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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 April 30, 2022
OR

☐ 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)
Delaware45-0357838
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.00001 par value per shareTITNThe 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 May 31, 2022, 22,567,932 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 Condensed Consolidated Financial Statements
8
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
20
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
29
ITEM 4.CONTROLS AND PROCEDURES
29
PART II.OTHER INFORMATION
30
ITEM 1.LEGAL PROCEEDINGS
30
ITEM 1A.RISK FACTORS
30
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
30
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
30
ITEM 4.MINE SAFETY DISCLOSURES
30
ITEM 5.OTHER INFORMATION
30
ITEM 6.EXHIBITS
30
Exhibit Index
31
Signatures
32

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PART I. FINANCIAL INFORMATION
ITEM 1.                FINANCIAL STATEMENTS
TITAN MACHINERY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except per share data)
April 30, 2022January 31, 2022
Assets
Current Assets
Cash$147,095 $146,149 
Receivables, net of allowance for expected credit losses84,870 94,287 
Inventories, net494,167 421,758 
Prepaid expenses and other22,223 28,135 
Total current assets748,355 690,329 
Noncurrent Assets
Property and equipment, net of accumulated depreciation183,489 178,243 
Operating lease assets53,980 56,150 
Deferred income taxes2,297 1,328 
Goodwill9,535 8,952 
Intangible assets, net of accumulated amortization11,509 10,624 
Other1,032 1,041 
Total noncurrent assets261,842 256,338 
Total Assets$1,010,197 $946,667 
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable$26,817 $25,644 
Floorplan payable188,881 135,415 
Current maturities of long-term debt6,270 5,876 
Current operating lease liabilities9,481 9,601 
Deferred revenue129,503 134,146 
Accrued expenses and other47,091 59,339 
Income taxes payable9,456 4,700 
Total current liabilities417,499 374,721 
Long-Term Liabilities
Long-term debt, less current maturities81,974 74,772 
Operating lease liabilities53,284 55,595 
Deferred income taxes2,001 2,006 
Other long-term liabilities3,956 4,374 
Total long-term liabilities141,215 136,747 
Commitments and Contingencies (Note 15)00
Stockholders' Equity
Common stock, par value $.00001 per share, 45,000 shares authorized; 22,569 shares issued and outstanding at April 30, 2022; 22,588 shares issued and outstanding at January 31, 2022— — 
Additional paid-in-capital254,390 254,455 
Retained earnings200,456 182,916 
Accumulated other comprehensive loss(3,363)(2,172)
Total stockholders' equity451,483 435,199 
Total Liabilities and Stockholders' Equity$1,010,197 $946,667 
 See Notes to Condensed Consolidated Financial Statements
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TITAN MACHINERY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
 Three Months Ended April 30,
 20222021
Revenue
Equipment$356,366 $275,980 
Parts68,562 62,626 
Service29,523 27,702 
Rental and other6,556 6,398 
Total Revenue461,007 372,706 
Cost of Revenue
Equipment310,234 243,676 
Parts47,310 44,440 
Service10,760 9,294 
Rental and other4,009 4,318 
Total Cost of Revenue372,313 301,728 
Gross Profit88,694 70,978 
Operating Expenses64,152 56,442 
Income from Operations24,542 14,536 
Other Income (Expense)
Interest and other income492 665 
Floorplan interest expense(254)(418)
Other interest expense(1,196)(1,104)
Income Before Income Taxes23,584 13,679 
Provision for Income Taxes6,044 3,132 
Net Income$17,540 $10,547 
Earnings per Share:
Basic$0.78 $0.47 
Diluted$0.78 $0.47 
Weighted Average Common Shares:
Basic22,312 22,168 
Diluted22,321 22,179 
See Notes to Condensed Consolidated Financial Statements

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TITAN MACHINERY INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(in thousands)
 Three Months Ended April 30,
 20222021
Net Income$17,540 $10,547 
Other Comprehensive Income (Loss)
Foreign currency translation adjustments(1,191)(2,379)
Comprehensive Income$16,349 $8,168 
See Notes to Condensed Consolidated Financial Statements

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TITAN MACHINERY INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
(in thousands)
Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
Shares OutstandingAmount
BALANCE, January 31, 202122,553 $— $252,913 $116,869 $1,499 $371,281 
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(33)— (975)— — (975)
Stock-based compensation expense— — 609 — — 609 
Net Income— — — 10,547 — 10,547 
Other comprehensive loss— — — — (2,379)(2,379)
BALANCE, April 30, 202122,520 $— $252,547 $127,416 $(880)$379,083 
Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
Shares OutstandingAmount
BALANCE, January 31, 202222,588 $— $254,455 $182,916 $(2,172)$435,199 
Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax(19)— (685)— — (685)
Stock-based compensation expense— — 620 — — 620 
Net income— — — 17,540 — 17,540 
Other comprehensive loss— — — — (1,191)(1,191)
BALANCE, April 30, 202222,569 $— $254,390 $200,456 $(3,363)$451,483 
See Notes to Condensed Consolidated Financial Statements
6

TITAN MACHINERY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
 Three Months Ended April 30,
 20222021
Operating Activities
Net income$17,540 $10,547 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization5,224 5,207 
Deferred income taxes(998)(1,008)
Stock-based compensation expense620 609 
Noncash interest expense58 54 
Other, net2,059 2,704 
Changes in assets and liabilities
Receivables, prepaid expenses and other assets13,446 (1,023)
Inventories(69,321)(1,615)
Manufacturer floorplan payable51,069 19,657 
Deferred Revenue(6,413)(10,308)
Accounts payable, accrued expenses and other and other long-term liabilities(7,963)2,132 
Net Cash Provided by Operating Activities5,321 26,956 
Investing Activities
Rental fleet purchases(1,046)(2,081)
Property and equipment purchases (excluding rental fleet)(4,065)(7,045)
Proceeds from sale of property and equipment836 135 
Acquisition consideration, net of cash acquired(7,675)— 
Other, net6 7 
Net Cash Used for Investing Activities(11,944)(8,984)
Financing Activities
Net change in non-manufacturer floorplan payable2,000 (9,141)
Proceeds from long-term debt borrowings8,415 6,462 
Principal payments on long-term debt and finance leases(1,743)(3,181)
Other, net(683)(974)
Net Cash Provided by (Used for) Financing Activities7,989 (6,834)
Effect of Exchange Rate Changes on Cash(420)(399)
Net Change in Cash946 10,739 
Cash at Beginning of Period146,149 78,990 
Cash at End of Period$147,095 $89,729 
Supplemental Disclosures of Cash Flow Information
Cash paid during the period
Income taxes, net of refunds$102 $253 
Interest$1,386 $1,404 
Supplemental Disclosures of Noncash Investing and Financing Activities
Net property and equipment financed with long-term debt, finance leases, accounts payable and accrued liabilities$1,247 $15,763 
Net transfer of assets from (to) property and equipment to (from) inventories$(891)$300 

See Notes to Condensed Consolidated Financial Statements
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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 three-month period ended April 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2023. The information contained in the consolidated balance sheet as of January 31, 2022 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, 2022 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 Colorado, Iowa, Minnesota, Nebraska, North Dakota, South Dakota, Wisconsin and Wyoming, and its European stores are located in Bulgaria, Germany, Romania, and Ukraine. 
Russia/Ukraine Geopolitical Conflict
On February 24, 2022, the ongoing Russia/Ukraine conflict significantly intensified. Titan Machinery Ukraine, LLC("Titan Machinery Ukraine"), the Company's wholly owned Ukrainian subsidiary, has ten locations throughout Ukraine primarily in western and central Ukraine. The Company's ability to maintain adequate liquidity for its operations, in Ukraine, is dependent upon a number of factors, including Titan Machinery Ukraine's revenue and earnings, the impact of the conflict on macroeconomic conditions, and Titan Machinery Ukraine's ability to implement further cost savings measures and cash conservation measures, if necessary. The conflict could have a significant adverse impact upon the Company.
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.
Accounting Guidance Not Yet Adopted
    In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update ("ASU") No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU No. 2020-04”), which provides temporary optional expedients and exceptions to accounting guidance on contract modifications and hedge accounting to ease entities’ financial reporting burdens as the market transitions from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. ASU 2020-04 is effective upon issuance and can be applied through December 31, 2022. The Company has amended most of its credit agreements to include language regarding the successor or alternate rate to LIBOR, and a review of other contracts and agreements is on-going. The Company does not expect the guidance to have a material impact on its results of operations, financial position, cash flows, or disclosures.
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NOTE 2 - EARNINGS PER SHARE
    The following table sets forth the calculation of basic and diluted earnings per share (EPS):
 Three Months Ended April 30,
 20222021
 (in thousands, except per share data)
Numerator:
Net income$17,540 $10,547 
Allocation to participating securities(210)(175)
Net income attributable to Titan Machinery Inc. common stockholders$17,330 $10,372 
Denominator:
Basic weighted-average common shares outstanding22,312 22,168 
Plus: incremental shares from vesting of restricted stock units9 11 
Diluted weighted-average common shares outstanding22,321 22,179 
Earnings Per Share:
Basic$0.78 $0.47 
Diluted$0.78 $0.47 

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 April 30, 2022
AgricultureConstructionInternationalTotal
(in thousands)
Equipment$251,093 $43,819 $61,454 $356,366 
Parts44,506 12,063 11,993 68,562 
Service21,953 5,823 1,747 29,523 
Other799 303 205 1,307 
Revenue from contracts with customers318,351 62,008 75,399 455,758 
Rental197 4,956 96 5,249 
Total revenues$318,548 $66,964 $75,495 $461,007 
Three Months Ended April 30, 2021
AgricultureConstructionInternationalTotal
(in thousands)
Equipment$169,257 $44,812 $61,911 $275,980 
Parts39,684 12,108 10,834 62,626 
Service19,753 6,369 1,580 27,702 
Other722 365 92 1,179 
Revenue from contracts with customers229,416 63,654 74,417 367,487 
Rental138 4,954 127 5,219 
Total revenues$229,554 $68,608 $74,544 $372,706 
Unbilled Receivables and Deferred Revenue
    Unbilled receivables from contracts with customers amounted to $20.6 million and $17.1 million as of April 30, 2022 and January 31, 2022, respectively. This 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.
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    Deferred revenue from contracts with customers amounted to $128.2 million and $132.2 million as of April 30, 2022 and January 31, 2022, respectively. 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 months ended April 30, 2022 and 2021, the Company recognized $64.6 million and $37.9 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, 2022 and January 31, 2021, respectively. No material amount of revenue was recognized during the three months ended April 30, 2022 or 2021 from performance obligations satisfied in previous periods.
    The Company has elected as a practical expedient to not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of service of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for parts installed and services performed. The contracts for which the practical expedient has been applied include (i) equipment revenue transactions, which do not have a stated contractual term but are short-term in nature, and (ii) service revenue transactions, which also do not have a stated contractual term but are generally completed within 30 days. For such service contracts, we recognize revenue over time in the amount for which we have the right to invoice for services completed to date.
NOTE 4 - RECEIVABLES
    The Company provides an allowance for expected credit losses on its nonrental receivables. To measure the expected credit losses, receivables have been grouped based on shared credit risk characteristics as shown in the table below.
    Trade and unbilled receivables from contracts with customers have credit risk and the allowance is determined by applying expected credit loss percentages to aging categories based on historical experience that are updated each quarter. The rates may also be adjusted to the extent future events are expected to differ from historical results. In addition, the allowance is adjusted based on information obtained by continued monitoring of individual customer credit.
    Trade receivables from finance companies, other receivables due from manufacturers, and other receivables have not historically resulted in any credit losses to the Company. These receivables are short-term in nature and deemed to be of good credit quality and have no need for any allowance for expected credit losses. Management continually monitors these receivables and should information be obtained that identifies potential credit risk, an adjustment to the allowance would be made if deemed appropriate.
    Trade and unbilled receivables from rental contracts are primarily in the United States and are specifically excluded from the accounting guidance in determining an allowance for expected losses. The Company provides an allowance for these receivables based on historical experience and using credit information obtained from continued monitoring of customer accounts.
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April 30, 2022January 31, 2022
(in thousands)
Trade and unbilled receivables from contracts with customers
Trade receivables due from customers$30,588 $30,041 
Unbilled receivables20,621 17,129 
Less allowance for expected credit losses2,637 1,979 
48,572 45,191 
Trade receivables due from finance companies23,197 17,937 
Trade and unbilled receivables from rental contracts
Trade receivables2,692 3,055 
Unbilled receivables484 538 
Less allowance for expected credit losses381 469 
2,795 3,124 
Other receivables
Due from manufacturers7,720 22,979 
Other2,586 5,056 
10,306 28,035 
Receivables, net of allowance for expected credit losses$84,870 $94,287 
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    Following is a summary of allowance for credit losses on trade and unbilled accounts receivable by segment:
AgricultureConstructionInternationalTotal
(in thousands)
Balance at January 31, 2022$232 $166 $1,502 $1,900 
Current expected credit loss provision3 43 768 814 
Write-offs charged against allowance(4)45 39 80 
Credit loss recoveries collected16 2 — 18 
Foreign exchange impact— — (15)(15)
Balance at April 30, 2022$255 $166 $2,216 $2,637 
AgricultureConstructionInternationalTotal
(in thousands)
Balance at January 31, 2021$228 $1,074 $1,690 $2,992 
Current expected credit loss provision30 68 (2)96 
Write-offs charged against allowance17 84 38 139 
Credit loss recoveries collected— 4 — 4 
Foreign exchange impact— — (50)(50)
Balance at April 30, 2021$241 $1,062 $1,600 $2,903 
    The increase in the credit loss provision in the International segment, during the three months ended April 30, 2022, was driven by a $0.7 million bad debt provision placed on the accounts receivables due from customers of Titan Machinery Ukraine, primarily due to the ongoing Russia-Ukraine conflict.
The following table presents impairment losses (recoveries) on receivables arising from sales contracts with customers and receivables arising from rental contracts:
Three Months Ended April 30,
20222021
(in thousands)
Impairment losses (recoveries) on:
Receivables from sales contracts$813 $98 
Receivables from rental contracts(11)(34)
$802 $64 
NOTE 5 - INVENTORIES
April 30, 2022January 31, 2022
 (in thousands)
New equipment$261,348 $195,775 
Used equipment125,995 128,047 
Parts and attachments103,872 95,890 
Work in process2,952 2,046 
$494,167 $421,758 

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NOTE 6 - PROPERTY AND EQUIPMENT
April 30, 2022January 31, 2022
 (in thousands)
Rental fleet equipment$66,847 $65,117 
Machinery and equipment23,651 22,819 
Vehicles61,095 58,650 
Furniture and fixtures50,637 50,228 
Land, buildings, and leasehold improvements127,355 123,323 
329,585 320,137 
Less accumulated depreciation146,096 141,894 
$183,489 $178,243 
    The Company includes depreciation expense related to its rental fleet and its trucking fleet, for hauling equipment, in Cost of Revenue, which was $1.5 million and $1.7 million for the three months ended April 30, 2022 and 2021, respectively. All other depreciation expense is included in Operating Expenses, which was $3.5 million and $3.1 million for the three months ended April 30, 2022 and 2021, respectively.
    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 April 30, 2022, the Company identified one such asset group, Titan Machinery Ukraine, and performed an impairment test, and concluded that no impairment was present. The Company did not recognize any impairment for the three months ended April 30, 2022 and April 30, 2021.
NOTE 7 - INTANGIBLE ASSETS AND GOODWILL
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 three months ended April 30, 2022:
AgricultureConstructionTotal
(in thousands)
January 31, 2022$10,136 $72 $10,208 
Arising from business combinations842 — 842 
April 30, 2022$10,978 $72 $11,050 
Goodwill
    The following presents changes in the carrying amount of goodwill, by segment, for the three months ended April 30, 2022:
AgricultureTotal
(in thousands)
January 31, 2022$8,952 $8,952 
Arising from business combinations583 583 
April 30, 2022$9,535 $9,535 
NOTE 8 - FLOORPLAN PAYABLE/LINES OF CREDIT
    As of April 30, 2022, the Company had floorplan lines of credit totaling $751.0 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 Third Amended and Restated Credit Agreement (the "Bank Syndicate Agreement"), and (iii) a $50.0 million credit facility with DLL Finance LLC.
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    The Company's outstanding balances of floorplan lines of credit as of April 30, 2022 and January 31, 2022, consisted of the following:
April 30, 2022January 31, 2022
(in thousands)
CNH Industrial$130,897 $94,054 
DLL Finance11,583 8,558 
Other outstanding balances with manufacturers and non-manufacturers46,401 32,803 
$188,881 $135,415 
    As of April 30, 2022 and January 31, 2022, the U.S. floorplan payables were generally all non-interest bearing. As of April 30, 2022, foreign floorplan payables carried various interest rates primarily ranging from 1.40% to 6.80%, compared to a range of 1.40% to 4.79% as of January 31, 2022. The Company had non-interest bearing floorplan payables of $159.5 million and $106.8 million, on April 30, 2022 and January 31, 2022, respectively. The Company has 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 - LONG TERM DEBT
    The following is a summary of long-term debt as of April 30, 2022 and January 31, 2022:
DescriptionMaturity DatesInterest RatesApril 30, 2022January 31, 2022
(in thousands)
Mortgage loans, securedVarious through May 20392.1% to 5.1%$65,518 $57,801 
Sale-leaseback financing obligationsVarious through December 20303.4% to 10.3%12,106 12,382 
Vehicle loans, securedVarious through September 20272.1% to 4.3%10,620 10,465 
Total debt88,244 80,648 
Less: current maturities6,270 5,876 
Long-term debt, net$81,974 $74,772 
NOTE 10 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following is a summary of the changes in accumulated other comprehensive income (loss), by component, for the three month periods ended April 30, 2022 and April 30, 2021:
Foreign Currency Translation AdjustmentNet Investment Hedging GainTotal Accumulated Other Comprehensive Income (Loss)
(in thousands)
Balance, January 31, 2022$(4,883)$2,711 $(2,172)
Other comprehensive loss(1,191)— (1,191)
Balance, April 30, 2022(6,074)2,711 (3,363)
Foreign Currency Translation AdjustmentNet Investment Hedging GainTotal Accumulated Other Comprehensive Income (Loss)
(in thousands)
Balance, January 31, 2021$(1,212)$2,711 $1,499 
Other comprehensive loss(2,379)— (2,379)
Balance, April 30, 2021(3,591)2,711 (880)
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NOTE 11 - 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; 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. 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.
    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 April 30,
Classification20222021
(in thousands)
Finance lease cost:
Amortization of leased assetsOperating expenses$208 $395 
Interest on lease liabilitiesOther interest expense44 108 
Operating lease costOperating expenses and rental and other cost of revenue3,474 4,541 
Short-term lease costOperating expenses27 81 
Variable lease costOperating expenses544 739 
Sublease incomeInterest and other income(369)(136)
$3,928 $5,728 
    Right-of-use lease assets and lease liabilities consist of the following:
ClassificationApril 30, 2022January 31, 2022
(in thousands)
Assets
Operating lease assetsOperating lease assets$53,980 $56,150 
Finance lease assets(a)
Property and equipment, net of accumulated depreciation8,738 9,045 
Total leased assets$62,718 $65,195 
Liabilities
Current
OperatingCurrent operating lease liabilities$9,481 $9,601 
FinanceAccrued expenses and other7,303 7,466 
Noncurrent
OperatingOperating lease liabilities53,284 55,595 
FinanceOther long-term liabilities1,403 1,518 
Total lease liabilities$71,471 $74,180 
(a)Finance lease assets are recorded net of accumulated amortization of $1.7 million as of April 30, 2022 and January 31, 2022.
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    Maturities of lease liabilities as of April 30, 2022 are as follows:
OperatingFinance
LeasesLeasesTotal
Fiscal Year Ended January 31,(in thousands)
2023 (remainder)$9,863 $7,330 $17,193 
202412,378 460 12,838 
202511,834 406 12,240 
202611,538 308 11,846 
202710,825 277 11,102 
20289,397 228 9,625 
Thereafter9,844 344 10,188 
Total lease payments75,679 9,353 85,032 
Less: Interest12,914 647 13,561 
Present value of lease liabilities$62,765 $8,706 $71,471 
    The weighted-average lease term and discount rate as of April 30, 2022 are as follows:
April 30, 2022
Weighted-average remaining lease term (years):
Operating leases6.5
Financing leases1.3
Weighted-average discount rate:
Operating leases6.2 %
Financing leases4.5 %
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. 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 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 condensed consolidated balance sheet, of our Construction segment as of April 30, 2022 and January 31, 2022:
April 30, 2022January 31, 2022
(in thousands)
Rental fleet equipment$66,847 $65,117 
Less accumulated depreciation24,108 23,501 
$42,739 $41,616 
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NOTE 12 - FAIR VALUE MEASUREMENTS
    As of April 30, 2022 and January 31, 2022, 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 January 31, 2022 as part of its long-lived asset impairment testing. The estimated fair value of such assets as of January 31, 2022 was $3.1 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 April 30, 2022 and January 31, 2022. 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:
April 30, 2022January 31, 2022
(in thousands)
Carrying amount$76,138 $68,267 
Fair value$71,864 $63,237 
NOTE 13 - INCOME TAXES
    Our effective tax rate was 25.6% and 22.9% for the three months ended April 30, 2022 and 2021, respectively. The effective tax rate for the three months ended April 30, 2022 and 2021 were subject to various factors such as the impact of certain discrete items, mainly the vesting of share-based compensation, the mix of domestic and foreign income, and recognition of a valuation allowance on certain of our foreign deferred tax assets.
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NOTE 14 - BUSINESS COMBINATIONS
Fiscal 2023
On April 1, 2022, the Company acquired certain assets of Mark's Machinery, Inc. The acquired business consisted of two agricultural equipment stores in Wagner and Yankton, South Dakota. These locations are included in the Company's Agriculture segment. The total cash consideration transferred for the acquired business was $7.7 million.
In connection with the acquisition, the Company acquired from CNH Industrial and certain other manufacturers equipment and parts inventory previously owned by Mark's Machinery, Inc. Upon acquiring such inventories, the Company was offered floorplan financing by the respective manufacturers. In total, the Company acquired inventory and recognized a corresponding financing liability of $3.2 million. The recognition of these inventories and the associated financing liabilities are not included as part of the accounting for the business combination.
Fiscal 2022
On December 1, 2021, the Company acquired certain assets of Jaycox Implement, Inc. The acquired business consisted of three agricultural equipment stores in Worthington and Luverne, Minnesota and Lake Park, Iowa. These locations are included in the Company's Agriculture segment. The total cash consideration transferred for the acquired business was $28.2 million. The Company completed the real estate purchase on December 31, 2021 for a purchase price of $5.5 million, which was partially financed with long-term debt and the remainder was 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 Jaycox Implement, Inc. Upon acquiring such inventories, the Company was offered floorplan financing by the respective manufacturers. In total, the Company acquired inventory and recognized a corresponding financing liability of $5.3 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 above acquisitions 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. As of April 30, 2022, all business combinations completed in fiscal years 2023 and 2022 are preliminary. The following table presents the aggregate purchase price allocations for all acquisitions completed during the fiscal year ended January 31, 2022 and the period ended April 30, 2022:
April 30, 2022January 31, 2022
(in thousands)
Assets acquired:
Cash$1 $4 
Receivables478 1,197 
Inventories3,386 13,780 
Prepaid expenses and other66 47 
Property and equipment4,088 8,236 
Intangible assets917 4,121 
Goodwill583 7,519 
9,519 34,904 
Liabilities assumed:
Deferred revenue1,844 1,261 
Net assets acquired$7,675 $33,643 
Goodwill recognized by segment:
Agriculture$583 $7,519 
Goodwill expected to be deductible for tax purposes$583 $7,519 
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    The recognition of goodwill in the above business combinations arose from the acquisition of an assembled workforce and anticipated synergies expected to be realized. For the business combination occurring during the period ended April 30, 2022, the Company recognized a non-competition intangible asset of $0.1 million and a distribution rights intangible asset of $0.8 million. For the business combination occurring during the fiscal year ended January 31, 2022, the Company recognized a non-competition intangible asset of $0.1 million and a distribution rights intangible asset of $3.9 million. The non-competition assets will be amortized over periods ranging from three to five years. The 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 periods ended April 30, 2022 or January 31, 2022, and have been expensed as incurred and recognized as Operating Expenses in the condensed consolidated statements of operations.
NOTE 15 - CONTINGENCIES
    The Company is engaged in legal proceedings incidental to the normal course of business. Due to their nature, such legal proceedings involve inherent uncertainties, including but not limited to, court rulings, negotiations between affected parties and governmental intervention. Based upon the information available to the Company and discussions with legal counsel, it is the Company's opinion that the outcome of these various legal actions and claims will not have a material impact on its financial position, results of operations or cash flows. These matters, however, are subject to many uncertainties, and the outcome of any matter is not predictable.
NOTE 16 - 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 April 30,
 20222021
 (in thousands)
Revenue
Agriculture$318,548 $229,554 
Construction66,964 68,608 
International75,495 74,544 
Total$461,007 $372,706 
Income (Loss) Before Income Taxes
Agriculture$16,449 $11,224 
Construction3,210 138 
International4,325 2,808 
Segment income before income taxes23,984 14,170 
Shared Resources(400)(491)
Total$23,584 $13,679 
April 30, 2022January 31, 2022
 (in thousands)
Total Assets
Agriculture$536,284 $481,190 
Construction166,831 157,846 
International152,003 155,275 
Segment assets855,118 794,311 
Shared Resources155,079 152,356 
Total$1,010,197 $946,667 
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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, 2022. 
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 dealers of Case Construction equipment in North America and one of the largest retail dealers of New Holland Agriculture and New Holland Construction equipment in the United States. 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, is impacted by agricultural commodity prices and net farm income. Based on February 2022 U.S. Department of Agriculture publications, the estimate of net farm income for calendar year 2022 indicated an approximate 4.5% decrease as compared to calendar year 2021, and an approximate 25.1% increase in net farm income for calendar year 2021 as compared to calendar year 2020.
    For the first quarter of fiscal 2023, our net income was $17.5 million, or $0.78 per diluted share, compared to a fiscal 2022 first quarter net income of $10.5 million, or $0.47 per diluted share. Our adjusted diluted earnings per share was $0.79 for the first quarter of fiscal 2023, compared to $0.46 for the first quarter of fiscal 2022. 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 first quarter of fiscal 2023 increased by 23.7% compared to the first quarter of fiscal 2022. Total company same store sales increased 22.1% compared to the prior year first quarter. Same store sales increased in each of our three reporting segments.
•Gross profit in the first quarter of fiscal 2023 increased 25.0% compared to the first quarter of fiscal 2022. The increase in gross profit was primarily the result of strong equipment sales and equipment gross profit margins increasing to 12.9% in the first quarter of fiscal 2023 from 11.7% in the first quarter of fiscal 2022.
•Floorplan and other interest expense decreased a combined 4.7% in the first quarter of fiscal 2023, as compared to the first quarter last year, due to lower borrowings.
Russian-Ukrainian Conflict
Since the onset of the active conflict in February 2022, most of Titan Machinery Ukraine's customers have been able to continue their work, although at a reduced capacity and schedule. The Company's websites and phone systems have continued to function but could be negatively impacted in the future. Some of Titan Machinery Ukraine's back office employees have been able to relocate outside of Ukraine and continue to work, while the customer support and sales teams have remained in Ukraine. The conflict could have a significant adverse effect upon the Company.
As of April 30, 2022, the Company had total assets of $35.0 million in Ukraine. The physical assets (e.g. inventory and fixed assets) are almost exclusively located in central and western areas of the country. Total assets in Ukraine as of January 31, 2022, was $32.7 million.
The situation is highly complex and continues to evolve. If the Company cannot provide efficient and uninterrupted services, this could have an adverse effect on the Company's operations and business in Ukraine. In addition, the Company's ability to maintain adequate liquidity for our operations in Ukraine is dependent on a number of factors, including Titan Machinery Ukraine's revenue and earnings, which could be significantly impacted by the conflict in Ukraine. Further, any additional military movement back into central and western Ukraine or any major threat to civilians or international banking disruption could materially impact the operations and liquidity of Titan Machinery Ukraine and the Company.

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Impact of the COVID-19 Pandemic on the Company
    We continue to monitor the progression of COVID-19 and its impact on our business. As this pandemic continues, we are following the directives and advice of government leaders and medical professionals and continue to attempt to mitigate its impact on our employees, customers, vendors, and other business partners, and communities in which we live and work.
    While there was no material adverse impacts on the Company's results of operations for the three months ended April 30, 2022 or 2021, uncertainty remains regarding the magnitude and duration of the pandemic and the resulting potential future financial effects. Increased infection rates and any future responses to mitigate the spread of the virus, including any potential vaccination mandates that would apply to our employees, could impact our business and our financial results of future periods.
Acquisitions
Fiscal 2023
    On April 1, 2022, the Company acquired certain assets of Mark's Machinery, Inc. The acquired business consisted of two agricultural equipment stores in Wagner and Yankton, South Dakota. These locations are included in our Agriculture segment. In its most recent fiscal year, Mark's Machinery, Inc. generated revenue of approximately $34.0 million. The total cash consideration paid for the acquired business was $7.7 million.
Fiscal 2022
    On December 1, 2021, the Company acquired certain assets of Jaycox Implement, Inc. The acquired business consisted of three agricultural equipment stores in Worthington and Luverne, Minnesota and Lake Park, Iowa. These locations are included in our Agriculture segment. In its most recent fiscal year, Jaycox Implement, Inc. generated revenue of approximately $91 million. The total cash consideration paid for the acquired business was $33.6 million.
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 also integrated the five stores acquired through the Jaycox Implement and Mark's Machinery acquistions in December 2021 and April 2022, respectively. We expect to begin our phased roll-out to the remaining domestic locations, beginning in the second half of fiscal 2023.
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 Operationssection of our Annual Report on Form 10-K for the fiscal year ended January 31, 2022. There have been no changes in our critical accounting policies and estimates since January 31, 2022.
Results of Operations
    The results presented below include the operating results of any acquisition made during these periods, from the date of acquisition, 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 this Results of Operations section.
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Comparative financial data for each of our four sources of revenue are expressed below.
 Three Months Ended April 30,
 20222021
 (dollars in thousands)
Equipment
Revenue$356,366 $275,980 
Cost of revenue310,234 243,676 
Gross profit$46,132 $32,304 
Gross profit margin12.9 %11.7 %
Parts
Revenue$68,562 $62,626 
Cost of revenue47,310 44,440 
Gross profit$21,252 $18,186 
Gross profit margin31.0 %29.0 %
Service
Revenue$29,523 $27,702 
Cost of revenue10,760 9,294 
Gross profit$18,763 $18,408 
Gross profit margin63.6 %66.5 %
Rental and other
Revenue$6,556 $6,398 
Cost of revenue4,009 4,318 
Gross profit$2,547 $2,080 
Gross profit margin38.9 %32.5 %
The following table sets forth our statements of operations data expressed as a percentage of total revenue for the periods indicated:
 Three Months Ended April 30,
 20222021
Revenue
Equipment77.3 %74.1 %
Parts14.9 %16.8 %
Service6.4 %7.4 %
Rental and other1.4 %1.7 %
Total Revenue100.0 %100.0 %
Total Cost of Revenue80.8 %81.0 %
Gross Profit Margin19.2 %19.0 %
Operating Expenses13.9 %15.1 %
Income from Operations5.3 %3.9 %
Other Income (Expense)(0.2)%(0.2)%
Income Before Income Taxes5.1 %3.7 %
Provision for Income Taxes1.3 %0.8 %
Net Income3.8 %2.8 %



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Three Months Ended April 30, 2022 Compared to Three Months Ended April 30, 2021
Consolidated Results
Revenue
 Three Months Ended April 30,Increase/Percent
 20222021(Decrease)Change
 (dollars in thousands) 
Equipment$356,366 $275,980 $80,386 29.1 %
Parts68,562 62,626 5,936 9.5 %
Service29,523 27,702 1,821 6.6 %
Rental and other6,556 6,398 158 2.5 %
Total Revenue$461,007 $372,706 $88,301 23.7 %
     Total revenue for the first quarter of fiscal 2023 was 23.7% or $88.3 million higher than the first quarter of fiscal 2022 driven primarily by an increase in Company-wide same-store sales of 22.1% and our acquistions of Jaycox Implement and Mark's Machinery, completed in December 2021 and April 2022, respectively. The same-store sales increase was primarily driven by favorable commodity prices, higher net farm income and increased construction activity in our footprint.
 Three Months Ended April 30,Increase/Percent
 20222021(Decrease)Change
 (dollars in thousands) 
Gross Profit
Equipment$46,132 $32,304 $13,828 42.8 %
Parts21,252 18,186 3,066 16.9 %
Service18,763 18,408 355 1.9 %
Rental and other2,547 2,080 467 22.5 %
Total Gross Profit$88,694 $70,978 $17,716 25.0 %
Gross Profit Margin
Equipment12.9 %11.7 %1.2 %10.3 %
Parts31.0 %29.0 %2.0 %6.9 %
Service63.6 %66.5 %(2.9)%(4.4)%
Rental and other38.8 %32.5 %6.3 %19.4 %
Total Gross Profit Margin19.2 %19.0 %0.2 %1.1 %
Gross Profit Mix
Equipment52.0 %45.5 %6.5 %14.3 %
Parts24.0 %25.6 %(1.6)%(6.3)%
Service21.2 %25.9 %(4.7)%(18.1)%
Rental and other2.8 %3.0 %(0.2)%(6.7)%
Total Gross Profit Mix100.0 %100.0 %
     Gross profit for the first quarter of fiscal 2023 increased 25.0% or $17.7 million, as compared to the same period last year. Gross profit margin also improved to 19.2% in the current quarter from 19.0% in the prior year quarter. The increase in gross profit margin was primarily due to stronger equipment margins, which were positively impacted by a healthy inventory and favorable end market conditions. The increase in equipment margins, was partially offset by the gross profit mix shift, to lower margin equipment sales relative to parts, service, and rental sales.
     Our Company-wide absorption rate — which is calculated by dividing our gross profit from sales of parts, service and rental fleet by our operating expenses, less commission expense on equipment sales, plus interest expense on floorplan payables and rental fleet debt — increased to 80.3% for the first quarter of fiscal 2023 compared to 76.0% during the same period last year as the increase in gross profit from parts, rental fleet, and service in the first quarter of fiscal 2023 combined with lower floorplan interest expenses more than offset the increase in operating expenses during the period.
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Operating Expenses
 Three Months Ended April 30,Increase/Percent
 20222021(Decrease)Change
 (dollars in thousands) 
Operating Expenses$64,152 $56,442 $7,710 13.7 %
Operating Expenses as a Percentage of Revenue13.9 %15.1 %(1.2)%(7.9)%
    Our operating expenses in the first quarter of fiscal 2023 increased 13.7% as compared to the first quarter of fiscal 2022. The increase in operating expenses was primarily due to an increase in variable expenses associated with increased sales. Operating expenses as a percentage of revenue decreased to 13.9% in the first quarter of fiscal 2023 from 15.1% in the first quarter of fiscal 2022. The decrease in operating expenses as a percentage of revenue was due to the increase in total revenue in the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022, which positively affected our ability to leverage our fixed operating costs.
Other Income (Expense)
 Three Months Ended April 30,Increase/Percent
 20222021(Decrease)Change
 (dollars in thousands) 
Interest and other income$492 $665 $(173)(26.0)%
Floorplan interest expense(254)(418)(164)(39.2)%
Other interest expense(1,196)(1,104)92 8.3 %
    Interest and other income decreased by $0.2 million in the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022, due to fluctuations in foreign currency exchange rates, primarily the Ukrainian currency. The decrease in floorplan interest expense of 39.2% was due to lower borrowings. The increase in other interest expense was primarily due to increased fixed rate, long term debt from real estate purchases throughout fiscal 2022.
Provision for Income Taxes
 Three Months Ended April 30,Increase/Percent
 20222021(Decrease)Change
 (dollars in thousands) 
Provision for Income Taxes$6,044 $3,132��$2,912 93.0 %
     Our effective tax rate was 25.6% and 22.9% for the three months ended April 30, 2022 and April 30, 2021, respectively. The effective tax rate for each of the three months ended April 30, 2022 and 2021 is subject to variation due to factors such as the impact of certain discrete items, mainly the vesting of share-based compensation, the mix of domestic and foreign income and recognition of a valuation allowance on certain of our foreign deferred tax assets.

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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.
 Three Months Ended April 30,Increase/Percent
 20222021(Decrease)Change
 (dollars in thousands) 
Revenue
Agriculture$318,548 $229,554 $88,994 38.8 %
Construction66,964 68,608 (1,644)(2.4)%
International75,495 74,544 951 1.3 %
Total$461,007 $372,706 $88,301 23.7 %
Income Before Income Taxes
Agriculture$16,449 $11,224 $5,225 46.6 %
Construction3,210 138 3,072 n/m
International4,325 2,808 1,517 54.0 %
Segment Income Before Income Taxes23,984 14,170 9,814 69.3 %
Shared Resources(400)(491)91 18.5 %
Total$23,584 $13,679 $9,905 72.4 %
Agriculture
    Agriculture segment revenue for the first quarter of fiscal 2023 increased 38.8% compared to the first quarter of fiscal 2022. The higher revenue was driven primarily by an increase in same-store sales of 26.3% and our acquistions of Jaycox Implement and Mark's Machinery, completed in December 2021 and April 2022, respectively. The same-store sales increase was primarily driven by favorable commodity prices and higher net farm income.
    Agriculture segment income before income taxes was $16.4 million for the first quarter of fiscal 2023 compared to $11.2 million for the first quarter of fiscal 2022. Higher equipment revenue along with increased gross profit margin on equipment were the primary drivers of the increase in income before income taxes.
Construction
    Construction segment revenue for the first quarter of fiscal 2023 decreased 2.4% compared to the first quarter of fiscal 2022. However, after taking into account the divestiture of the Billings, Great Falls, and Missoula, Montana, and Gillette, Wyoming stores in the fourth quarter of fiscal 2022 and the first quarter of fiscal 2023 divestiture of our consumer products store in North Dakota, same-store sales in our Construction segment increased 24.9% for the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022. Higher same store sales were driven by increased construction activity throughout our footprint.
    Our Construction segment income before taxes was $3.2 million for the first quarter of fiscal 2023 compared to $0.1 million in the first quarter of fiscal 2022. The improvement in segment results was primarily due to an increase in same store sales, as described above, the sale of our consumer products store, in the first quarter of fiscal 2023, resulting in a gain of $1.4 million and increased equipment gross profit margin. An increase in rental fleet utilization, led to an increase in rental gross profit margin, also contributed to the improvement in segment results. The dollar utilization — which is calculated by dividing the rental revenue earned on our rental fleet by the average gross carrying value of our rental fleet (comprised of original equipment costs plus additional capitalized costs) for that period — of our rental fleet increased from 19.2% in the first quarter of fiscal 2022 to 24.5% in the first quarter of fiscal 2023.
International
International segment revenue, for the first quarter of fiscal 2023 increased 1.3% compared to the first quarter of fiscal 2022. Higher segment revenue was driven by many of the same macroeconomic factors as the Agriculture segment, which has improved customer sentiment and has had a positive impact on equipment sales. The increase in revenue was partially offset by lower revenues in our Ukrainian subsidiary, which was impacted by the Russia-Ukraine conflict in the first quarter of fiscal
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2023. Same-store sales in our International segment increased 6.2% for the first quarter of fiscal 2023 as compared to the first quarter of fiscal 2022, primarily driven by an increase in equipment sales.
    Our International segment income before income taxes was $4.3 million for the first quarter of fiscal 2023 compared to segment income before income taxes of $2.8 million for the same period last year. The increase in segment pre-tax income was primarily the result of increased equipment sales and equipment gross profit margin. This increase was partially offset by a $0.7 million estimated bad debt provision on our accounts receivables with customers of Titan Machinery Ukraine.
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, unallocated balances may occur. Shared Resources loss before income taxes was $0.4 million for the first quarter of fiscal 2023 compared to a loss before income taxes of $0.5 million for the same period last year.
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 foreign currency remeasurement gains/losses in 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 April 30,
20222021
(dollars in thousands, except per share data)
Adjusted Net Income
Net Income$17,540 $10,547 
Adjustments
Ukraine remeasurement (gain) / loss (1)294 (129)
Total Pre-Tax Adjustments294 (129)
Adjusted Net Income$17,834 $10,418 
Adjusted Diluted EPS
Diluted EPS$0.78 $0.47 
Adjustments (2)
Ukraine remeasurement (gain) / loss (1)0.01 (0.01)
Total Pre-Tax Adjustments0.01 (0.01)
Adjusted Diluted EPS$0.79 $0.46 
(1) Due to the income tax valuation allowance on the Ukrainian subsidiary, there are no tax adjustments of the Ukraine remeasurement (gain)/loss for the quarters ending April 30, 2022 and 2021.
(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 obligations and other commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future,
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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 April 30, 2022, the Company had floorplan payable lines of credit for equipment purchases totaling $751.0 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 $50.0 million credit facility with DLL Finance.
    Our equipment inventory turnover increased from 2.3 times for the rolling 12 month period ended April 30, 2021 to 3.5 times for the rolling 12 month period ended April 30, 2022. The increase in equipment turnover was attributable to an increase in equipment sales and a decrease in average equipment inventory over the rolling 12 month period ended April 30, 2022 as compared to the same period ended April 30, 2021. Our equity in equipment inventory, which reflects the portion of our equipment inventory balance that is not financed by floorplan payables, decreased to 51.2% as of April 30, 2022 from 58.2% as of January 31, 2022. The decrease was due to more inventory being financed with non-interest bearing floorplan lines of credit.
Adequacy of Capital Resources
    Our primary uses of cash have been to fund our operating activities, including the purchase of inventories and providing for other working capital needs, meeting our debt service requirements, making payments due under our various leasing arrangements, and funding capital expenditures, including rental fleet assets. 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 April 30, 2022, 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 April 30, 2022. 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 Operating Activities
Net cash provided by operating activities was $5.3 million for the first three months of fiscal 2023, compared to net cash provided by operating activities of $27.0 million for the first three months of fiscal 2022. The change in net cash provided by operating activities is primarily the result of an increase in inventories partially offset by an increase in non-interest bearing floorplan lines of credit from manufacturers and higher net income for the first three months of fiscal 2023.
Cash Flow Used for Investing Activities
    Net cash used for investing activities was $11.9 million for the first three months of fiscal 2023, compared to $9.0 million for the first three months of fiscal 2022. The increase in cash used for investing activities was primarily the result of the business acquisition of Mark's Machinery in the first three months of fiscal 2023.
Cash Flow Provided by (Used for) Financing Activities
    Net cash provided by financing activities was $8.0 million for the first three months of fiscal 2023 compared to cash used for financing activities of $6.8 million for the first three months of fiscal 2022. The increase in cash provided by financing activities was primarily the result of proceeds from the financing of real estate, owned by the Company, and increased non-manufactured floorplan payables in the first three months of fiscal 2023 compared to the same period last year.
Information Concerning Off-Balance Sheet Arrangements
    As of April 30, 2022, 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. Therefore, we are 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, 2022, 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 the performance of our Ukrainian subsidiary within our International segment, the impact of farm income levels on customer demand for agricultural equipment and services, the impact of the COVID-19 pandemic on our business, the effectiveness of the new ERP system and the timing of the phased roll-out of the ERP system to the Company's domestic locations, the general market conditions of the agricultural and construction industries, equipment inventory levels, 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. These statements are based upon the current beliefs and expectations of our management. These forward-looking statements involve important risks and uncertainties that could significantly affect anticipated results or outcomes in the future and, accordingly, 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 impact of the Russia -Ukraine conflict on our Ukrainian subsidiary, the duration, scope and impact of the COVID-19 pandemic on the Company's operations and business, including the disruption of supply chains and associated impacts on the Company's supply vendors, 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. In addition to those 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 or 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 April 30, 2022, 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 $0.3 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 $0.3 million. At April 30, 2022, we had floorplan payables of $188.9 million, of which approximately $29.4 million was variable-rate floorplan payable and $159.5 million was non-interest bearing. In addition, at April 30, 2022, we had total long-term debt, including finance lease obligations, of $96.6 million, of which 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 April 30, 2022, 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 April 30, 2022, our Ukrainian subsidiary had $0.7 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. In February 2022, the National Bank of Ukraine imposed certain currency and payment controls. While this has made it more difficult to manage our UAH exposure, the agriculture industry is classified as a critical industry allowing the conversion of UAH for certain parts and equipment invoices. The continuation of political tensions in the Russia/Ukraine conflict could lead to more significant UAH devaluations. The inability to fully manage our net monetary asset position and continued UAH devaluations for an extended period of time, could have a significant impact on our results of operations and cash flows.
    In addition to transactional foreign currency exchange rate risk, we are also exposed to translational foreign currency exchange rate risk as we translate the results of operations and assets and liabilities of our foreign operations from their functional currency to the U.S. dollar. As a result, our results of operations, cash flows and net investment in our foreign operations may be adversely impacted by fluctuating foreign currency exchange rates. We believe that a hypothetical 10% increase or decrease in all applicable foreign exchange rates, holding all other variables constant, would not have a material impact on our results of operations or cash flows.
ITEM 4. CONTROLS AND PROCEDURES
(a)Evaluation of disclosure controls and procedures. After evaluating the effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer, with the participation of the Company’s management, have concluded that the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) are effective.
(b)Changes in internal controls. There has not been any change in the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during its most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1.                LEGAL PROCEEDINGS
    We are, from time to time, subject to claims and suits arising in the ordinary course of business. Such claims have, in the past, generally been covered by insurance. There can be no assurance that our insurance will be adequate to cover all liabilities that may arise out of claims brought against us, or that our insurance will cover all claims. We are not currently a party to any material litigation.
ITEM 1A.             RISK FACTORS
    In addition to the other information set forth in this Quarterly Report, including the important information in “Forward-Looking Statements,” you should carefully consider the “Risk Factors” discussed in our Form 10-K for the fiscal year ended January 31, 2022, as filed with the Securities and Exchange Commission. 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 results of operations. In addition to those factors, additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially adversely affect our business, financial condition or results of 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.
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
Letter Agreement between Titan Machinery Inc. and Mark Kalvoda, dated April 25, 2022.
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
101Financial statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended April 30, 2022, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to the Condensed Consolidated Financial Statements.
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
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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:June 2, 2022
TITAN MACHINERY INC.
By/s/ Mark Kalvoda
Mark Kalvoda
Chief Financial Officer
(Principal Financial Officer)

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