodities early in the year, but were later offset by other more positive macro conditions, such as U.S. crop production and increased commodity exports. The variability in commodity prices makes it difficult to estimate the extent and timing of this impact on our equipment sales. However, we believe our parts and service business has been less negatively impacted by COVID-19, as our customers are continuing to experience wear and tear on their equipment. Also, offsetting some of the challenges in the agriculture industry will be government support programs for our farm customers, such as the $16 billion Coronavirus Food Assistance Program (CFAP).

~~Construction~~

We believe all revenue categories of equipment, parts, service and rental have been negatively impacted in this segment as a result of COVID-19, with such effects expected to continue as long as pandemic related macroeconomic stress and uncertainties persist. Examples of such macroeconomic stressors include: lower oil prices, higher unemployment, lower GDP, and reduced government spending on infrastructure projects. We believe all of these factors have lead to lower overall U.S. construction spending.

~~International~~

In addition to the industry challenges indicated for our Agriculture segment, our International segment is also being negatively impacted by border shutdowns, timing of equipment shipments and, from time to time, more stringent in-country pandemic regulations. We believe all revenue categories in this segment have been more negatively impacted than our Agriculture segment because of these additional challenges and the general lack of government support programs for our International farm customers.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 ~~transferred~~paid for the acquired business was $6.8 million ~~paid~~ 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.

~~Fiscal 2020~~

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On October 1, 2019, we acquired certain assets of Uglem-Ness Co., a single store Case IH agriculture equipment dealership in Northwood, North Dakota. The acquisition continues our strategy of acquiring dealerships in agriculture markets contiguous to our current North American agriculture stores. The service area of Uglem-Ness is contiguous to our existing locations in Grand Forks and Casselton, North Dakota and Ada, Minnesota. The total consideration paid in the acquisition was $10.9 million, which the Company financed through available cash resources and capacity under our existing floorplan payable and other credit facilities. The Northwood, ND dealership is 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 ~~2021 and expects all~~2021; we anticipate the remaining domestic stores to be ~~migrated~~converted to the ~~new~~ ERP ~~during~~within the ~~second or third quarter of fiscal 2022. We have prospectively adjusted the useful life of our current ERP application such that it will be fully amortized upon its estimated replacement date.~~next 12 months.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are included in the Management's Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the fiscal year ended January 31, 2020. Other than the adoption of the accounting standards for current expected credit loss and the standard for cloud computing described in Note 1 to our consolidated financial statements in this Quarterly Report on Form 10-Q, there2021. There have been no changes in our critical accounting policies since January 31, ~~2020.~~2021.

Results of Operations

The results presented below include the operating results of any acquisition made during these 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 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 period in the current and preceding fiscal years. We do not distinguish between relocated or 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		%

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Three Months Ended October 31, Nine Months Ended October 31,
2020 2019 2020 2019
(dollars in thousands) (dollars in thousands)
Equipment
Revenue $ 240,901 $ 245,986 $ 662,060 $ 654,376
Cost of revenue 215,770 219,484 593,048 583,345
Gross profit $ 25,131 $ 26,502 $ 69,012 $ 71,031
Gross profit margin 10.4 % 10.8 % 10.4 % 10.9 %
Parts
Revenue $ 76,778 $ 70,788 $ 194,846 $ 181,928
Cost of revenue 53,556 49,834 136,205 128,380
Gross profit $ 23,222 $ 20,954 $ 58,641 $ 53,548
Gross profit margin 30.2 % 29.6 % 30.1 % 29.4 %
Service
Revenue $ 30,696 $ 27,553 $ 84,282 $ 77,215
Cost of revenue 10,254 8,950 28,263 25,170
Gross profit $ 20,442 $ 18,603 $ 56,019 $ 52,045
Gross profit margin 66.6 % 67.5 % 66.5 % 67.4 %
Rental and other
Revenue $ 12,497 $ 16,609 $ 33,357 $ 40,688
Cost of revenue 8,741 10,894 23,379 27,612
Gross profit $ 3,756 $ 5,715 $ 9,978 $ 13,076
Gross profit margin 30.1 % 34.4 % 29.9 % 32.1 %

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,
2020 2019 2020 2019
Revenue
Equipment 66.8 % 68.2 % 67.9 % 68.6 %
Parts 21.3 % 19.6 % 20.0 % 19.1 %
Service 8.5 % 7.6 % 8.6 % 8.1 %
Rental and other 3.5 % 4.6 % 3.4 % 4.3 %
Total Revenue 100.0 % 100.0 % 100.0 % 100.0 %
Total Cost of Revenue 79.9 % 80.1 % 80.1 % 80.1 %
Gross Profit Margin 20.1 % 19.9 % 19.9 % 19.9 %
Operating Expenses 15.0 % 16.1 % 16.4 % 17.4 %
Impairment of Goodwill 0.4 % — % 0.1 % — %
Impairment of Intangible and Long-Lived Assets 0.3 % — % 0.1 % — %
Income from Operations 4.4 % 3.8 % 3.1 % 2.5 %
Other Income (Expense) (0.6) % (0.3) % (0.6) % (0.5) %
Income Before Income Taxes 3.8 % 3.4 % 2.6 % 2.0 %
Provision for Income Taxes 1.1 % 1.2 % 0.7 % 0.6 %
Net Income 2.7 % 2.3 % 1.9 % 1.4 %
Three Months Ended July 31, 2021 Compared to Three Months Ended July 31, 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	%

Total revenue for the second quarter of fiscal 2022 was 24.4% or $74.2 million higher than the second quarter of fiscal 2021 driven primarily by increased demand for equipment, which increased equipment sales 34.6% from the prior year period. The increased equipment demand was 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 second quarter of fiscal 2022 increased 27.0% versus the comparable period in fiscal 2021.

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~~Three Months Ended October 31, 2020 Compared to Three Months Ended October 31, 2019~~

~~Consolidated Results~~

~~Revenue~~

Three Months Ended October 31, Increase/ Percent
2020 2019 (Decrease) Change
(dollars in thousands)
Equipment $ 240,901 $ 245,986 $ (5,085) (2.1) %
Parts 76,778 70,788 5,990 8.5 %
Service 30,696 27,553 3,143 11.4 %
Rental and other 12,497 16,609 (4,112) (24.8) %
Total Revenue $ 360,872 $ 360,936 $ (64) — %

Total revenue for the third quarter of fiscal 2021 was virtually flat compared to the third quarter of fiscal 2020. Increased revenue from parts and service was offset by lower equipment and rental and other revenue. Company-wide same-store sales in the third quarter of fiscal 2021 decreased 2.1% versus the comparable period in fiscal 2020. The most significant decrease in same store sales occurred in the International segment with same-store sales decreasing 11.1% from the prior year quarter.

Gross Profit

Three Months Ended October 31, Increase/ Percent
2020 2019 (Decrease) Change
(dollars in thousands)
Gross Profit
Equipment $ 25,131 $ 26,502 $ (1,371) (5.2) %
Parts 23,222 20,954 2,268 10.8 %
Service 20,442 18,603 1,839 9.9 %
Rental and other 3,756 5,715 (1,958) (34.3) %
Total Gross Profit $ 72,551 $ 71,774 $ 778 1.1 %
Gross Profit Margin
Equipment 10.4 % 10.8 % (0.4) % (3.7) %
Parts 30.2 % 29.6 % 0.6 % 2.0 %
Service 66.6 % 67.5 % (0.9) % (1.3) %
Rental and other 30.1 % 34.4 % (4.3) % (12.5) %
Total Gross Profit Margin 20.1 % 19.9 % 0.2 % 1.0 %
Gross Profit Mix
Equipment 34.6 % 36.9 % (2.3) % (6.2) %
Parts 32.0 % 29.2 % 2.8 % 9.6 %
Service 28.2 % 25.9 % 2.3 % 8.9 %
Rental and other 5.2 % 8.0 % (2.8) % (35.0) %
Total Gross Profit Mix 100.0 % 100.0 %


	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		%

Gross profit for the ~~third~~second quarter of fiscal ~~2021~~2022 increased ~~1.1%~~19.7% or ~~$0.8~~$12.3 million, as compared to the same period last year. ~~Gross~~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 ~~also improved~~ to ~~20.1%~~19.9% in the current quarter from ~~19.9%~~20.7% in the prior year ~~quarter. The increase in gross profit and gross profit margin~~quarter was primarily due to the ~~result~~shift of ~~a change in~~the gross profit mix ~~resulting from a greater percentage of revenue generated by our higher~~to lower margin equipment sales relative to parts, service, and ~~service businesses.~~rental sales.

Our ~~company-wide~~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 sales, plus interest expense on floorplan payables and rental fleet debt — increased to ~~94.2%~~86.2% for the ~~third~~second quarter of fiscal ~~2021~~2022 compared to ~~82.6%~~80.9% during the same period last year as the increase in gross profit from parts and service in the ~~third~~second quarter of fiscal 2022 combined with lower floorplan interest expenses more than offset the increase in operating 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)	%

Our operating expenses in the second quarter of fiscal 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 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 was due to the increase in total revenue in the second quarter of fiscal 2022, as compared to the second quarter of fiscal 2021, ~~combined with lower~~which positively affected our ability to leverage our fixed operating ~~and floorplan interest expenses generated the improved absorption rate compared to that of the prior year quarter.~~costs.

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~~Operating Expenses~~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	%

Three Months Ended October 31, Increase/ Percent
2020 2019 (Decrease) Change
(dollars in thousands)
Operating Expenses $ 54,115 $ 58,184 $ (4,069) (7.0) %
Operating Expenses as a Percentage of Revenue 15.0 % 16.1 % (1.1) % (6.8) %

~~Our operating expenses~~ The Company recognized impairment expense of $1.5 million related to certain intangible assets and and long-lived assets in its International segment in the ~~third~~second quarter of fiscal 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 second quarter of fiscal 2021, decreased 7.0%, as compared to the third quarter of fiscal 2020. The increased operating expenses of four acquired locations, which were not in the prior year quarter, were more than offset by managed expense reductions in our Construction and International segments and various lower operating expenses caused by COVID-19 such as reduced travel and fuel costs. Operating expenses as a percentage of revenue decreased to 15.0% in the third quarter of fiscal 2021 from 16.1% in the third quarter of fiscal 2020.

~~Impairment Charges~~

Three Months Ended October 31, Increase/ Percent
2020 2019 Decrease Change
(dollars in thousands)
Impairment of Goodwill $ 1,453 $ — $ 1,453 100.0%
Impairment of Intangible and Long-Lived Assets 1,103 51 1,052 n/m

We recognized $1.5 million in impairment expense related to certain goodwill assets in our International segment in the third quarter of fiscal 2021. We also recognized impairment expense related to other intangible assets and long-lived assets of $1.1 million primarily in our International segment during the same period. The total impairment expense of $2.6 million is an increase compared to the impairment expense in third quarter of fiscal 2020 of $0.1 million.

~~Other Income (Expense)~~

Three Months Ended October 31, Increase/ Percent
2020 2019 (Decrease) Change
(dollars in thousands)
Interest and other income (expense) $ (360) $ 1,273 $ (1,633) n/m
Floorplan interest expense (757) (1,448) (691) (47.7) %
Other interest expense (940) (955) (15) (1.6) %

~~Floorplan interest expense decreased 47.7% in the third quarter of fiscal 2021, as compared to the third quarter of fiscal 2020,~~ due to ~~an overall~~ lower borrowings. The increase in other interest rate environment, a lower interest rate spread under our new five-year Bank Syndicate Agreement that was finalized in April 2020, and lower borrowings on our line of credit. The decrease in Interest and other income (expense)expense was primarily due to ~~foreign currency remeasurement losses in Ukraine, resulting~~increased fixed rate long term debt from ~~a devaluation of~~real estate purchases throughout the ~~Ukrainian hyrvnia in the third quarter of fiscal 2021.~~year.

Provision for Income Taxes

Three Months Ended October 31, Increase/ Percent
2020 2019 (Decrease) Change
(dollars in thousands)
Provision for Income Taxes $ 3,912 $ 4,195 $ (283) (6.7) %


	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	%

Our effective tax rate was ~~28.3%~~28.0% and 22.8% for the ~~third quarter of fiscal~~three months ended July 31, 2021 and ~~33.8% for the third quarter of fiscal~~July 31, 2020. ~~In the current quarter our~~The effective tax rate ~~differed~~for the three months ended July 31, 2021 benefited from vesting of share-based compensation but was offset by the ~~21.0% domestic federal statutory tax rate primarily due to the impact~~recognition of ~~state taxes, share-based payments, foreign currency fluctuations on our Ukrainian business and~~ a ~~partial~~ valuation allowance ~~recorded~~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 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 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.

~~Table of Contents~~


		Three Months Ended October 31,				Increase/		Percent			Three Months Ended July 31,				Increase/		Percent
		2020		2019		(Decrease)		Change			2021		2020		(Decrease)		Change
		(dollars in thousands)									(dollars in thousands)
Revenue	Revenue									Revenue
Agriculture	Agriculture	$	220,625	$	214,073	$	6,552	3.1	%	Agriculture	$	219,364	$	169,072	$	50,292	29.8	%
Construction	Construction	79,030		78,031		999		1.3	%	Construction	80,943		77,719		3,224		4.1	%
International	International	61,217		68,832		(7,615)		(11.1)	%	International	77,323		56,674		20,649		36.4	%
Total	Total	$	360,872	$	360,936	$	(64)	—	%	Total	$	377,630	$	303,465	$	74,165	24.4	%

Income (Loss) Before Income Taxes	Income (Loss) Before Income Taxes									Income (Loss) Before Income Taxes
Agriculture	Agriculture	$	13,575	$	10,259	$	3,316	32.3	%	Agriculture	$	12,067	$	6,752	$	5,315	78.7	%
Construction	Construction	1,448		347		1,101		n/m		Construction	2,815		1,375		1,440		104.7	%
International	International	(2,424)		2,061		(4,485)		n/m		International	430		(432)		862		n/m
Segment income before income taxes	Segment income before income taxes	12,599		12,667		(68)		(0.5)	%	Segment income before income taxes	15,312		7,695		7,617		99.0	%
Shared Resources	Shared Resources	1,225		(258)		1,483		n/m		Shared Resources	320		597		(277)		(46.4)	%
Total	Total	$	13,824	$	12,409	$	1,415	11.4	%	Total	$	15,632	$	8,292	$	7,340	88.5	%

Agriculture

Agriculture segment revenue for the ~~third~~second quarter of fiscal ~~2021~~2022 increased ~~3.1%~~29.8% compared to the ~~third~~second quarter of fiscal ~~2020.~~2021. The higher revenue was driven primarily by ~~increases in our parts and service businesses. Parts and service revenue continued~~increased equipment demand due to benefit from an aging customer fleet and all sources of revenue in this segment benefited from the addition of four locations that were not included in the full prior year quarter. Parts and service also benefited in the quarter from good harvest conditions throughout much of our footprint in the quarter.higher commodity prices, higher recent net farm income. Same-store sales ofin our Agriculture segment ~~decreased 1.3%~~increased 29.3% for the ~~third~~second quarter of fiscal 2022 as compared to the second quarter of fiscal 2021, ~~as compared to the third quarter of fiscal 2020.~~primarily driven by an increase in equipment sales.

Agriculture segment income before income taxes was ~~$13.6~~$12.1 million for the ~~third~~second quarter of fiscal ~~2021~~2022 compared to ~~$10.3~~$6.8 million for the ~~third~~second quarter of fiscal ~~2020. The improvement~~2021. Higher equipment revenue along with increased gross profit margin on equipment drove the increase in segment results was primarily due to the higher parts and service revenue as well as the addition of the four acquired locations. Increased operating expenses for the quarter were partially offset by a decreasegross profit. Decreased inventory levels resulted in ~~traveling expenses due to COVID-19. Lower~~lower floorplan and other interest expense for the ~~third~~second quarter of fiscal 2022, as compared to the second quarter of fiscal 2021, ~~as compared to the third quarter of fiscal 2020,~~which also contributed to the improvement in segment results.

Construction

Construction segment revenue for the ~~third~~second quarter of fiscal ~~2021~~2022 increased ~~1.3%~~4.1% compared to the ~~third~~second quarter of fiscal ~~2020.~~2021. The higher revenue was driven by increases in our equipment sales, as compared to the prior year’s ~~third~~second quarter. This increase was partially offset by lower rental and other revenue, which was down due to a smaller fleet and lower utilization compared to the prior year driven by more difficult industry conditions such as lower oil prices and a general slowdown in the economy due to COVID-19. Higher revenues were offset by the divestiture of ~~the Albuquerque, New Mexico store~~our Phoenix and Tucson, Arizona stores in the fourth quarter of fiscal ~~2020.~~2021 as well as lower rental and other revenue due to a smaller rental fleet. Same-store sales ofin our Construction segment increased ~~3.6%~~14.1% for the ~~third~~second quarter of fiscal ~~2021,~~2022, as compared to the ~~third~~second quarter of fiscal ~~2020.~~2021.

Our Construction segment income before taxes was ~~$1.4~~$2.8 million for the ~~third~~second quarter of fiscal 2022 compared to $1.4 million in the second quarter of fiscal 2021. The improvement in segment results was primarily due to increased construction activity as well as operational improvements within the segment. Decreased inventory levels resulted in lower floorplan and other interest expense for the second quarter of fiscal 2022, as compared to the second quarter of fiscal 2021, ~~compared~~which also contributed to ~~$0.3 million~~the improvement in ~~the third quarter of fiscal 2020. Lower gross profits in this~~ segment ~~were more than offset by managed operating expense reductions and interest expense savings compared to that of the prior year.~~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 (comprised of original equipment costs plus additional capitalized costs) for that period — of our rental fleet ~~decreased~~increased from ~~30.4%~~22.2% in the ~~third~~second quarter of fiscal ~~2020~~2021 to ~~25.7%~~26.6% in the ~~third~~second quarter of fiscal ~~2021.~~2022.

International

International segment revenue, ~~and same-store sales,~~ for the ~~third~~second quarter of fiscal ~~2021 decreased 11.1%~~2022 increased 36.4% compared to the ~~third~~second quarter of fiscal ~~2020. All primary sources of revenue — equipment, parts and service — declined for the segment's third quarter of fiscal 2021, as compared to the prior year's third quarter. Lower~~2021. Higher segment revenue was driven by ~~decreased customer demand due to below average yields in certain areas~~many of ~~our International footprint~~the same macroeconomic factors as the Agriculture segment, as well as ~~overall challenging economic~~favorable growing condition throughout most of the farming footprint we serve, which has improved customer sentiment and ~~business conditions due to COVID-19.~~has had a positive impact on equipment sales.

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Our International segment ~~loss~~income before income taxes was ~~$2.4~~$0.4 million for the ~~third~~second quarter of fiscal ~~2021~~2022 compared to segment ~~income~~loss of ~~$2.1~~$0.4 million for the same period last year. The ~~decrease~~increase in segment pre-tax income was primarily the result of ~~lower revenues~~increased equipment sales and equipment gross profit margin and was partially offset by an impairment of ~~goodwill~~certain intangible and ~~other intangible~~fixed assets in our ~~Germany~~German reporting unit. In the third quarter of fiscal 2020, the International segment was positively impacted by foreign currency gains resulting from a strengthening U.S. dollar relative to the Euro and a strengthening Ukrainian hryvnia relative to the U.S. dollar.

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 Resources income before income taxes was ~~$1.2~~$0.3 million for the ~~third~~second quarter of fiscal ~~2021~~2022 compared to ~~a loss~~income before income taxes of ~~$0.3~~$0.6 million for the same period last year. The increase in Shared Resources income was the result of operating expense reductions due to COVID-19 as well as interest expense reductions due to a lower interest rate environment and lower borrowings, compared to the same period last year.

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~~Nine~~Six Months Ended ~~October~~July 31, ~~2020~~2021 Compared to ~~Nine~~Six Months Ended ~~October~~July 31, ~~2019~~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, Increase/ Percent
2020 2019 (Decrease) Change
(dollars in thousands)
Equipment $ 662,060 $ 654,376 $ 7,684 1.2 %
Parts 194,846 181,928 12,918 7.1 %
Service 84,282 77,215 7,067 9.2 %
Rental and other 33,357 40,688 (7,331) (18.0) %
Total Revenue $ 974,545 $ 954,207 $ 20,338 2.1 %

Total revenue for the first ~~nine~~six months of fiscal ~~2021~~2022 was up ~~2.1%~~22.3% or ~~$20.3~~$136.7 million compared to the first ~~nine~~six months of fiscal ~~2020,~~2021, and was driven by increases in revenue from our equipment, parts and service businesses. ~~These~~The 30.3% increase in equipment sales was the driving factor in the total sales increase from prior year and all three segments saw increases, ~~occurred~~compared to the prior year period, in ~~our Agriculture segment but were partially offset by lower revenue in our Construction and International segments.~~equipment sales. Company-wide same-store sales increased ~~0.5%~~23.6% over the comparable prior year period. Same-store sale increases in our Agriculture segment more than offset the decreases in same-store sales in our other two segments. Our total revenue increase was also positively impacted by the addition of the four acquired locations.

Gross Profit

Nine Months Ended October 31, Increase/ Percent
2020 2019 (Decrease) Change
(dollars in thousands)
Gross Profit
Equipment $ 69,012 $ 71,031 $ (2,019) (2.8) %
Parts 58,641 53,548 5,093 9.5 %
Service 56,019 52,045 3,974 7.6 %
Rental and other 9,978 13,076 (3,097) (23.7) %
Total Gross Profit $ 193,650 $ 189,700 $ 3,951 2.1 %
Gross Profit Margin
Equipment 10.4 % 10.9 % (0.5) % (4.6) %
Parts 30.1 % 29.4 % 0.7 % 2.4 %
Service 66.5 % 67.4 % (0.9) % (1.3) %
Rental and other 29.9 % 32.1 % (2.2) % (6.9) %
Total Gross Profit Margin 19.9 % 19.9 % — % — %
Gross Profit Mix
Equipment 35.6 % 37.4 % (1.8) % (4.8) %
Parts 30.3 % 28.2 % 2.1 % 7.4 %
Service 28.9 % 27.4 % 1.5 % 5.5 %
Rental and other 5.2 % 7.0 % (1.8) % (25.7) %
Total Gross Profit Mix 100.0 % 100.0 %


	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		%

~~The $4.0~~Gross profit increased 20.6% or $24.9 million ~~increase in gross profit~~ for the first ~~nine~~six months of fiscal ~~2021,~~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 ~~higher~~a shift in gross profit mix to lower margin equipment sales relative to parts, service, and ~~service revenue for the first nine months of fiscal 2021 partially offset by lower equipment margins and lower revenues in our~~ rental ~~and other business.~~sales.

Our ~~company-wide~~Company-wide absorption rate for the first ~~nine~~six months of fiscal ~~2021~~2022 increased to ~~82.7%~~81.0% as compared to ~~76.1%~~77.0% during the same period last year as the increase in gross profit from parts and service combined with lower ~~operating expenses and lower~~ floorplan interest expense ~~generated~~more than offset the ~~improved absorption rate~~increase in operating expenses during the six month period compared to that of the prior year ~~nine~~six month period.

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Operating Expenses

Nine Months Ended October 31, Increase/ Percent
2020 2019 (Decrease) Change
(dollars in thousands)
Operating Expenses $ 160,252 $ 165,594 $ (5,342) (3.2) %
Operating Expenses as a Percentage of Revenue 16.4 % 17.4 % (1.0) % (5.7) %


	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 ~~nine~~six months of fiscal ~~2021 decreased $5.3~~2022 increased $7.4 million as compared to the first ~~nine~~six months of fiscal ~~2020.~~2021. The ~~increased~~increase in operating expenses of four acquired locations, which were not in the prior year nine-month period, were more than offset by managed expense reductions in our Construction and International segments and various lower operatingwas primarily due to variable expenses ~~caused by COVID-19 such as reduced travel and fuel costs.~~associated with increased sales. Operating expenses as a percentage of revenue decreased to ~~16.4%~~15.1% in the first ~~nine~~six months of fiscal ~~2021~~2022 from ~~17.4%~~17.3% in the first ~~nine~~six months of fiscal ~~2020.~~2021. The decrease in operating expenses as a percentage of total revenue was due to ~~lower expenses combined with~~ the increase in total revenue in the first ~~nine~~six months of fiscal ~~2021,~~2022, as compared to the ~~the~~ first ~~nine~~six months of fiscal ~~2020,~~2021, which positively affected our ability to leverage our fixed operating costs.

~~Restructuring Costs~~

Nine Months Ended October 31, Increase/ Percent
2020 2019 Decrease Change
(dollars in thousands)
Impairment of Goodwill $ 1,453 $ — $ 1,453 100.0 %
Impairment of Intangible and Long-Lived Assets 1,319 186 1,133 n/m
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

We recognized $1.5 million in impairment ~~expense~~charges in our International segment related to certain ~~goodwill~~intangible and long-lived assets ~~in the International segment in the first nine months of fiscal 2021. We also recognized $1.3 million, primarily in our International segment,~~ and $0.2 million of impairment charges on certain ~~intangible assets and~~ long-lived assets in our Construction segment during the first ~~nine~~six months of fiscal ~~2021~~2022 and ~~2020,~~2021, respectively.

Other Income (Expense)

Nine Months Ended October 31, Increase/ Percent
2020 2019 (Decrease) Change
(dollars in thousands)
Interest and other income (expense) $ 333 $ 2,687 $ (2,354) (87.6) %
Floorplan interest expense (2,811) (3,724) (913) (24.5) %
Other interest expense (2,884) (3,562) (678) (19.0) %


	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	%

Floorplan interest expense decreased ~~24.5%~~62.6% for the first ~~nine~~six months of fiscal ~~2021,~~2022, as compared to the same period last year, primarily due to ~~an overall~~ lower ~~interest rate environment as well as~~borrowings and a lower interest rate ~~spread under our new five-year Bank Syndicate Agreement that was finalized in April 2020.~~environment. The ~~decrease~~increase in other interest expense in the first ~~nine~~six months of fiscal ~~2021,~~2022, as compared to the first ~~nine~~six months of fiscal ~~2020,~~2021, is the result of ~~our repayment~~increased long term debt on real estate purchased in ~~full of~~ the ~~outstanding balance of our senior convertible notes in May 2019.~~past year. The ~~decrease~~increase in Interest and other income ~~(expense)~~ in the first ~~nine~~six months of fiscal ~~2021~~2022 as compared to ~~the~~ the same period of fiscal ~~2020~~2021 is primarily due to the ~~result of differences in~~ foreign currency ~~gains and~~remeasurement losses ~~recognized during the periods. The U.S. dollar strengthened relative to the Euro and~~in Ukraine, resulting from a devaluation of the Ukrainian ~~hyrvia strengthened relative to~~hryvnia in the ~~U.S. dollar in~~first quarter of fiscal ~~2020 creating foreign currency gains in fiscal 2020.~~2021.

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Provision for 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, Increase/ Percent
2020 2019 Decrease Change
(dollars in thousands)
Provision for Income Taxes $ 6,691 $ 6,041 $ 650 10.8 %

Our effective tax rate was ~~26.5%~~25.6% for the first ~~nine~~six months of fiscal ~~2021~~2022 and ~~31.3%~~24.3% for the same period last year. ~~In the nine-month period of fiscal our~~The effective tax rate ~~differed~~for the six months ended July 31, 2021 benefited from vesting of share-based compensation but was offset by the ~~21.0% domestic federal statutory tax rate primarily due to the impact~~recognition of ~~state taxes, share-based payments, foreign currency fluctuations on our Ukrainian business and~~ a ~~partial~~ valuation allowance ~~recorded~~on certain of our foreign deferred tax assets including recording a valuation allowance on the remaining deferred tax assets of our Germany entity. ~~The~~For the six months ended July 31, 2020, the effective tax rate ~~for~~benefited from a weakening Ukrainian currency but was offset by increased tax expense on the ~~first nine months fiscal 2020 was impacted by foreign currency gains recognized as a result~~vesting of ~~a strengthening Ukrainian hryvnia, which had increased our effective tax rate by approximately seven percentage points for the first nine months of fiscal 2020.~~share-based compensation.

Segment Results

Nine Months Ended October 31, Increase/ Percent
2020 2019 (Decrease) Change
(dollars in thousands)
Revenue
Agriculture $ 583,326 $ 533,538 $ 49,788 9.3 %
Construction 216,862 232,813 (15,951) (6.9) %
International 174,357 187,856 (13,499) (7.2) %
Total $ 974,545 $ 954,207 $ 20,338 2.1 %
Income (Loss) Before Income Taxes
Agriculture $ 26,490 $ 18,312 $ 8,178 44.7 %
Construction (50) (541) 491 90.8 %
International (3,136) 2,783 (5,919) n/m
Segment income before income taxes 23,304 20,554 2,750 13.4 %
Shared Resources 1,961 (1,233) 3,194 n/m
Total $ 25,265 $ 19,321 $ 5,944 30.8 %


	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

Agriculture

Agriculture segment revenue for the first ~~nine~~six months of fiscal ~~2021~~2022 increased ~~9.3%~~23.8% compared to the same period last year. We experienced increases across our equipment, parts and service businesses. Equipment sales were ~~supported~~driven by ~~replacement~~increased equipment demand ~~and the delay of customer purchases from the fourth quarter of fiscal 2020 to the first quarter of the current year~~ due to ~~the late~~higher commodity prices, higher recent net farm income, as well as current and ~~difficult harvest conditions in areas of our footprint last year.~~prior year government support payments. ~~Parts and service revenue continued to benefit from an aging customer fleet and all~~All sources of revenue in this segment benefited from the addition of ~~four~~the three HorizonWest locations (acquired in May 2020) that were not in the full prior year ~~nine-month~~six-month period. Same-store sales increased ~~5.1%~~21.7% for the first ~~nine~~six months of fiscal ~~2021,~~2022, as compared to the same period last year.

Agriculture segment income before income taxes was ~~$26.5~~$23.3 million for the first ~~nine~~six months of fiscal ~~2021~~2022 compared to ~~$18.3~~$12.9 million over the first ~~nine~~six months of fiscal ~~2020.~~2021. The improvement in segment results was the result of ~~increased~~higher equipment revenue along with higher gross profit margin on equipment driven by an industry environment of high demand and ~~a higher mix of higher margin parts~~lower supply. Decreased inventory levels resulted in lower floorplan and ~~service business, but was partially offset by increased operating expenses due~~other interest expense for the six months ended July 31, 2021, which also contributed to the ~~addition of four locations.~~improvement in segment results.

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Construction

Construction segment revenue for the first ~~nine~~six months of fiscal ~~2021 decreased 6.9%~~2022 increased 8.5% compared to the same period last year, due to a same-store sales ~~decrease~~increase of ~~4.1% and~~19.3% which more than offset our divestiture of the ~~Albuquerque, New Mexico store~~Phoenix and Tucson, Arizona stores in the fourth quarter of fiscal year ~~2020. All sources of revenue –~~2021. Higher equipment ~~parts, service and rental and other – declined in~~sales were driven by increased construction activity throughout the ~~current year nine-month period, as compared to the prior year’s nine-month period.The overall lower same-store sales are a result of decreased customer sentiment, lower oil prices, and a general slowdown in the economy due to COVID-19.~~footprint.

Our Construction segment ~~loss~~income before income taxes was ~~$0.1~~$3.0 million for the first ~~nine~~six months of fiscal ~~2021~~2022 compared to ~~$0.5~~a loss of $1.5 million for the first ~~nine~~six months of fiscal ~~2020.~~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 ~~operating~~inventory levels which resulted in lower floorplan and other interest ~~expenses partially offset by lower revenues compared to~~expense for the ~~prior year preiod.~~six months ended July 31, 2021. The dollar utilization of our rental fleet ~~decreased~~increased from ~~25.5%~~20.5% in the first ~~nine~~six months of fiscal ~~2020~~2021 to ~~22.2%~~22.9% in the first ~~nine~~six months of fiscal ~~2021.~~2022.

International

International segment revenue for the first ~~nine~~six months of fiscal ~~2021 decreased 7.2%~~2022 increased 34.2% compared to the same period last ~~year as a result of lower equipment sales. Lower~~year. Higher segment revenue ~~was~~is being driven by ~~decreased customer demand due to below average yields in certain areas~~many of ~~our International footprint~~the same macroeconomic factors as the Agriculture segment as well as ~~overall challenging economic and business~~favorable growing conditions ~~due to COVID-19.~~for much of our farming footprint which has had a positive impact on all sources of sales, but primarily equipment sales.

Our International segment income before income taxes was $3.2 million for the first six months of fiscal 2022 compared to a loss before income taxes ~~was $3.1 million for the first nine months~~ of ~~fiscal 2021 compared to income before income taxes of $2.8~~$0.7 million for the same period last year. The ~~lower~~higher segment results were the result of ~~decreased~~increased equipment ~~revenue~~sales and ~~the resulting negative impact on our ability to leverage our fixed operating costs within this segment and impairment charges.~~equipment gross profit margin. Impairment charges of ~~$2.3~~$1.5 million were recognized in the first ~~nine~~six months of fiscal ~~2021,~~2022, related to the impairment of ~~the goodwill balance~~certain intangible and ~~a portion of the distribution rights~~long-lived assets of our ~~Germany~~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 Resources loss before income taxes was $0.2 million for the first six months of fiscal 2022 compared to income before income taxes ~~was $2.0 million for the first nine months~~ of ~~fiscal 2021 compared to loss before income taxes of $1.2~~$0.7 million for the same period last year. The increase in Shared Resources income was the result of operating expense reductions due to COVID-19 as well as interest expense reductions due to a lower interest rate environment and lower borrowings, compared to the same period last year.

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Non-GAAP Financial Measures

To supplement net income and diluted earnings per share ("Diluted EPS"), both GAAP measures, we present adjusted net income and adjusted Diluted EPS, both non-GAAP measures, which include adjustments for items such as valuation allowances for income tax, ERP transition costs for fiscal year 2021, impairment charges and foreign currency remeasurement gains/losses in ~~Ukraine resulting from valuation changes of the Ukrainian hryvnia.~~Ukraine. We believe that the presentation of adjusted net income 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 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.

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

Three Months Ended October 31, Nine Months Ended October 31,
2020 2019 2020 2019
(dollars in thousands, except per share data)
Adjusted Net Income
Net Income $ 9,912 $ 8,214 $ 18,574 $ 13,280
Adjustments
ERP transition costs 765 2,062 2,250 4,778
Impairment charges 2,555 51 2,771 186
Ukraine remeasurement (gain) / loss 339 (435) 974 (588)
Total Pre-Tax Adjustments 3,659 1,678 5,995 4,376
Less: Tax Effect of Adjustments (1) 1,566 (846) 2,613 (417)
Plus: Income Tax Valuation Allowance 1,018 — 1,018 —
Total Adjustments 3,111 2,524 4,400 4,793
Adjusted Net Income $ 13,023 $ 10,738 $ 22,974 $ 18,073
Adjusted Diluted EPS
Diluted EPS $ 0.44 $ 0.37 $ 0.83 $ 0.60
Adjustments (2)
ERP transition costs 0.03 0.09 0.10 0.21
Impairment charges 0.11 — 0.12 0.01
Ukraine remeasurement (gain) / loss 0.02 (0.02) 0.04 (0.03)
Total Pre-Tax Adjustments 0.16 0.07 0.26 0.19
Less: Tax Effect of Adjustments (1) 0.07 (0.04) 0.12 (0.02)
Plus: Income Tax Valuation Allowance 0.05 — 0.05 —
Total Adjustments 0.14 0.11 0.19 0.21
Adjusted Diluted EPS $ 0.58 $ 0.48 $ 1.02 $ 0.81
(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. The tax effect of the Germany related adjustments was calculated using a 29% tax rate. Included in the tax effect of the adjustments is the tax impact of foreign currency changes in Ukraine of $0.7 million for the three months ended October 31, 2020 and $1.3 million for the nine months ended October 31, 2020.
(2) Adjustments are net of amounts allocated to participating securities where applicable.


	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.

Liquidity and Capital Resources

Sources of Liquidity

Our primary sources of liquidity are cash reserves, cash generated from operations, and borrowings under our floorplan 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

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obligations and other commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future, provided 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, ~~2020,~~2021, the Company had floorplan payable lines of credit for equipment purchases totaling ~~$765.0~~$771.0 million, which is primarily comprised of a $450.0 million credit facility with CNH Industrial, a $185.0 million floorplan payable line under the Bank Syndicate Agreement, and a $60.0 million credit facility with DLL Finance.

Our equipment inventory turnover ~~decreased~~increased from ~~1.7 times for the four-quarter period ended October 31, 2019 to~~ 1.6 times for the ~~four-quarter~~rolling 12 month period ended ~~October~~July 31, ~~2020.~~2020 to 2.7 times for the rolling 12 month period ended July 31, 2021. The ~~decrease~~increase in equipment turnover was attributable to ~~a slight decrease~~an increase in equipment sales and a ~~slight~~decrease ~~increase~~ in ~~our~~average equipment inventory over the rolling 12 month ~~average equipment inventory~~ ~~over the four-quarter~~ period ended ~~October~~July 31, ~~2020~~2021 as compared to the ~~four-quarter~~same period ended ~~October~~July 31, ~~2019.~~2020. Our equity in equipment inventory, which reflects the portion of our equipment inventory balance that is not financed by floorplan payables, ~~increased~~decreased to ~~36.0%~~44.7% as of ~~October~~July 31, ~~2020~~2021 from ~~27.9%~~52.1% as of January 31, ~~2020.~~2021. The ~~increase~~decrease was due to ~~cash generated from operating activities used to pay down~~more inventory being financed with non-interest bearing floorplan ~~payables.~~

~~Long-Term Debt~~

~~During the third quarter~~lines of fiscal 2020, the Company reclassified the Wells Fargo working capital line of credit outstanding, which had a maturity date of October 28, 2020, from long-term debt to current maturities of long-term debt. During the first quarter of fiscal of 2021, the Company entered into an amended and restated five year credit agreement. As a result, the working capital line of credit outstanding of $10 million under the prior credit facility was reclassified from current maturities of long-term debt to long-term debt.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. Based on our current operational performance, we believe our cash flow from operations, available cash and available borrowing capacity under our existing credit facilities will adequately provide for our liquidity needs for, at a minimum, the next 12 months.

As of ~~October~~July 31, ~~2020,~~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 Bank Syndicate Agreement as our adjusted excess availability plus eligible cash collateral (as defined therein) was not less than 15% of the lesser of (i) aggregate borrowing base and (ii) maximum credit amount as of ~~October~~July 31, ~~2020.~~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 by (Used for) Operating Activities

Net cash provided by operating activities was ~~$60.8~~$28.6 million for the first ~~nine~~six months of fiscal ~~2021,~~2022, compared to net cash ~~used for~~provided by operating activities of ~~$8.3~~$13.0 million for the first ~~nine~~six months of fiscal ~~2020.~~2021. The change in net cash provided by ~~(used for)~~ operating activities is primarily the result of ~~a reduction~~an increase in net income and an increase in the amount of inventory financed with non-interest bearing floorplan lines of credit from manufacturers which was partially offset by an increase in receivables and prepaid expenses for the first ~~nine~~six months of fiscal ~~2021.~~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 ~~provided by~~used for operating activities was ~~$56.5~~$19.0 million for the first ~~nine~~six months of fiscal ~~2021~~2022 compared to an adjusted cash flow ~~used for~~provided by operating activities of ~~$35.0~~$16.1 million for the first ~~nine~~six months of fiscal ~~2020.~~2021. The change in adjusted cash flow provided by (used for) operating activities is primarily the result of ~~increased equipment~~the amount of inventory ~~stocking during the previous fiscal year compared to reducing inventories during~~financed with non-interest bearing floorplan lines of credit from manufacturers and a decrease in non-manufacturing floor plan payables for the first ~~nine~~six months of fiscal ~~2021.~~2022. See the Adjusted Cash Flow Reconciliation below for a reconciliation of adjusted cash flow ~~used for~~provided by (used for) operating activities to the GAAP measure of cash flow ~~used for~~provided by (used for) operating activities.

Cash Flow Used for Investing Activities

Net cash used for investing activities was ~~$22.2~~$19.4 million for the first ~~nine~~six months of fiscal ~~2021,~~2022, compared to ~~$30.8~~$16.8 million for the first ~~nine~~six months of fiscal ~~2020.~~2021. The ~~decrease~~increase in cash used for investing activities was primarily the result of a

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~~decreased level of rental fleet~~an increase in property and equipment purchases as the Company purchased formerly leased buildings and ~~a decrease~~bought out vehicle leases in ~~cash paid for acquisitions in the purchase of equipment dealerships for~~ the first ~~nine~~six months of fiscal ~~2021~~2022 ~~compared to the same period last year.~~.

Cash Flow Provided by (Used for) Financing Activities

Net cash used for financing activities was ~~$40.8~~$22.4 million for the first ~~nine~~six months of fiscal ~~2021~~2022 compared to cash provided by financing activities of ~~$34.9~~$4.5 million for the first ~~nine~~six months of fiscal ~~2020~~2021. The decrease in cash provided by

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financing activities was primarily the result of ~~a decrease~~an increase in ~~proceeds from~~repayments of non-manufacturer floorplan ~~as well as a decrease in~~lines of credit partially offset by proceeds from long term debt borrowings in the first ~~nine~~six months of fiscal ~~2021~~2022 compared to the same period last year. ~~The cash provided by financing activities in fiscal~~ ~~2020~~ ~~was partially offset by the repayment of the senior convertible notes.~~

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. We also evaluate our cash flow from operating activities by assuming a constant level of equity in our equipment inventory. Our equity in our equipment inventory reflects the portion of our equipment inventory balance that is not financed by floorplan payables. Our adjustment to maintain a constant level of equity in our equipment inventory is equal to the difference between our actual level of equity in equipment inventory at each period-end as presented in the consolidated 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 ~~increased~~decreased to ~~36.0%~~44.7% as of ~~October~~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, and decreased to 18.0% as of October 31, 2019 from 34.4% as of January 31, 2019.~~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 net cash provided by (used for) 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)

Net Cash Provided by (Used for) Operating Activities Net Cash Provided by (Used for) Financing Activities
Nine Months Ended October 31, 2020 Nine Months Ended October 31, 2019 Nine Months Ended October 31, 2020 Nine Months Ended October 31, 2019
(in thousands) (in thousands)
Cash Flow, As Reported $ 60,814 $ (8,289) $ (40,779) $ 34,902
Adjustment for Non-Manufacturer Floorplan (40,779) 62,387 40,779 (62,387)
Adjustment for Constant Equity in Equipment Inventory 36,477 (89,076) — —
Adjusted Cash Flow $ 56,512 $ (34,978) $ — $ (27,485)

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

As of ~~October~~July 31, ~~2020,~~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.

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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 Analysis of Financial Condition and Results of Operations,” as well as in our Annual Report on Form 10-K for the year ended January 31, ~~2020,~~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, statements relating to our expectations regarding exchange rate and interest rate impact on our business, the impact of

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farm income levels on customer demand for agricultural ~~equipment and services, the impact of oil prices on market demand for~~ equipment and services, the impact of the COVID-19 pandemic on 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, ~~2020,~~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 ~~$1.3~~$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 ~~$1.3~~$0.4 million. At ~~October~~July 31, ~~2020,~~2021, we had floorplan payables of ~~$287.8~~$185.5 million, of which approximately ~~$123.3~~$36.9 million was variable-rate floorplan payable and ~~$164.6~~$148.7 million was non-interest bearing. In addition, at ~~October~~July 31, ~~2020,~~2021, we had total long-term debt, including finance lease obligations, of ~~$64.4~~$72.2 million, of which ~~$10.0 million was variable rate debt and $54.4 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, ~~2020,~~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, ~~2020,~~2021, our Ukrainian subsidiary had ~~$5.2~~$2.1 million of net monetary assets denominated in Ukrainian hryvnia ("UAH"). We have attempted to minimize our net monetary asset position in Ukraine through reducing overall asset levels in Ukraine and 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.

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, ~~2020,~~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.~~

~~We are supplementing the risk~~results of operations. In addition to those factors, ~~described under “Item 1A. Risk Factors” in our 2020 Annual Report on Form 10-K with the~~ additional ~~risk factor set forth below, which supplements,~~risks and uncertainties not currently known to ~~the extent inconsistent, supersedes such risk factors.~~

~~COVID-19 has disrupted, and~~us or that we currently deem to be immaterial may ~~continue to disrupt, our business, which could~~materially adversely affect our business, financial ~~performance.~~

~~The COVID-19 pandemic has adversely impacted the global economy and disrupted, and may continue to disrupt, our business. Governmental authorities have taken severe countermeasures to slow the spread~~condition or results of COVID-19, including a number of shelter-in-place orders and large-scale restrictions on travel. While our stores are operational at this time and have been classified as “essential businesses,” the pandemic is a highly fluid and rapidly evolving situation and we cannot anticipate whether we may be forced to close any of our stores due to potential restrictions imposed by a governmental authority in one of the jurisdictions that we operate or due to a COVID-19 outbreak. In addition, some of the original equipment manufacturers that we represent have had to suspend manufacturing operations at certain plants. We cannot predict with any certainty whether they could be forced to suspend operations again at some point in the future due to COVID-19.

Although we believe that the COVID-19 pandemic has had, and is expected to continue to have, a negative impact on our business, the magnitude of such impact cannot be predicted with precision at this time due to numerous uncertainties, such as the impact of oil prices on the construction business, the duration of the pandemic and business closures, the effectiveness of actions taken to contain the spread of the disease and unforeseen events of those actions. The impact of the pandemic may include changes in customer demand; our relationship with, and the financial and operational capacities of, original equipment manufacturers, captive finance companies and other suppliers; workforce availability; risks associated with our indebtedness (including available borrowing capacity, compliance with financial covenants and ability to refinance or repay indebtedness on favorable terms); the adequacy of our cash flow and earnings and other conditions which may affect our liquidity; and disruptions to our technology network and other critical systems, including our existing ERP platform or other facilities or equipment, and impacting the timing of the rollout of our new ERP platform.operations.

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

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

10.1						Amendment No. 1 dated June 4, 2021 to the Third Amended and Restated Credit Agreement dated April 3, 2020 by and 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 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 September 1, 2021 to the Executive Employment Agreement, dated September 5, 2018 between Bryan J. Knutson and the 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, ~~2020,~~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*101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL*101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB*101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF*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

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 3, 2020~~September 2, 2021
		TITAN MACHINERY INC.


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

4339


	Three Months Ended October 31,				Nine Months Ended October 31,
	2020		2019		2020		2019
Revenue
Equipment	$	240,901	$	245,986	$	662,060	$	654,376
Parts	76,778		70,788		194,846		181,928
Service	30,696		27,553		84,282		77,215
Rental and other	12,497		16,609		33,357		40,688
Total Revenue	360,872		360,936		974,545		954,207
Cost of Revenue
Equipment	215,770		219,484		593,048		583,345
Parts	53,556		49,834		136,205		128,380
Service	10,254		8,950		28,263		25,170
Rental and other	8,741		10,894		23,379		27,612
Total Cost of Revenue	288,321		289,162		780,895		764,507
Gross Profit	72,551		71,774		193,650		189,700
Operating Expenses	54,115		58,184		160,252		165,594
Impairment of Goodwill	1,453		—		1,453		—
Impairment of Intangible and Long-Lived Assets	1,102		51		1,318		186

Income from Operations	15,881		13,539		30,627		23,920
Other Income (Expense)
Interest and other income (expense)	(360)		1,273		333		2,687
Floorplan interest expense	(757)		(1,448)		(2,811)		(3,724)
Other interest expense	(940)		(955)		(2,884)		(3,562)
Income Before Income Taxes	13,824		12,409		25,265		19,321
Provision for Income Taxes	3,912		4,195		6,691		6,041
Net Income	$	9,912	$	8,214	$	18,574	$	13,280

Earnings per Share:
Basic	$	0.44	$	0.37	$	0.83	$	0.60
Diluted	$	0.44	$	0.37	$	0.83	$	0.60

Weighted Average Common Shares:
Basic	22,132		21,973		22,089		21,936
Diluted	22,137		21,976		22,091		21,942


	Three Months Ended October 31, 2020								Three Months Ended October 31, 2019
	Agriculture		Construction		International		Total		Agriculture		Construction		International		Total
	(in thousands)								(in thousands)
Equipment	$	146,410	$	47,766	$	46,725	$	240,901	$	148,680	$	43,299	$	54,007	$	245,986
Parts	50,528		14,072		12,179		76,779		44,923		13,586		12,279		70,788
Service	22,316		6,497		1,883		30,696		18,885		6,674		1,994		27,553
Other	823		628		102		1,553		835		826		50		1,711
Revenue from contracts with customers	220,077		68,963		60,889		349,929		213,323		64,385		68,330		346,038
Rental	548		10,067		328		10,943		750		13,646		502		14,898
Total revenues	$	220,625	$	79,030	$	61,217	$	360,872	$	214,073	$	78,031	$	68,832	$	360,936