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, ~~2017~~2020

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

644 East Beaton Drive

West Fargo, ND 58078-2648

(Address of Principal Executive Offices)

Registrant’s telephone number (701) 356-0130

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~~ x NO oYes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). ~~YES~~ x NO oYes ☒ No ☐

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

Large accelerated filer

☐

Accelerated filer

☒

~~Large accelerated filer~~

~~Accelerated filer~~

Non-accelerated filer

o☐

~~(Do not check if smaller reporting company)~~

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. ~~YES~~ o NO o☐

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

~~The number~~As of August 31, 2020, 22,533,401 shares ~~outstanding~~ of ~~the registrant’s common stock as of November 30, 2017 was:~~ Common Stock, $0.00001 par value, ~~22,094,610 shares.~~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
	Consolidated Balance Sheets ~~as of October 31, 2017 and January 31, 2017~~	3
	Consolidated Statements of Operations ~~for the three and nine months ended October 31, 2017 and 2016~~	4
	Consolidated Statements of Comprehensive Income ~~(Loss) for the three and nine months ended October 31, 2017 and 2016~~	5
	Consolidated Statements of Stockholders' Equity	6
	Consolidated Statements of Cash Flows ~~for the nine months ended October 31, 2017 and 2016~~	67
	Notes to Consolidated Financial Statements	78
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1723
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3138
ITEM 4.	CONTROLS AND PROCEDURES	3138
PART II.	OTHER INFORMATION	3239
ITEM 1.	LEGAL PROCEEDINGS	3239
ITEM 1A.	RISK FACTORS	3239
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3239
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	3239
ITEM 4.	MINE SAFETY DISCLOSURES	3239
ITEM 5.	OTHER INFORMATION	3239
ITEM 6.	EXHIBITS	3239
Exhibit Index		3340
Signatures		3441

Table of Contents

PART I. — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TITAN MACHINERY INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share data)


								July 31, 2020		January 31, 2020
	October 31, 2017			January 31, 2017
Assets							Assets
Current Assets							Current Assets
Cash	$	43,861		$	53,151		Cash	$	44,484	$	43,721
Receivables (net of allowance of $3,233 and $3,630 as of October 31, 2017 and January 31, 2017, respectively)	73,605			60,082
Receivables, net of allowance for expected credit losses							Receivables, net of allowance for expected credit losses	75,782		72,776
Inventories	529,761			478,266			Inventories	570,680		597,394
Prepaid expenses and other	8,363			10,989			Prepaid expenses and other	7,144		13,655
Income taxes receivable	111			5,380

Total current assets	655,701			607,868			Total current assets	698,090		727,546
Noncurrent Assets							Noncurrent Assets
Property and equipment, net of accumulated depreciation							Property and equipment, net of accumulated depreciation	150,496		145,562
Operating lease assets							Operating lease assets	83,586		88,281
Deferred income taxes							Deferred income taxes	3,337		2,147
Goodwill							Goodwill	2,818		2,327
Intangible assets, net of accumulated amortization	4,944			5,001			Intangible assets, net of accumulated amortization	8,568		8,367
Property and equipment, net of accumulated depreciation	156,426			156,647
Deferred income taxes	271			547
Other	948			1,359			Other	1,130		1,113
Total noncurrent assets	162,589			163,554			Total noncurrent assets	249,935		247,797
Total Assets	$	818,290		$	771,422		Total Assets	$	948,025	$	975,343

Liabilities and Stockholders' Equity							Liabilities and Stockholders' Equity
Current Liabilities							Current Liabilities
Accounts payable	$	19,567		$	17,326		Accounts payable	$	20,734	$	16,976
Floorplan payable	322,439			233,228			Floorplan payable	352,215		371,772

Current maturities of long-term debt	1,529			1,373			Current maturities of long-term debt	3,921		13,779
Customer deposits	15,111			26,366
Current operating lease liabilities							Current operating lease liabilities	12,158		12,259
Deferred revenue							Deferred revenue	22,716		40,968
Accrued expenses and other	27,298			30,533			Accrued expenses and other	38,122		38,409

Total current liabilities	385,944			308,826			Total current liabilities	449,866		494,163
Long-Term Liabilities							Long-Term Liabilities
Senior convertible notes	62,277			88,501
Long-term debt, less current maturities	35,892			38,236			Long-term debt, less current maturities	48,665		37,789
Operating lease liabilities							Operating lease liabilities	83,341		88,387
Deferred income taxes	4,806			9,500			Deferred income taxes	2,301		2,055
Other long-term liabilities	10,216			5,180			Other long-term liabilities	9,060		7,845
Total long-term liabilities	113,191			141,417			Total long-term liabilities	143,367		136,076
Commitments and Contingencies							Commitments and Contingencies
Stockholders' Equity							Stockholders' Equity
Common stock, par value $.00001 per share, 45,000 shares authorized; 22,042 shares issued and outstanding at October 31, 2017; 21,836 shares issued and outstanding at January 31, 2017	—			—
Common stock, par value $.00001 per share, $45,000 shares authorized; $22,553 shares issued and outstanding at July 31, 2020; $22,335 shares issued and outstanding at January 31, 2020							Common stock, par value $.00001 per share, $45,000 shares authorized; $22,553 shares issued and outstanding at July 31, 2020; $22,335 shares issued and outstanding at January 31, 2020	0		0
Additional paid-in-capital	245,140			240,615			Additional paid-in-capital	251,587		250,607
Retained earnings	75,361			85,347			Retained earnings	106,175		97,717
Accumulated other comprehensive loss	(1,346		)	(4,783		)	Accumulated other comprehensive loss	(2,970)		(3,220)
Total stockholders' equity	319,155			321,179			Total stockholders' equity	354,792		345,104
Total Liabilities and Stockholders' Equity	$	818,290		$	771,422		Total Liabilities and Stockholders' Equity	$	948,025	$	975,343

See Notes to Consolidated Financial Statements

Table of Contents

TITAN MACHINERY INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)


	Three Months Ended October 31,						Nine Months Ended October 31,							Three Months Ended July 31,						Six Months Ended July 31,
	2017			2016			2017			2016				2020		2019		2020		2019
Revenue													Revenue
Equipment	$	215,956		$	212,194		$	551,752		$	570,369		Equipment	$	202,654	$	214,435	$	421,159	$	408,390
Parts	64,729			69,261			176,892			185,106			Parts	61,454		59,202		118,068		111,140
Service	31,532			33,777			90,807			96,065			Service	27,986		26,832		53,586		49,662
Rental and other	18,124			17,034			43,879			43,919			Rental and other	11,371		14,512		20,860		24,079
Total Revenue	330,341			332,266			863,330			895,459			Total Revenue	303,465		314,981		613,673		593,271
Cost of Revenue													Cost of Revenue
Equipment	199,154			201,140			509,400			532,370			Equipment	180,231		190,707		377,278		363,861
Parts	45,408			48,387			124,868			130,006			Parts	43,032		41,732		82,649		78,546
Service	11,139			11,828			33,377			35,473			Service	9,665		8,737		18,010		16,219
Rental and other	13,163			12,485			32,482			32,703			Rental and other	7,849		9,778		14,636		16,719
Total Cost of Revenue	268,864			273,840			700,127			730,552			Total Cost of Revenue	240,777		250,954		492,573		475,345
Gross Profit	61,477			58,426			163,203			164,907			Gross Profit	62,688		64,027		121,100		117,926
Operating Expenses	50,374			53,143			152,884			159,132			Operating Expenses	53,079		54,855		106,137		107,410
Restructuring Costs	2,587			275			10,480			546
Income (Loss) from Operations	8,516			5,008			(161		)	5,229

Impairment of Long-Lived Assets													Impairment of Long-Lived Assets	0		0		216		135

Income from Operations													Income from Operations	9,609		9,172		14,747		10,381
Other Income (Expense)													Other Income (Expense)
Interest income and other income	380			502			1,840			1,251
Interest and other income													Interest and other income	562		620		692		1,414
Floorplan interest expense	(1,900		)	(3,294		)	(6,719		)	(10,843		)	Floorplan interest expense	(901)		(1,399)		(2,054)		(2,276)
Other interest expense	(2,110		)	(2,160		)	(6,694		)	(5,930		)	Other interest expense	(978)		(966)		(1,944)		(2,607)
Income (Loss) Before Income Taxes	4,886			56			(11,734		)	(10,293		)
Provision for (Benefit from) Income Taxes	2,502			(208		)	(3,000		)	(3,997		)
Net Income (Loss) Including Noncontrolling Interest	$	2,384		$	264		$	(8,734	)	$	(6,296	)
Less: Loss Attributable to Noncontrolling Interest	—			—			—			(356		)
Net Income (Loss) Attributable to Titan Machinery Inc.	$	2,384		$	264		$	(8,734	)	$	(5,940	)
Net (Income) Loss Allocated to Participating Securities - Note 1	(56		)	(8		)	176			120
Net Income (Loss) Attributable to Titan Machinery Inc. Common Stockholders	$	2,328		$	256		$	(8,558	)	$	(5,820	)
Earnings (Loss) per Share - Note 1
Earnings (Loss) per Share - Basic	$	0.11		$	0.01		$	(0.40	)	$	(0.27	)
Earnings (Loss) per Share - Diluted	$	0.11		$	0.01		$	(0.40	)	$	(0.27	)
Weighted Average Common Shares - Basic	21,585			21,218			21,503			21,208
Weighted Average Common Shares - Diluted	21,643			21,269			21,503			21,208
Income Before Income Taxes													Income Before Income Taxes	8,292		7,427		11,441		6,912
Provision for Income Taxes													Provision for Income Taxes	1,892		1,916		2,779		1,846
Net Income													Net Income	$	6,400	$	5,511	$	8,662	$	5,066

Earnings per Share:													Earnings per Share:
Basic													Basic	$	0.28	$	0.25	$	0.39	$	0.23
Diluted													Diluted	$	0.28	$	0.25	$	0.39	$	0.23

Weighted Average Common Shares:													Weighted Average Common Shares:
Basic													Basic	22,118		21,960		22,068		21,917
Diluted													Diluted	22,119		21,964		22,068		21,922

See Notes to Consolidated Financial Statements

Table of Contents

TITAN MACHINERY INC.

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

(in thousands)

Three Months Ended October 31, Nine Months Ended October 31,
2017 2016 2017 2016
Net Income (Loss) Including Noncontrolling Interest $ 2,384
$ 264
$ (8,734 ) $ (6,296 )
Other Comprehensive Income (Loss)
Foreign currency translation adjustments 1,369
626
2,760
945
Unrealized gain (loss) on interest rate swap cash flow hedge derivative instrument, net of tax expense (benefit) of $91 for the three months ended October 31, 2016, and $19 and ($109) for the nine months ended October 31, 2017 and 2016 —
137
29
(163 )
Reclassification of loss on interest rate swap cash flow hedge derivative instrument included in net loss, net of tax benefit of $39 and $133 for the three months ended October 31, 2017 and 2016, and $433 and $426 for the nine months ended October 31, 2017 and 2016 59
200
651
638
Total Other Comprehensive Income 1,428
963
3,440
1,420
Comprehensive Income (Loss) 3,812
1,227
(5,294 ) (4,876 )
Comprehensive Loss Attributable to Noncontrolling Interest —
—
—
(333 )
Comprehensive Income (Loss) Attributable To Titan Machinery Inc. $ 3,812
$ 1,227
$ (5,294 ) $ (4,543 )


	Three Months Ended July 31,						Six Months Ended July 31,
	2020		2019		2020		2019
Net Income	$	6,400	$	5,511	$	8,662	$	5,066
Other Comprehensive Income
Foreign currency translation adjustments	778		1,012		250		241
Comprehensive Income	$	7,178	$	6,523	$	8,912	$	5,307

See Notes to Consolidated Financial Statements

Table of Contents

TITAN MACHINERY INC.

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, 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
Cumulative-effect adjustment of adopting ASC 842, Leases	—	—		—		—		—		—
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					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, Credit Loss	—	—		—		(204)		—		(204)
Common stock issued on grant of restricted stock, 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
Cumulative-effect adjustment of adopting ASC 326, Credit Loss	—	—		—		—		—		—
Common stock issued on grant of restricted stock, 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

See Notes to Consolidated Financial Statements

TITAN MACHINERY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Six Months Ended July 31,
	2020		2019
Operating Activities
Net income	$	8,662	$	5,066
Adjustments to reconcile net income to net cash provided by (used for) operating activities
Depreciation and amortization	11,286		13,264
Impairment	216		135
Deferred income taxes	(944)		(251)
Stock-based compensation expense	1,181		1,297
Noncash interest expense	75		407
Noncash lease expense	5,717		6,198

Other, net	(368)		(8)
Changes in assets and liabilities
Receivables, prepaid expenses and other assets	3,347		(2,149)
Inventories	31,885		(140,149)
Manufacturer floorplan payable	(26,726)		128,635
Accounts payable, deferred revenue, accrued expenses and other and other long-term liabilities	(15,140)		(12,362)

Operating lease liabilities	(6,156)		(6,386)
Net Cash Provided by (Used for) Operating Activities	13,035		(6,303)
Investing Activities
Rental fleet purchases	(6,001)		(9,249)
Property and equipment purchases (excluding rental fleet)	(4,472)		(3,101)
Proceeds from sale of property and equipment	489		670
Acquisition consideration, net of cash acquired	(6,790)		(2,972)
Other, net	(20)		14
Net Cash Used for Investing Activities	(16,794)		(14,638)
Financing Activities
Net change in non-manufacturer floorplan payable	7,229		49,937
Principal payments on senior convertible notes	0		(45,644)
Proceeds from long-term debt borrowings	1,112		11,786
Principal payments on long-term debt and finance leases	(2,952)		(1,940)
Payment of debt issuance costs	(670)		0
Other, net	(200)		(492)
Net Cash Provided by Financing Activities	4,519		13,647
Effect of Exchange Rate Changes on Cash	3		66
Net Change in Cash	763		(7,228)
Cash at Beginning of Period	43,721		56,745
Cash at End of Period	$	44,484	$	49,517
Supplemental Disclosures of Cash Flow Information
Cash paid (received) during the period
Income taxes, net of refunds	$	(228)	$	3,064
Interest	$	4,103	$	4,705
Supplemental Disclosures of Noncash Investing and Financing Activities
Net property and equipment financed with long-term debt, finance leases, accounts payable and accrued liabilities	$	4,645	$	6,133
Net transfer of assets from (to) property and equipment to (from) inventories	$	319	$	(2,995)

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

See Notes to Consolidated Financial Statements

Table of Contents

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1—1 - BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. The quarterly operating results for Titan Machinery Inc. (the “Company”) are subject to fluctuation due to varying weather patterns, which may impact the timing and amount of equipment purchases, rentals, and after-sales parts and service purchases by the Company’s Agriculture, Construction and International customers. Therefore, operating results for the ~~nine-month~~six-month period ended ~~October~~July 31, ~~2017~~2020 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, ~~2018.~~2021. The information contained in the consolidated balance sheet as of January 31, ~~2017~~2020 was derived from the audited consolidated financial statements for the Company for the fiscal year then ended. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, ~~2017~~2020 as filed with the SEC.

Nature of Business

The Company is engaged in the retail sale, service and rental of agricultural and construction machinery through its stores in the United States and Europe. The Company’s North American stores are located in Arizona, Colorado, Iowa, Minnesota, Montana, Nebraska, ~~New Mexico,~~ North Dakota, South Dakota, Wisconsin and Wyoming, and its European stores are located in Bulgaria, 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 and rapidly evolving situation, and we cannot anticipate with any certainty the length, scope, or severity of such restrictions in each of the markets that we operate. See Item 1A. Risk Factors for more information on possible impacts.

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, in the event of a positive case at one of our locations.

Even though we are considered an essential business, in response to the COVID-19 pandemic, the Company closed its U.S. stores to the public on March 23, 2020 but continued operations through social distancing means in all areas: equipment, parts, service and rental. Beginning May 4, 2020, we began fully reopening our stores to the public, following pandemic safety protocols applicable to the locations. Additionally, our International stores have also been following pandemic safety protocols applicable to each location. By June 2020, all of our stores were open to the public but still maintain pandemic safety protocols.

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, collectability of receivables, and income taxes.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned ~~and majority-owned~~ subsidiaries. All material accounts, transactions and profits between the consolidated companies have been eliminated in consolidation.

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Recently Adopted Accounting Guidance

In June 2016, the ~~Company acquired all~~Financial Accounting Standards Board ("FASB") issued a new standard, codified in ASC 326, 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 ~~outstanding ownership interest held by~~asset. The guidance impacts the ~~non-controlling interest holder~~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 ~~Company's Bulgarian subsidiary. Subsequent~~financial statements to ~~this acquisition, all~~understand the credit risk inherent in a portfolio and how management monitors the credit quality of the ~~Company's subsidiaries are wholly-owned.~~

~~Earnings (Loss) Per Share (“EPS”)~~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 ~~uses~~adopted the ~~two-class method~~new guidance on February 1, 2020 using a modified retrospective approach and recognized an immaterial cumulative-effect adjustment to ~~calculate basic~~retained earnings as of the effective date. The Company identified and ~~diluted EPS. Unvested restricted stock awards are considered participating securities because they entitle holders~~updated existing internal controls and procedures to ~~non-forfeitable rights~~ensure compliance with the new guidance, but such modifications were not deemed to dividends during the vesting term. Under the two-class method, basic EPS was computed by dividing net income (loss) attributable to Titan Machinery Inc. after allocation of net income (loss) to participating securities by the weighted-average number of shares of common stock outstanding during the relevant period.

Diluted EPS was computed by dividing net income (loss) attributable to Titan Machinery Inc. after allocation of net income (loss) to participating securities by the weighted-average shares of common stock outstanding after adjusting for potential dilution relatedbe material to the ~~conversion~~Company's overall system of ~~all dilutive securities into common stock. All potentially dilutive securities were included~~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. This guidance aligns the ~~computation~~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. This standard was adopted on February 1, 2020 and was applied using the prospective transition approach. The adoption of ~~diluted EPS. All anti-dilutive securities were excluded~~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 issued 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 ~~computation of diluted EPS.~~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 its contracts and hedging relationships that reference LIBOR to determine if the Company will adopt the new guidance.

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NOTE 2 - EARNINGS PER SHARE

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


	Three Months Ended July 31,						Six Months Ended July 31,
	2020		2019		2020		2019
	(in thousands, except per share data)
Numerator:
Net income	$	6,400	$	5,511	$	8,662	$	5,066
Allocation to participating securities	(101)		(82)		(129)		(76)
Net income attributable to Titan Machinery Inc. common stockholders	$	6,299	$	5,429	$	8,533	$	4,990
Denominator:
Basic weighted-average common shares outstanding	22,118		21,960		22,068		21,917
Plus: incremental shares from vesting of restricted stock units	1		4		0		5
Diluted weighted-average common shares outstanding	22,119		21,964		22,068		21,922

Earnings Per Share:
Basic	$	0.28	$	0.25	$	0.39	$	0.23
Diluted	$	0.28	$	0.25	$	0.39	$	0.23

Anti-dilutive shares excluded from diluted weighted-average common shares outstanding:
Restricted stock units	—		—		18		—

NOTE 3 - REVENUE

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

21,218

21,503

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

51

—

—
Diluted Weighted-Average Common Shares Outstanding 21,643

21,269

21,503

21,208

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

Earnings (Loss) per Share - Basic $ 0.11

$ 0.01

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

$ 0.01

$ (0.40 )
$ (0.27 )

~~Recent Accounting Guidance~~

~~Accounting guidance adopted~~

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

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

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

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~~Accounting guidance not yet adopted~~

~~In May 2014 and August 2015, the FASB issued authoritative guidance on accounting for revenue recognition, codified in ASC 606,~~ ~~Revenue from Contracts with Customers. This guidance has been amended on various occasions and supersedes the revenue recognition requirements in ASC 605,~~ ~~Revenue Recognition. This guidance is based on the principle that revenue is recognized to depict the transfer of~~promised goods or services is transferred to ~~customers~~the customer, in an amount that reflects the consideration we expect to ~~which the entity expects to be entitled~~collect in exchange for those goods or services. Sales, value added and other taxes collected from our customers concurrent with our revenue activities are excluded from revenue.

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


	Three Months Ended July 31, 2020														Three Months Ended July 31, 2019
	Agriculture		Construction		International		Total		Agriculture		Construction		International		Total
	(in thousands)														(in thousands)
Equipment	$	110,601	$	48,478	$	43,575	$	202,654	$	111,212	$	51,396	$	51,827	$	214,435
Parts	37,470		13,016		10,968		61,454		35,054		13,066		11,082		59,202
Service	19,429		6,806		1,751		27,986		18,000		6,968		1,864		26,832
Other	829		725		119		1,673		793		820		130		1,743
Revenue from contracts with customers	168,329		69,025		56,413		293,767		165,059		72,250		64,903		302,212
Rental	743		8,694		261		9,698		633		11,789		347		12,769
Total revenues	$	169,072	$	77,719	$	56,674	$	303,465	$	165,692	$	84,039	$	65,250	$	314,981


	Six Months Ended July 31, 2020														Six Months Ended July 31, 2019
	Agriculture		Construction		International		Total		Agriculture		Construction		International		Total
	(in thousands)														(in thousands)
Equipment	$	250,349	$	82,732	$	88,078	$	421,159	$	219,075	$	94,442	$	94,873	$	408,390
Parts	72,550		24,476		21,042		118,068		65,029		25,770		20,341		111,140
Service	37,150		13,017		3,419		53,586		32,984		13,489		3,189		49,662
Other	1,562		1,243		223		3,028		1,412		1,413		152		2,977
Revenue from contracts with customers	361,611		121,468		112,762		595,841		318,500		135,114		118,555		572,169
Rental	1,089		16,365		378		17,832		964		19,668		470		21,102
Total revenues	$	362,700	$	137,833	$	113,140	$	613,673	$	319,464	$	154,782	$	119,025	$	593,271

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Unbilled Receivables and Deferred Revenue

Unbilled receivables amounted to $17.3 million and $13.9 million as of July 31, 2020 and January 31, 2020. The increase in unbilled receivables is primarily the ~~nature, amount, timing~~result of a seasonal increase in the volume of our service transactions in which we recognize revenue as our work is performed and ~~uncertainty~~prior to customer invoicing.

Deferred revenue from contracts with customers amounted to $21.7 million and $39.5 million as of July 31, 2020 and January 31, 2020. Our deferred revenue most often increases in the fourth quarter of each fiscal year due to a higher level of customer down payments or prepayments and longer time periods between customer payment and delivery of the equipment asset, and the related recognition of equipment revenue, prior to its seasonal use. During the six months ended July 31, 2020 and 2019, the Company recognized $37.0 million and $41.2 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, 2020 and ~~cash flows~~January 31, 2019, respectively. No material amount of revenue was recognized during the three months ended July 31, 2020 and 2019 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 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 such 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 in accordance with the guidance in ASU 2016-13. 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 US and are specifically excluded from the guidance in ASU 2016-13 in determining an allowance for expected losses. The Company does provide an allowance for these receivables based on historical experience and using credit information obtained from continued monitoring of customer accounts.

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	July 31, 2020		January 31, 2020
	(in thousands)
Trade and unbilled receivables from contracts with customers
Trade receivables due from customers	$	35,691	$	36,400
Unbilled receivables	17,280		13,944
Less allowance for expected credit loss	3,293		2,943
	49,678		47,401

Trade receivables due from finance companies	11,813		12,352

Trade and unbilled receivables from rental contracts
Trade receivables	5,578		7,381
Unbilled receivables	875		861
Less allowance for expected credit loss	1,979		2,180
	4,474		6,062
Other receivables
Due from manufacturers	8,819		5,763
Other	998		1,198
	9,817		6,961
Receivables, net of allowance for expected credit losses	$	75,782	$	72,776

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


	Agriculture		Construction		International		Total
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
F/X 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		0		0		9
F/X Impact	—		—		23		23
Balance at July 31, 2020	$	208	$	1,079	$	2,006	$	3,293

The following table presents impairment losses on receivables arising from ~~customer~~sales contracts ~~including significant judgments~~with customers and ~~changes in judgments and assets recognized~~receivables arising from ~~costs incurred to obtain or fulfill a contract.~~ rental contracts:


	Three Months Ended July 31,						Six Months Ended July 31,
	2020		2019		2020		2019
	(in thousands)
Impairment losses on:
Receivables from sales contracts	$	377	$	658	$	520	$	986
Receivables from rental contracts	13		414		151		497
	$	390	$	1,072	$	671	$	1,483

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NOTE 5 - INVENTORIES


	July 31, 2020		January 31, 2020
	(in thousands)
New equipment	$	334,457	$	358,339
Used equipment	148,239		157,535
Parts and attachments	86,301		79,813
Work in process	1,683		1,707
	$	570,680	$	597,394

NOTE 6 - PROPERTY AND EQUIPMENT


	July 31, 2020		January 31, 2020
	(in thousands)
Rental fleet equipment	$	101,856	$	104,133
Machinery and equipment	23,346		22,682
Vehicles	53,048		51,850
Furniture and fixtures	42,468		41,720
Land, buildings, and leasehold improvements	76,861		70,408
	297,579		290,793
Less accumulated depreciation	147,083		145,231
	$	150,496	$	145,562

The Company ~~will adopt~~reviews its long-lived assets for potential impairment whenever events or circumstances indicate that the carrying value of the long-lived asset (or asset group) may not be recoverable. During the three months ended July 31, 2020, the Company determined that a current period operating loss combined with historical losses of a certain store location indicated that the long-lived asset group of a store location may not be recoverable. The Company performed an impairment assessment of this ~~guidance~~asset group and as a result determined an impairment charge was not needed for the three months ended July 31, 2020. For the six months ended July 31, 2020, the Company recognized total impairment charges of $0.2 million within its Construction segment. For the three and six months ended July 31, 2019, the Company recognized an impairment charge of $0.1 million within its Construction segment.

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 ~~February 1, 2018.~~

~~We are~~the new ERP system in the process of assessing the impact adoption of this standard will have on our consolidated financial statements and related disclosures. Our implementation efforts to date consist of an identification and assessment of our primary revenue streams and performing contract analyses over a sample of contracts within each of our revenue streams. Based on our assessment to date, we do not expect the adoption of this standard to have a material impact on our revenue recognition policies for our equipment, parts or service revenues. ASC 606 does not apply to the recognition of our rental revenues as the accounting for such revenues is governed by other authoritative guidance. We anticipate adopting the standard by usesecond quarter of the ~~modified retrospective approach. In addition, we are continuing~~current fiscal year and expects all domestic stores to ~~evaluate the changes necessary to our business processes, systems and controls to support recognition and disclosure under~~be on the new ~~standard.~~

~~In February 2016, the FASB amended authoritative guidance on leases, codified~~ERP application in ~~ASC 842,~~ ~~Leases~~. The amended guidance requires lessees to recognize most leases on their balance sheets related to the rights and obligations created by those leases. The new standard also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The provisions of this guidance are to be applied using a modified retrospective approach, with elective reliefs, which requires application of the guidance for all periods presented. We anticipate adopting the new standard on February 1, 2019, and expect to elect the package of practical expedients afforded under the guidance, including the use of hindsight to determine the lease term. While we continue to evaluate this standard, we anticipate this standard will have a material impact on our consolidated balance sheets due to the capitalization of a right-of-use asset and lease liability associated with our current operating leases, but do not believe it will have a material impact on our consolidated statements of operations or cash flows.

~~In May 2017, the FASB amended authoritative guidance on modifications related to stock compensation, codified in ASC 718,~~ ~~Compensation - Stock Compensation~~. The amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting. The guidance is effective for the Company as of the first ~~quarter~~half of ~~its~~the fiscal year ending January 31, ~~2019.~~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 $1.3 million as of July 31, 2020 will be amortized on a straight-line basis over the estimated remaining period of use.

NOTE 7 - 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 base calculations and reduced by outstanding standby letters of credit and certain reserves. The Bank Syndicate Agreement has a variable interest rate on outstanding balances, has a 0.25% non-usage fee on the average monthly unused amount (replacing the previous non-usage fee of 0.25% to 0.375%), 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%. The Base Rate is the greater of (a) the prime rate of interest announced, from time to time, by Bank of America; (b) the Federal Funds Rate plus 0.5%, or (c) one month LIBOR plus 1%, but in no event shall the Base Rate be less than zero. The applicable margin rate is determined based on excess availability under the Bank Syndicate Agreement and

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ranges from 0.5% to 1.0% for Base Rate Loans and 1.5% to 2.0% for LIBOR Rate Loans. The new applicable margins under the Bank Syndicate Agreement are up to 0.5% less than the existing margins under the prior credit facility.

The Bank Syndicate Agreement does not obligate the Company to maintain financial covenants, except in the event that excess availability (each 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 e 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 ~~believe~~have the ~~update will have a material impact on its consolidated financial statements.~~intention or obligation to repay amounts borrowed within one year.

~~In August 2017, the FASB amended authoritative guidance on hedge accounting, codified in ASC 815,~~ ~~Derivatives and Hedging.~~ ~~The amendments better align the accounting rules with a company's risk management activities; better reflects economic results~~As of ~~hedging in financial statements; and simplifies hedge accounting treatment. The guidance is effective for~~July 31, 2020, the Company ashad floorplan lines of ~~the first quarter of its fiscal year ending January 31, 2020. The Company is evaluating the impact of this new standard on the financial statements.~~

~~NOTE 2—INVENTORIES~~

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

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~~NOTE 3—PROPERTY AND EQUIPMENT~~

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

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

~~Floorplan Lines of Credit~~

~~Floorplan payable balances reflect the amount owed for new equipment inventory purchased from a manufacturer and for used equipment inventory,~~credit totaling $763.0 million, which is primarily ~~acquired through trade-in on equipment sales. Certain~~comprised of the manufacturers from which the Company purchases new equipment inventory offer financing on these purchases, either offered directly from the manufacturer or through the manufacturers’ captive finance subsidiaries. CNH Industrial's captive finance subsidiary, CNH Industrial Capital, also provides financing of used equipment inventory. The Company also has floorplan payable balances with non-manufacturer lenders for new and used equipment inventory. Cash flows associated with manufacturer floorplan payable are reported as operating cash flows, while cash flows associated with non-manufacturer floorplan payable are reported as financing cash flows in the Company's consolidated statements of cash flows. The Company has three significant floorplan lines of ~~credit for U.S. operations, floorplan credit facilities for its foreign subsidiaries, and other floorplan payable balances with non-manufacturer lenders and manufacturers.~~

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

As of $107.4 million in credit facilities related to our foreign subsidiaries. Floorplan payables relating to these credit facilities totaled approximately $306.6 million of the total floorplan payable balance of $322.4 million outstanding as of OctoberJuly 31, ~~2017~~2020 and ~~$228.3 million of the total floorplan payable balance of $233.2 million outstanding as of~~ January 31, ~~2017. The remaining~~2020, the Company's outstanding balances ~~relate to equipment inventory financing from manufacturers and non-manufacturer lenders other than the~~of floorplan lines of credit ~~described above.~~consisted of the following:


	July 31, 2020		January 31, 2020
	(in thousands)
CNH Industrial	$	151,790	$	187,690
Bank Syndicate Agreement Floorplan Loan	98,400		—
Wells Fargo Floorplan Payable Line	—		82,700
DLL Finance	25,064		30,657
Other outstanding balances with manufacturers and non-manufacturers	76,961		70,725
	$	352,215	$	371,772

As of ~~October~~July 31, ~~2017,~~2020, the interest-bearing U.S. floorplan payables carried various interest rates ranging primarily ~~ranging~~ from ~~3.74%~~2.00% to ~~6.55%~~3.31%, ~~and the~~compared to a range of 4.05% to 4.81% as of January 31, 2020. As of July 31, 2020, foreign floorplan payables carried various interest rates primarily ranging from ~~0.92%~~1.34% to ~~7.24%.~~

6.15%, compared to a range of 0.86% to 7.66% as of January 31, 2020. As of ~~October~~July 31, ~~2017,~~2020 and January 31, 2020, $185.0 million and $205.2 million, respectively, of outstanding floorplan payables were non-interest bearing. As of July 31, 2020, the Company had a compensating balance arrangement under one of its foreign floorplan credit facilities, which requires a minimum cash deposit to be maintained with the lender in the amount of $5.0 million for the term of the credit facility.

~~Working Capital Line~~

As of October 31, 2017, the Company had a $60.0 million Working Capital Line under the Wells Fargo Credit Agreement. The Company had $13.0 million and $13.0 million outstanding on this Working Capital Line as of October 31, 2017 and January 31, 2017, respectively. As of October 31, 2017, the Working Capital Line carried an interest rate of 3.73%.

~~Wells Fargo Credit Agreement~~

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

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

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

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

~~DLL Finance Floorplan Payable Line of Credit~~

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

NOTE 5—8 - DEFERRED REVENUE


	July 31, 2020		January 31, 2020
	(in thousands)
Deferred revenue from contracts with customers	$	21,686	$	39,512
Deferred revenue from rental and other contracts	1,030		1,456
	$	22,716	$	40,968

NOTE 9 - SENIOR CONVERTIBLE NOTES

The ~~Company’s 3.75%~~Company's senior convertible notes ~~issued~~matured, and the outstanding principal balance of $45.6 million was repaid in full, on ~~April 24, 2012 (“senior convertible notes”) consisted of~~May 1, 2019, as such there was no interest expense for the ~~following:~~

October 31, 2017 January 31, 2017

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

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

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

Conversion price (per share of common stock) $ 43.17

~~For the nine~~three months ended ~~October~~July 31, ~~2017, the Company repurchased an aggregate of $30.1 million face value of its senior convertible notes with $29.1 million in cash.~~2019.

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

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	Three Months Ended October 31,				Nine Months Ended October 31,					Six Months Ended July 31,
	2017		2016		2017		2016			2020		2019
	(in thousands)				(in thousands)					(in thousands)
Cash Interest Expense									Cash Interest Expense
Coupon interest expense	$	666	$	996	$	2,157	$	3,457	Coupon interest expense	$	0	$	421
Noncash Interest Expense									Noncash Interest Expense
Amortization of debt discount	517		703		1,628		2,406		Amortization of debt discount	0		350
Amortization of transaction costs	71		100		225		347		Amortization of transaction costs	0		45
	$	1,254	$	1,799	$	4,010	$	6,210		$	0	$	816

NOTE 10 - LONG TERM DEBT

The ~~senior convertible notes mature on May 1, 2019, unless purchased earlier by the Company, redeemed or converted. As~~following is a summary of ~~October~~long-term debt as of July 31, ~~2017, the unamortized debt discount will be amortized over a remaining period of approximately 1.5 years. As of October 31, 2017~~2020 and January 31, 2017, the if-converted value of the senior convertible notes did not exceed the principal balance. The effective interest rate of the liability component was equal to 7.3% for each of the consolidated statements of operations periods presented.

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2020:


	July 31, 2020		January 31, 2020
	(in thousands)
Sale-leaseback financing obligations, interest rates ranging from 3.4% to 10.3% with various maturity dates through December 2030	$	17,153	$	17,781
Bank Syndicate Agreement - Working Capital Line, interest accrues at a variable rate on outstanding balances, requires monthly payments of accrued interest, matures April 2025	10,000		10,000
Real estate mortgage bearing interest at 5.11%, payable in annual installments of $0.3 million, maturing on May 15, 2039, secured by real estate assets	6,485		6,827
Equipment financing loan, payable in monthly installments over a 72-month term for each funded tranche, interest rates ranging from 1.7% to 3.89%, secured by vehicle assets	7,446		7,468
Real estate mortgage bearing interest at 4.62%, payable in monthly installments of $0.04 million with a final payment at maturity of $3.4 million, maturing on June 10, 2024, secured by real estate assets	4,315		4,416
Real estate mortgage interest accrues at a variable rate of 2.5% plus 1-month LIBOR, requires monthly payments of accrued interest, final payment at maturity of $2.0 million, maturing on February 28, 2027, secured by real estate assets	1,964		—
Real estate mortgage bearing interest at 4.4%, payable in monthly installments of $0.01 million with a final payment at maturity of $1.0 million, maturing on January 1, 2027, secured by real estate assets	1,458		1,489
Equipment financing loan, payable in monthly installments over a 72-month term, bearing interest at 3.94%, secured by vehicle assets	1,025		—
Real estate mortgage bearing interest at 2.09%, payable in monthly installments, maturing on June 30, 2026, secured by real estate assets	2,339		2,520
Other long-term debt primarily bearing interest at three-month EURIBOR plus 2.6%, payable in quarterly installments, maturing on January 31, 2021	401		1,067
	52,586		51,568
Less current maturities	(3,921)		(13,779)
	$	48,665	$	37,789

NOTE 6—11 - DERIVATIVE INSTRUMENTS

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

~~Cash Flow Hedge~~

On October 9, 2013, the Company entered into a forward-starting interest rate swap instrument, which has a notional amount of $100.0 million, an effective date of September 30, 2014 and a maturity date of September 30, 2018. The objective of the instrument is to, beginning on September 30, 2014, protect the Company from changes in benchmark interest rates to which the Company is exposed through certain of its variable interest rate credit facilities. The instrument provides for a fixed interest rate of 1.901% up to the maturity date. The interest rate swap instrument was designated as a cash flow hedging instrument and accordingly changes in the effective portion of the fair value of the instrument have been recorded in other comprehensive income and only reclassified into earnings in the period(s) in which the related hedged item affects earnings or the anticipated underlying hedged transactions are no longer probable of occurring. Any hedge ineffectiveness is recognized in earnings immediately.

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

~~Derivative Instruments Not Designated as Hedging Instruments~~

The Company uses foreign currency forward contracts to hedge the effects of fluctuations in exchange rates on outstanding intercompany loans. The Company does not formally designate and document such derivative instruments as hedging instruments; however, the instruments are an effective economic hedge of the underlying foreign currency exposure. Both the gain or loss on the derivative instrument and the offsetting gain or loss on the underlying intercompany loan are recognized in earnings immediately, thereby eliminating or reducing the impact of foreign currency exchange rate fluctuations

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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 July 31, 2020 was $11.0 million.

~~The following table sets forth~~ As of July 31, 2020, the ~~notional~~fair value of the Company's outstanding derivative ~~instruments.~~

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

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

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

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The following table sets forth the gains and losses ~~(before the related income tax effects)~~ recognized in ~~other comprehensive~~ income ~~(loss) ("OCI") and income (loss) related to~~from the Company’s derivative instruments for the three and ~~nine~~six months ended ~~October~~July 31, ~~2017~~2020 and ~~2016, respectively.~~

Three Months Ended October 31, Nine Months Ended October 31,
2017 2016 2017 2016
OCI Income (Loss) OCI Income (Loss) OCI Income (Loss) OCI Income (Loss)
(in thousands) (in thousands)
Dervatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate swap ^(a)
—
(98 ) 228
(333 ) 48
(1,084 ) (272 ) (1,064 )
Dervatives Not Designated as Hedging Instruments:
Foreign currency contracts ^(b)
—
78
—
126
—
(978 ) —
112
Total Derivatives $ —
$ (20 ) $ 228
$ (207 ) $ 48
$ (2,062 ) $ (272 ) $ (952 )

^(a) ~~No material hedge ineffectiveness has been recognized. The amounts shown in income (loss) above~~2019. Gains and losses are ~~reclassification amounts from accumulated other comprehensive income (loss) and are recorded in floorplan interest expense in the consolidated statements of operations.~~

^(b) ~~Amounts are included~~recognized in interest income and other income (expense) in the consolidated statements of ~~operations.~~operations:

~~During~~


	Three Months Ended July 31,						Six Months Ended July 31,
	2020		2019		2020		2019
	(in thousands)
Foreign currency contract gain	$	202	$	166	$	189	$	368

NOTE 12 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following is a summary of the first quarter of fiscal 2018, the Company reclassified $0.6 million of pre-tax accumulated losses on its interest rate swap instrument from accumulated other comprehensive income (loss) to income as the original forecasted interest payments, which served as the hedged item underlying the interest rate swap instrument, were no longer probable of occurring during the time period over which such transactions were previously anticipated to occur. As of October 31, 2017, the Company had an immaterial amount of remaining pre-tax net unrealized losses associated with its interest rate swap cash flow hedging instrument recordedchanges in accumulated other comprehensive income (loss), by component, for the periods ended July 31, 2020 and July 31, 2019:


	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)


	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)

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NOTE 13 - 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 leases are expensed on a straight-line basis over the lease term. Many real estate lease agreements require the Company ~~expects will~~to pay the real estate taxes on the properties during the lease term and require that the Company maintain property insurance on each of the leased premises. Such payments are deemed to be ~~reclassified into income~~variable lease payments as the amounts may change during the term of the lease. Certain leases include renewal options that can extend the lease term for periods of one to ten years. Most real estate leases grant the Company a right of first refusal or other options to purchase the real estate, generally at fair market value, either during the lease term or at its conclusion. In most cases, the Company has not included these renewal and purchase options within the measurement of the right-of-use asset and lease liability. Most often the Company cannot readily determine the interest rate implicit in the lease and thus applies its incremental borrowing rate to capitalize the right-of-use asset and lease liability. The Company estimates its incremental borrowing rate by incorporating considerations of lease term, asset class and lease currency and geographical market. The Company's lease agreements do not contain any material non-lease components, residual value guarantees or material restrictive covenants.

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

The components of lease expense were as follows:


		Three Months Ended July 31,						Six Months Ended July 31,
	Classification	2020		2019		2020		2019
		(in thousands)						(in thousands)
Finance lease cost:
Amortization of leased assets	Operating expenses	$	389	$	331	$	781	$	707
Interest on lease liabilities	Other interest expense	117		139		242		278
Operating lease cost	Operating expenses & rental and other cost of revenue	4,325		4,725		8,788		9,541
Short-term lease cost	Operating expenses	110		80		190		160
Variable lease cost	Operating expenses	735		715		1,370		1,335
Sublease income	Interest income and other income (expense)	(131)		(154)		(283)		(321)
		$	5,545	$	5,836	$	11,088	$	11,700

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


	Classification	July 31, 2020		January 31, 2020
		(in thousands)
Assets
Operating lease assets	Operating lease assets	$	83,586	$	88,281
Finance lease assets^(a)	Property and equipment, net of accumulated depreciation	8,027		6,297
Total leased assets		$	91,613	$	94,578
Liabilities
Current
Operating	Current operating lease liabilities	$	12,158	$	12,259
Finance	Accrued expenses and other	4,038		1,708
Noncurrent
Operating	Operating lease liabilities	83,341		88,387
Finance	Other long-term liabilities	3,398		4,103
Total lease liabilities		$	102,935	$	106,457

^(a)Finance lease assets are recorded net of accumulated amortization of $2.2 million as of July 31, 2020 and $1.5 million as of January 31, 2020.

Maturities of lease liabilities as of July 31, 2020 are as follows:


	Operating		Finance
	Leases		Leases		Total
Fiscal Year Ended January 31,	(in thousands)
2021 (remainder)	$	8,852	$	3,404	$	12,256
2022	17,004		1,873		18,877
2023	16,028		1,226		17,254
2024	15,097		493		15,590
2025	13,961		402		14,363
2026	13,804		311		14,115
Thereafter	34,698		1,084		35,782
Total lease payments	119,444		8,793		128,237
Less: Interest	23,945		1,357		25,302
Present value of lease liabilities	$	95,499	$	7,436	$	102,935

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


	July 31, 2020
Weighted-average remaining lease term (years):
Operating leases	7.6
Financing leases	5.1
Weighted-average discount rate:
Operating leases	6.1	%
Financing leases	9.7	%

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, may also provide short-term rentals of certain equipment inventory assets. Certain rental arrangements may include rent-to-purchase options whereby customers are given a period of time to exercise an option to purchase the related equipment at an established price with any rental payments paid applied to reduce the purchase price.

All of the Company's leasing arrangements as lessor are classified as operating leases. Rental revenue is recognized on a straight-line basis over the ~~next 12 months.~~rental period. Rental revenue includes amounts charged for loss and damage insurance on rented equipment. In most cases, our rental arrangements include non-lease components, including delivery and pick-up services. The

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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 of our Construction segment as of July 31, 2020 and January 31, 2020:


	July 31, 2020		January 31, 2020
	(in thousands)
Rental fleet equipment	$	101,856	$	104,133
Less accumulated depreciation	38,123		42,076
	$	63,733	$	62,057

NOTE 7—14 - FAIR VALUE ~~OF FINANCIAL INSTRUMENTS~~MEASUREMENTS

~~The liabilities~~As of July 31, 2020 and January 31, 2020, the fair value of the Company's foreign currency contracts, which are either assets or liabilities measured at fair value on a recurring basis, ~~as of October 31, 2017 and January 31, 2017 are as follows:~~

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

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

The Company also valued certain long-lived assets at fair value on a non-recurring basis as of April 30, 2020 and January 31, ~~2017~~2020 as part of its long-lived asset impairment testing. The estimated fair value of such assets as of April 30, 2020 and January 31, ~~2017~~2020 was ~~$3.6~~$0.4 million and ~~consisted of real estate assets and fair~~$2.8 million, respectively. Fair value was ~~determined by utilizing market and~~estimated through an income ~~approaches~~approach incorporating both observable and unobservable inputs, and are deemed to be Level 3 fair value inputs. The most significant unobservable inputs used in the fair value measurements under the market approach include adjustments to observable market sales information to incorporate differences in geographical locations and age and condition of subject assets, and the most significant unobservable inputs under the income approach include forecasted net cash generated from the use of the ~~subject~~ assets and the discount rate

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applied to such cash flows to arrive at a fair value estimate. In addition, in certain instances ~~as of January 31, 2017,~~ the Company estimated the fair value of long-lived assets to approximate zero as no future cash flows were assumed to be generated from the use of such assets and the expected ~~sales values were~~value to be realized upon disposition was deemed to be nominal. All such fair value measurements were based on unobservable inputs and thus are Level 3 fair value inputs. No long-lived assets were valued at fair value on a non-recurring basis as of October 31, 2017.

The Company also has financial instruments that are not recorded at fair value in ~~its~~the consolidated ~~financial statements. The carrying amount of~~balance sheets, including cash, receivables, payables ~~short-term debt~~ and ~~other current liabilities approximates~~long-term debt. The carrying amounts of these financial instruments approximated their fair value because of the short maturity and/or frequent repricing of those instruments, which are Level 2 fair value inputs. Based upon current borrowing rates with similar maturities, which are Level 2 fair value inputs, the carrying value of long-term debt approximates the fair valuevalues as of ~~October~~July 31, ~~2017~~2020 and January 31, ~~2017, respectively. The following table provides details on the senior convertible notes as of October 31, 2017 and January 31, 2017. The difference between the face value and the carrying~~2020. Fair value of these ~~notes is the result of the allocation between the debt and equity components, and unamortized debt issuance costs. Fair value of the senior convertible notes~~financial instruments was estimated based on Level 2 fair value inputs.

October 31, 2017 January 31, 2017
Estimated Fair Value Carrying Value Face Value Estimated Fair Value Carrying Value Face Value
(in thousands) (in thousands)
Senior convertible notes $ 65,000
$ 62,277
$ 65,644
$ 87,000
$ 88,501
$ 95,725

NOTE ~~8—SEGMENT INFORMATION AND OPERATING RESULTS~~15 - INCOME TAXES

~~The Company has three reportable segments: Agriculture, Construction~~ Our effective tax rate was 22.8% and International. Revenue between segments is immaterial. The Company retains various unallocated income/(expense) items and assets at the general corporate level, which the Company refers to as “Shared Resources” in the table below. Shared Resources assets primarily consist of cash and property and equipment.

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

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

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

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October 31, 2017 January 31, 2017
(in thousands)
Total Assets
Agriculture $ 404,200
$ 411,726
Construction 244,725
221,092
International 126,706
106,899
Segment assets 775,631
739,717
Shared Resources 42,659
31,705
Total $ 818,290
$ 771,422

~~NOTE 9—RESTRUCTURING COSTS~~

In February 2017, to better align the Company's cost structure and business in certain markets, the Company announced a restructuring plan (the "Fiscal 2018 Restructuring Plan"), to close one Construction location and 14 Agriculture locations. As of October 31, 2017, the Company has closed and fully exited all of these locations. The Fiscal 2018 Restructuring Plan is expected to result in a significant reduction of expenses while allowing the Company to continue to provide a leading level of service to its customers. In total, over the term of the Fiscal 2018 Restructuring Plan, the Company anticipates recognizing approximately $15.0 million of restructuring charges consisting primarily of fixed asset impairment charges, lease termination costs and termination benefits. The Company anticipates the restructuring charges to be approximately $9.0 million, $4.5 million and $1.5 million within its Agriculture, Construction and Shared Resources segments.

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

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

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

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

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

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

~~Restructuring charges recognized~~25.8% for the three months ended ~~October~~July 31, ~~2016 totaled $0.3 million,~~2020 and July 31, 2019 and was 24.3% and 26.7% for the ~~nine~~six months ended ~~October~~July 31, ~~2016 totaled $0.5 million. These charges were~~2020 and July 31, 2019. Our effective tax rate differs from the ~~result~~domestic federal statutory tax rate due to the impact of ~~prior cost reduction plans. As~~state taxes, the mix of ~~January 31, 2017, these plans were substantially complete.~~domestic and foreign income or losses, the impact of the recognition of valuation allowance on our foreign deferred tax assets, including net operating losses, the impact of foreign currency fluctuations on our Ukrainian business and discrete events that take place throughout the year, primarily the tax impact of share based payments

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NOTE ~~10—RELATED PARTY TRANSACTIONS~~16 - BUSINESS COMBINATIONS

~~Effective February 1, 2017,~~Fiscal 2021

On May 4, 2020, the Company acquired certain assets of HorizonWest Inc. This acquired CaseIH agriculture dealership complex consisted of three agriculture equipment stores in Scottsbluff and ~~Peter Christianson (our former President~~Sidney, Nebraska and ~~former member of our Board of Directors), who is a brother of Tony Christianson (a member of our Board of Directors), agreed to terminate a consulting arrangement between~~Torrington, Wyoming, which expands the ~~parties.~~ Company's agriculture presence in Nebraska and into Wyoming. The total consideration transferred for the acquired business was $6.8 million paid in cash.

In connection with the ~~termination,~~acquisition, the Company ~~agreed to pay Mr. Peter Christianson~~acquired from CNH Industrial and certain other manufacturers equipment and parts inventory previously owned by HorizonWest Inc. Upon acquiring such inventories, the ~~sum~~Company was offered floorplan financing by the manufacturer. In total, the Company acquired inventory and recognized a corresponding financing liability of ~~$0.7 million, payable in two equal installments in fiscal 2018~~$2.7 million. The recognition of these inventories and ~~2019. All unvested stock options and shares of restricted stock held by Mr. Peter Christianson will continue to vest~~the associated financing liabilities are not included as ~~scheduled. As a result~~part of the ~~termination agreement,~~accounting for the business combination.

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 consists 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, including the real estate. The real estate was acquired in January 2020 for $2.1 million.

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 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. The accounting for all business combinations was complete as of July 31, 2020.

The following table presents the aggregate purchase price allocations for all acquisitions completed during the six months ended July 31, 2020 and twelve months ended January 31, 2020:

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	July 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

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 combinations occurring during the twelve months ended January 31, 2020, the Company recognized a customer relationship intangible asset of $0.2 million, a non-competition intangible asset of $0.1 million, and a distribution rights intangible asset of $1.6 million. For the business combinations occurring during the six months ended July 31, 2020, 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 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 ~~nine~~six months ended ~~October~~July 31, ~~2017, a total of $0.8 million in termination costs, consisting of $0.7 million of cash payments owed to Mr. Peter Christianson~~2020 and ~~$0.1 million for unvested shares of restricted stock. These termination costs are included in restructuring costs~~twelve months ended January 31, 2020, and have been expensed as incurred and recognized as operating expenses in the consolidated statements of operations.

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

NOTE ~~11—~~17 - 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 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.

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NOTE 18 - 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,
	2020		2019		2020		2019
	(in thousands)						(in thousands)
Revenue
Agriculture	$	169,072	$	165,692	$	362,700	$	319,464
Construction	77,719		84,039		137,833		154,782
International	56,674		65,250		113,140		119,025
Total	$	303,465	$	314,981	$	613,673	$	593,271

Income (Loss) Before Income Taxes
Agriculture	$	6,752	$	6,177	$	12,914	$	8,053
Construction	1,375		1,334		(1,498)		(888)
International	(432)		505		(711)		722
Segment income before income taxes	7,695		8,016		10,705		7,887
Shared Resources	597		(589)		736		(975)
Total	$	8,292	$	7,427	$	11,441	$	6,912


	July 31, 2020		January 31, 2020
	(in thousands)
Total Assets
Agriculture	$	436,826	$	444,942
Construction	248,390		275,645
International	201,031		191,513
Segment assets	886,247		912,100
Shared Resources	61,778		63,243
Total	$	948,025	$	975,343

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our interim unaudited consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report, and the audited consolidated financial statements and related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2017.~~2020.

Overview

We own and operate a network of full service agricultural and construction equipment stores in the United States and Europe. Based upon information provided to us by CNH Industrial N.V. or its U.S. subsidiary CNH Industrial America, LLC, we are the largest retail dealer of Case IH Agriculture equipment in the world, the largest retail dealer of Case Construction equipment in North America and a major retail dealer of New Holland Agriculture and New Holland Construction equipment in the U.S. We operate our business through three reportable ~~segments,~~segments: Agriculture, Construction and International. Within each segment, we have four principal sources of revenue: new and used equipment sales, parts sales, service, and equipment rental and other activities.

~~The agriculture industry has been experiencing challenging conditions such as low~~Demand for agricultural equipment and, to a lesser extent, parts and service support, are impacted by agricultural commodity prices and net farm ~~income, which, among other things, have a negative effect~~income. Based on customer sentiment and our customers' ability to secure financing for their equipment purchases. Changes in actual or anticipated net farm income generally have a direct correlation with agricultural equipment purchases by farmers. In August 2017, theFebruary 2020 U.S. Department of Agriculture ~~("USDA") published its U.S. farm sector financial indicators. The USDA projected~~publications, the estimate of net farm income for calendar year ~~2017 to remain relatively flat~~2019 indicated an approximate 11.0% increase as compared to calendar year ~~2016~~2018, and ~~decrease 30.4%~~an approximate 3.3% increase in net farm income for calendar year 2020, as compared to calendar year 2019.

For the ~~most recent five-year average. These industry conditions have negatively impacted~~second quarter of fiscal 2021, our ~~customer demand, resulting in decreased equipment revenue and an oversupply of equipment inventory in our geographic footprint.~~

Certain of our Construction stores, particularly those in the northern and western parts of our footprint, are impacted by the strength of the oil industry. Oil prices have not fully rebounded from the significant decrease that occurred during fiscal 2015 and 2016, however oil prices have increased in fiscal 2018 from fiscal 2017. The lower prices have caused a decrease in oil production and infrastructure activity in these areas. In addition, the aforementioned agriculture industry conditions have also led to a reduction of purchases of construction equipment by customers in the agriculture industry, negatively affecting certain of our Construction stores. These factors have reduced demand for equipment purchases, equipment rentals, and service work and parts, and have caused an oversupply of equipment inventory and rental fleet equipment in these areas.

~~Our~~ net income ~~including noncontrolling interest~~ was ~~$2.4~~$6.4 million, or ~~$0.11~~$0.28 per diluted share, ~~for the three months ended October 31, 2017,~~ compared to a fiscal 2020 second quarter net income ~~including noncontrolling interest~~ of ~~$0.3~~$5.5 million, or ~~$0.01~~$0.25 per diluted ~~share, for the three months ended October 31, 2016. On an~~share. Our adjusted ~~basis, our~~ diluted earnings per share was ~~$0.20~~$0.29 for the ~~three months ended October 31, 2017,~~second quarter of fiscal 2021, compared to ~~an adjusted diluted loss per share of $0.01~~$0.31 for the ~~three months ended October 31, 2016.~~second quarter of fiscal 2020. See the Non-GAAP Financial Measures section below for a reconciliation of ~~these non-GAAP measures~~adjusted diluted earnings per share to diluted earnings per share, the most comparable GAAP ~~measures.~~financial measure. Significant factors impacting the quarterly comparisons were:

•Revenue ~~remained relatively flat for~~in the ~~third~~second quarter of fiscal ~~2018, as~~2021 was 3.7% lower than the second quarter of fiscal 2020. Increased revenue from parts and service was more than offset by lower equipment and rental and other revenue. Total same store sales were down 5.8% compared to the ~~third~~prior year second quarter ~~last year. Revenue~~as the Northwood (ND) location was negatively impacted by our store closings associated with our Fiscal 2018 Restructuring Plan, and also impacted by the incremental revenue associated with our expanded marketing of aged equipment inventory during fiscal 2017, but was largely offset by increased revenues in our International segment.

Total gross profit margin increased to 18.6% for the third quarter of fiscal 2018, as compared to 17.6% for the third quarter of fiscal 2017. The increase in gross profit margin was primarily the result of higher gross profit margins on equipment revenues.

~~Floorplan interest expense decreased 42.3%~~acquired in the third quarter of fiscal ~~2018,~~2020 and the Scottsbluff (NE), Sidney (NE) and Torrington (WY) locations were acquired in the second quarter of fiscal 2021.

•Operating expenses decreased 3.2% compared to the second 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 travel and fuel expenses.

•Floorplan and other interest expense decreased a combined 20.5% in the second quarter of fiscal 2021, as compared to the ~~third~~second quarter last year, ~~primarily~~ due to an overall lower interest rate environment as well as a ~~decrease~~lower interest rate spread under our new five-year Bank Syndicate Agreement that was finalized in April 2020.

Impact of the COVID-19 Pandemic on the Company

Since the beginning of the COVID-19 pandemic, the safety of our ~~average interest-bearing inventory~~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 are considered an essential business, in response to the ~~third quarter of fiscal 2018.~~COVID-19 pandemic, the company closed its U.S. stores to the public on March 23, 2020 but continued operations through social distancing means in all areas: equipment, parts, service and rental. Beginning May 4, 2020, we began fully reopening our stores to the public, following pandemic safety

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

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protocols applicable to the locations. Additionally, our International stores have also been following pandemic safety protocols applicable to each location. By June 2020, all of our stores were open to the public but still maintain pandemic safety protocols.

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

Agriculture

Overall, COVID-19 has created industry challenges such as lower agriculture commodity prices as demand deterioration and supply chain disruptions are affecting areas such as ethanol, livestock and international trade. We believe that the existing and anticipated lower commodity prices will reduce our equipment sales, but it is difficult to estimate the extent and timing of this impact given all the variables and uncertainties. We believe our parts and service business will be less impacted, as our customers will be experiencing similar levels of 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 will be impacted in this segment, with such effects continuing so long as pandemic related macroeconomic stress and uncertainties persist. Examples of such macroeconomic stress include: lower oil prices, higher unemployment, lower GDP, and reduced government spending on infrastructure projects. All of these factors we believe will lead to lower overall U.S. construction spending.

International

In addition to the industry challenges indicated for our Agriculture Segment, International is also being 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 will experience greater negative impacts than our Agriculture Segment because of these additional challenges along with the general lack of government support programs to our International farm customers.

Acquisitions

Fiscal ~~2018 Restructuring Plan~~2021

~~In February 2017, to better align~~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 expands the Company's ~~cost structure~~agriculture presence in Nebraska and into Wyoming. The total consideration transferred for the acquired business was $6.8 million paid in ~~certain markets,~~cash, which the Company ~~announced~~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

On October 1, 2019, we acquired certain assets of Uglem-Ness Co., a ~~dealership restructuring plan (the "Fiscal 2018 Restructuring Plan"),~~single Case IH agriculture equipment store 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 ~~included the closure of one Construction location and 14 Agriculture locations. As of October 31, 2017,~~ the Company ~~has closed~~financed through available cash resources and ~~fully exited all~~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 ~~these locations.~~converting to a new Enterprise Resource Planning ("ERP") application. The ~~Fiscal 2018 Restructuring Plan~~new ERP application is expected to ~~result~~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 ~~a significant reduction of expenses while allowing~~ the ~~Company to continue to provide a leading level of service to its customers. In total, over the term~~second quarter of the ~~Fiscal 2018 Restructuring Plan,~~current fiscal year and expects all domestic stores to be on the Company anticipates recognizing approximately $15.0 million of restructuring charges consisting primarily of fixed asset impairment charges, lease termination costs and termination benefits. The Company recognized $3.0 million of restructuring chargesnew ERP application in the ~~fourth quarter~~first half of the fiscal ~~2017 and $10.5 million during~~year ending January 31, 2022. We have prospectively adjusted the ~~nine months ended October 31, 2017.~~useful life of our current ERP application such that it will be fully amortized upon its estimated replacement date.

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

Critical Accounting Policies and Estimates

~~There have been no material changes~~Our critical accounting policies and estimates are included in ~~our Critical Accounting Policies~~the Management's Discussion and ~~Estimates, as disclosed in~~Analysis of Financial Condition and Results of Operationssection of our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2017.~~2020. Other than the adoption of the accounting standards for current expected credit loss and the standard for cloud computing

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described in Note 1 to our consolidated financial statements in this Quarterly Report on Form 10-Q, there have been no changes in our critical accounting policies since January 31, 2020.

Results of Operations

The results ~~shown~~presented below include the operating results of any ~~acquisitions~~acquisition made during these ~~periods.~~periods as well as the operating results of any stores closed during these periods, up to the date of the store closure. The period-to-period comparisons included below are not necessarily indicative of future results. Segment information is provided later in ~~this~~the discussion and analysis of our results of operations.

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

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


	Three Months Ended October 31,						Nine Months Ended October 31,							Three Months Ended July 31,									Six Months Ended July 31,
	2017			2016			2017			2016				2020			2019			2020			2019
	(dollars in thousands)						(dollars in thousands)							(dollars in thousands)									(dollars in thousands)
Equipment													Equipment
Revenue	$	215,956		$	212,194		$	551,752		$	570,369		Revenue	$	202,654		$	214,435		$	421,159		$	408,390
Cost of revenue	199,154			201,140			509,400			532,370			Cost of revenue	180,231			190,707			377,278			363,861
Gross profit	$	16,802		$	11,054		$	42,352		$	37,999		Gross profit	$	22,423		$	23,728		$	43,881		$	44,529
Gross profit margin	7.8		%	5.2		%	7.7		%	6.7		%	Gross profit margin	11.1		%	11.1		%	10.4		%	10.9		%
Parts													Parts
Revenue	$	64,729		$	69,261		$	176,892		$	185,106		Revenue	$	61,454		$	59,202		$	118,068		$	111,140
Cost of revenue	45,408			48,387			124,868			130,006			Cost of revenue	43,032			41,732			82,649			78,546
Gross profit	$	19,321		$	20,874		$	52,024		$	55,100		Gross profit	$	18,422		$	17,470		$	35,419		$	32,594
Gross profit margin	29.8		%	30.1		%	29.4		%	29.8		%	Gross profit margin	30.0		%	29.5		%	30.0		%	29.3		%
Service													Service
Revenue	$	31,532		$	33,777		$	90,807		$	96,065		Revenue	$	27,986		$	26,832		$	53,586		$	49,662
Cost of revenue	11,139			11,828			33,377			35,473			Cost of revenue	9,665			8,737			18,010			16,219
Gross profit	$	20,393		$	21,949		$	57,430		$	60,592		Gross profit	$	18,321		$	18,095		$	35,576		$	33,443
Gross profit margin	64.7		%	65.0		%	63.2		%	63.1		%	Gross profit margin	65.5		%	67.4		%	66.4		%	67.3		%
Rental and other													Rental and other
Revenue	$	18,124		$	17,034		$	43,879		$	43,919		Revenue	$	11,371		$	14,512		$	20,860		$	24,079
Cost of revenue	13,163			12,485			32,482			32,703			Cost of revenue	7,849			9,778			14,636			16,719
Gross profit	$	4,961		$	4,549		$	11,397		$	11,216		Gross profit	$	3,522		$	4,734		$	6,224		$	7,360
Gross profit margin	27.4		%	26.7		%	26.0		%	25.5		%	Gross profit margin	31.0		%	32.6		%	29.8		%	30.6		%

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


	Three Months Ended July 31,						Six Months Ended July 31,
	2020		2019		2020		2019
Revenue
Equipment	66.8	%	68.1	%	68.6	%	68.8	%
Parts	20.3	%	18.8	%	19.2	%	18.7	%
Service	9.2	%	8.5	%	8.7	%	8.4	%
Rental and other	3.7	%	4.6	%	3.4	%	4.1	%
Total Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Total Cost of Revenue	79.3	%	79.7	%	80.3	%	80.1	%
Gross Profit Margin	20.7	%	20.3	%	19.7	%	19.9	%
Operating Expenses	17.5	%	17.4	%	17.3	%	18.1	%

Income from Operations	3.2	%	2.9	%	2.4	%	1.7	%
Other Income (Expense)	(0.4)	%	(0.6)	%	(0.5)	%	(0.6)	%
Income Before Income Taxes	2.7	%	2.4	%	1.9	%	1.2	%
Provision for Income Taxes	0.6	%	0.6	%	0.5	%	0.3	%
Net Income	2.1	%	1.7	%	1.4	%	0.9	%

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

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

Three Months Ended ~~October~~July 31, ~~2017~~2020 Compared to Three Months Ended ~~October~~July 31, ~~2016~~2019

Consolidated Results

Revenue


	Three Months Ended October 31,				Increase/			Percent			Three Months Ended July 31,						Increase/		Percent
	2017		2016		(Decrease)			Change			2020		2019		(Decrease)		Change
	(dollars in thousands)										(dollars in thousands)
Equipment	$	215,956	$	212,194	$	3,762		1.8	%	Equipment	$	202,654	$	214,435	$	(11,781)	(5.5)	%
Parts	64,729		69,261		(4,532		)	(6.5	)%	Parts	61,454		59,202		2,252		3.8	%
Service	31,532		33,777		(2,245		)	(6.6	)%	Service	27,986		26,832		1,154		4.3	%
Rental and other	18,124		17,034		1,090			6.4	%	Rental and other	11,371		14,512		(3,141)		(21.6)	%
Total Revenue	$	330,341	$	332,266	$	(1,925	)	(0.6	)%	Total Revenue	$	303,465	$	314,981	$	(11,516)	(3.7)	%

~~The relatively flat~~ Total revenue for the ~~third~~second quarter of fiscal ~~2018~~2021 was ~~primarily~~down 3.7% or $11.5 million as compared to the result of a decrease in Agriculture and Construction segment revenue partially offset by an increase in revenue in our International segment. Agriculture and Construction revenue decreased due to our store closings associated with our Fiscal 2018 Restructuring Plan and the impact of incremental revenue associated with our expanded marketing of aged equipment inventory in the thirdsecond quarter of fiscal ~~2017. Approximately $10.8 million of~~2020 driven by revenue decreases in equipment ~~revenue was recognized~~and rental and other. These decreases primarily occurred in our Construction and International segments. Company-wide same-store sales in the ~~third~~second quarter of fiscal ~~2017 as~~2021 decreased 5.8% versus the ~~result of our expanded marketing plan.~~comparable period in the fiscal 2020. Same-store sales decreased in all three segments but most notably in International where same-store sales were down 13.1%.

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Gross Profit


	Three Months Ended October 31,						Increase/			Percent			Three Months Ended July 31,									Increase/		Percent
	2017			2016			(Decrease)			Change			2020			2019			(Decrease)			Change
	(dollars in thousands)												(dollars in thousands)
Gross Profit												Gross Profit
Equipment	$	16,802		$	11,054		$	5,748		52.0	%	Equipment	$	22,423		$	23,728		$	(1,305)		(5.5)	%
Parts	19,321			20,874			(1,553		)	(7.4	)%	Parts	18,422			17,470			952			5.4	%
Service	20,393			21,949			(1,556		)	(7.1	)%	Service	18,321			18,095			226			1.2	%
Rental and other	4,961			4,549			412			9.1	%	Rental and other	3,522			4,734			(1,212)			(25.6)	%
Total Gross Profit	$	61,477		$	58,426		$	3,051		5.2	%	Total Gross Profit	$	62,688		$	64,027		$	(1,339)		(2.1)	%
Gross Profit Margin												Gross Profit Margin
Equipment	7.8		%	5.2		%	2.6		%	50.0	%	Equipment	11.1		%	11.1		%	—		%	—	%
Parts	29.8		%	30.1		%	(0.3		)%	(1.0	)%	Parts	30.0		%	29.5		%	0.5		%	1.7	%
Service	64.7		%	65.0		%	(0.3		)%	(0.5	)%	Service	65.5		%	67.4		%	(1.9)		%	(2.8)	%
Rental and other	27.4		%	26.7		%	0.7		%	2.6	%	Rental and other	31.0		%	32.6		%	(1.6)		%	(4.9)	%
Total Gross Profit Margin	18.6		%	17.6		%	1.0		%	5.7	%	Total Gross Profit Margin	20.7		%	20.3		%	0.4		%	2.0	%
Gross Profit Mix												Gross Profit Mix
Equipment	27.3		%	18.9		%	8.4		%	44.4	%	Equipment	35.8		%	37.1		%	(1.3)		%	(3.5)	%
Parts	31.4		%	35.7		%	(4.3		)%	(12.0	)%	Parts	29.4		%	27.3		%	2.1		%	7.7	%
Service	33.2		%	37.6		%	(4.4		)%	(11.7	)%	Service	29.2		%	28.3		%	0.9		%	3.2	%
Rental and other	8.1		%	7.8		%	0.3		%	3.8	%	Rental and other	5.6		%	7.3		%	(1.7)		%	(23.3)	%
Total Gross Profit Mix	100.0		%	100.0		%						Total Gross Profit Mix	100.0		%	100.0		%

Gross profit for the ~~third~~second quarter of fiscal ~~2018 increased 5.2%~~2021 decreased 2.1% or $1.3 million, as compared to the same period last year. ~~Gross profit margins increased from 17.6% for the third quarter of fiscal 2017 to 18.6% for the third quarter of fiscal 2018.~~ The ~~increase~~decrease in gross profit was due to the revenue decreases in equipment and rental and other. Total gross profit margin ~~was mainly~~increased to 20.7% in the current quarter from 20.3% in the prior year quarter primarily due to an increased mix of higher ~~gross profit margins on equipment revenue.~~margin parts and service business slightly offset by lower service and rental and other margins.

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 ~~92.0%~~80.9% for the ~~third~~second quarter of fiscal ~~2018~~2021 compared to ~~90.0%~~77.1% during the same period last year as ~~our decrease~~the increase in gross profit from parts, service, and rental and other in the second quarter of fiscal ~~2018 was more than offset by a reduction in our fixed~~2021 combined with lower operating ~~costs~~ and floorplan interest ~~expense.~~expenses generated the improved absorption compared to the prior year.

Operating Expenses


	Three Months Ended October 31,									Percent			Three Months Ended July 31,									Increase/		Percent
	2017			2016			(Decrease)			Change			2020			2019			(Decrease)			Change
	(dollars in thousands)												(dollars in thousands)
Operating Expenses	$	50,374		$	53,143		$	(2,769	)	(5.2	)%	Operating Expenses	$	53,079		$	54,855		$	(1,776)		(3.2)	%
Operating Expenses as a Percentage of Revenue	15.2		%	16.0		%	(0.8		)%	(5.0	)%	Operating Expenses as a Percentage of Revenue	17.5		%	17.4		%	0.1		%	0.6	%

Our operating expenses in the ~~third~~second quarter of fiscal ~~2018~~2021 decreased ~~$2.8 million~~3.2%, as compared ~~with~~to the ~~same period last~~second quarter of fiscal 2020. The increased operating expenses of four acquired locations, which were not in the prior year quarter, was more than offset by managed expense reductions in our Construction and International segments and various lower operating expenses caused by COVID-19 such as travel and fuel costs. Operating expenses as a percentage of revenue remained relatively flat at 17.5% in the second quarter of fiscal 2021 from 17.4% in the second quarter of fiscal 2020.

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Other Income (Expense)


	Three Months Ended July 31,						Increase/		Percent
	2020		2019		(Decrease)		Change
	(dollars in thousands)
Interest income and other income (expense)	$	562	$	620	$	(58)	(9.4)	%
Floorplan interest expense	(901)		(1,399)		(498)		(35.6)	%
Other interest expense	(978)		(966)		12		1.2	%

Floorplan interest expense decreased ~~5.0%~~35.6% in the second quarter of fiscal 2021, as compared to the same period last year. These decreases are primarily the result of cost savings arising from our Fiscal 2018 Restructuring Plan, partially offset by an increase in our International segment operating expenses resulting from the continued build-out of our footprint and presence in our European markets.

~~Restructuring Costs~~

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

The restructuring costs recognized in the third quarters of fiscal 2018 and 2017 are charges associated with the result of our restructuring plans and associated exit costs, including accruals for lease terminations and remaining lease obligations,

~~Table of Contents~~

termination benefits, and the costs associated with relocating certain assets of our closed stores. The Company anticipates recognizing approximately $1.5 million of additional restructuring costs during the remainder of fiscal 2018.

~~Other Income (Expense)~~

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

~~The decrease in floorplan interest expense for the third~~second quarter of fiscal ~~2018, as compared to the third quarter of fiscal 2017, was primarily~~2020, due to an overall lower interest rate environment as well as a ~~decrease~~lower interest rate spread under our new five-year Bank Syndicate Agreement that was finalized in our average interest-bearing inventory in the third quarter of fiscal 2018. Interest expense associated with our senior convertible notes, which is reflected in other interest expense, decreased $0.5 million in the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017 due to interest savings resulting from our repurchases of our senior convertible notes. Other interest expense for the third quarter of fiscal 2017 includes a $1.0 million gain related to the repurchases of our senior convertible notes partially offset by $0.6 million of expense recognized related to the write-off of capitalized debt issuance costs.April 2020.

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

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


	Three Months Ended July 31,						Increase/		Percent
	2020		2019		(Decrease)		Change
	(dollars in thousands)
Provision for Income Taxes	$	1,892	$	1,916	$	(24)	(1.3)	%

Our effective tax rate was ~~51.2%~~22.8% for the ~~third~~second quarter of fiscal ~~2018~~2021 and ~~(371.4)%~~25.8% for the ~~same period last year. The difference in~~second quarter of fiscal 2020. In the current quarter our effective tax rate isdiffered from the 21.0% domestic federal statutory tax rate primarily due to the ~~change in mix~~impact of ~~our domestic and foreign income or losses before income taxes in relation to our total income or loss before income~~state taxes and discreet items, such as the tax impact of ~~valuation allowances recognized for deferred~~share-based payments, offset by the tax ~~assets, including net operating losses, in certain~~impact of foreign currency fluctuations on our ~~domestic and international jurisdictions.~~Ukrainian business.

Segment Results

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


	Three Months Ended October 31,						Increase/			Percent			Three Months Ended July 31,						Increase/		Percent
	2017			2016			(Decrease)			Change			2020		2019		(Decrease)		Change
	(dollars in thousands)												(dollars in thousands)
Revenue												Revenue
Agriculture	$	186,546		$	205,540		$	(18,994	)	(9.2	)%	Agriculture	$	169,072	$	165,692	$	3,380	2.0	%
Construction	72,942			80,789			(7,847		)	(9.7	)%	Construction	77,719		84,039		(6,320)		(7.5)	%
International	70,853			45,937			24,916			54.2	%	International	56,674		65,250		(8,576)		(13.1)	%
Total	$	330,341		$	332,266		$	(1,925	)	(0.6	)%	Total	$	303,465	$	314,981	$	(11,516)	(3.7)	%

Income (Loss) Before Income Taxes												Income (Loss) Before Income Taxes
Agriculture	$	4,909		$	(1,798	)	$	6,707		373.0	%	Agriculture	$	6,752	$	6,177	$	575	9.3	%
Construction	(2,373		)	(105		)	(2,268		)	*N/M		Construction	1,375		1,334		41		3.1	%
International	2,453			604			1,849			306.1	%	International	(432)		505		(937)		n/m
Segment income (loss) before income taxes	4,989			(1,299		)	6,288			484.1	%	Segment income (loss) before income taxes	7,695		8,016		(321)		(4.0)	%
Shared Resources	(103		)	1,355			(1,458		)	(107.6	)%	Shared Resources	597		(589)		1,186		n/m
Total	$	4,886		$	56		$	4,830		*N/M		Total	$	8,292	$	7,427	$	865	11.6	%

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Agriculture

Agriculture segment revenue for the ~~third~~second quarter of fiscal ~~2018 decreased 9.2%~~2021 increased 2.0% compared to the ~~same period last year. Same-store sales increased 3.0% over the third~~second quarter of fiscal ~~2017.~~2020. The higher revenue ~~decrease~~ was ~~primarily due~~driven by increases in our parts and service businesses. Parts and service revenue continued to ~~a decrease~~benefit from an aging customer fleet and all sources of revenue in ~~revenue resulting~~this segment benefited from the ~~impact~~addition of four locations that were not in the prior year quarter. Same-store sales of our ~~store closings associated with our Fiscal 2018 Restructuring Plan.~~Agriculture segment decreased 3.5% for the second quarter of fiscal 2021, as compared to the second quarter of fiscal 2020.

Agriculture segment income before income taxes was ~~$4.9~~$6.8 million for the ~~third~~second quarter of fiscal ~~2018~~2021 compared to ~~a $1.8~~$6.2 million ~~loss before income taxes~~ for the ~~third~~second quarter of fiscal ~~2017.~~2020. The ~~increased~~improvement in segment ~~income before income taxes~~results was ~~largely~~primarily due to the result of increased gross profit margins on equipment revenues, operating expense savings as a result of the Fiscal 2018 Restructuring Plan, as well as a decrease in floorplan interest expense as the result of a decrease in our interest-bearing inventory in the third quarter of fiscal 2018.higher parts and service revenue.

Construction

Construction segment revenue for the ~~third~~second quarter of fiscal ~~2018~~2021 decreased ~~9.7%~~7.5% compared to the ~~same period last year. The revenue decrease was~~second quarter of fiscal 2020, due to a same-store sales decrease of ~~8.7% over~~4.5% and our divestiture of the ~~third~~Albuquerque, New Mexico store in the fourth quarter of fiscal ~~2017,~~2020. All sources of revenue — equipment, parts, service and rental and other — declined for the segment’s second quarter of 2021, as compared to the prior year’s second quarter. A larger contributor to the decrease was ~~primarily~~our rental and other revenue, which was down due to a smaller fleet and lower utilization compared to the ~~result of decreased equipment revenue, largely resulting from the impact of the incremental revenue associated with our expanded marketing of aged equipment inventory that occurred~~prior year driven by more difficult industry conditions such as lower oil prices and a general slowdown in the ~~third~~economy due to COVID-19.

Our Construction segment income before taxes was $1.4 million for the second quarter of fiscal ~~2017,~~2021 compared to $1.3 million in the second quarter of fiscal 2020. Lower revenues in this segment were fully offset by decreases in operating and interest expenses compared to that of the prior year. The dollar utilization — which ~~totaled $5.3 million.~~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 from 25.5% in the second quarter of fiscal 2020 to 22.2% in the second quarter of fiscal 2021.

International

International segment revenue and same-store sales, for the second quarter of fiscal 2021 decreased 13.1% compared to the second quarter of fiscal 2020. All primary sources of revenue — equipment, parts and service — declined for the segment's second quarter of fiscal 2021, as compared to the prior year's second quarter. Lower segment revenue was driven by decreased customer demand due to below average small grain yields in certain areas of our International footprint as well as overall challenging economic and business conditions due to COVID-19.

Our ~~Construction~~International segment loss before income taxes was ~~$2.4~~$0.4 million for the ~~third~~second quarter of fiscal ~~2018~~2021 compared to $0.1 million for the third quarter of fiscal 2017. The decrease in segment results was primarily due to a decrease in segment revenues and gross profit as well as the recognition of $1.7 million of restructuring costs in the third quarter of fiscal 2018, partially offset by decreases in operating expenses related to cost savings from our Fiscal 2018 Restructuring Plan. The dollar utilization of our rental fleet decreased slightly from 28.4% in the third quarter of fiscal 2017 to 27.2% in the third quarter of fiscal 2018.

~~International~~

International segment revenue for the third quarter of fiscal 2018 increased 54.2% compared to the same period last year primarily due to increased equipment revenue. Equipment revenue increased in the third quarter of fiscal 2018 primarily due to the build-out of our footprint, availability of subvention funds and positive crop conditions in certain of our markets.

~~Our International~~ segment income ~~before income taxes was $2.5 million for the third quarter~~ of ~~fiscal 2018 compared to $0.6~~$0.5 million for the same period last year. ~~The increase~~Decreased revenues drove the lower results in this segment ~~income before income taxes was primarily due to the increase in segment revenue as noted above,~~ but ~~partially~~were slightly offset by ~~an increase~~decreases in operating ~~expenses resulting from the continued build-out of our footprint and presence in our European markets.~~expenses.

Shared Resources/Eliminations

We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments. Since these allocations are set early in the year, and a portion is planned to be unallocated, unallocated balances may occur. Shared ~~Resource~~Resources income before income taxes was $0.6 million for the second quarter of fiscal 2021 compared to a loss before income taxes ~~was $0.1 million for the third quarter~~ of ~~fiscal 2018 compared to income before income taxes of $1.4~~$0.6 million for the same period last year.

~~Nine~~

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Six Months Ended ~~October~~July 31, ~~2017~~2020 Compared to ~~Nine~~Six Months Ended ~~October~~July 31, ~~2016~~2019

Consolidated Results

Revenue


	Six Months Ended July 31,						Increase/		Percent
	2020		2019		(Decrease)		Change
	(dollars in thousands)
Equipment	$	421,159	$	408,390	$	12,769	3.1	%
Parts	118,068		111,140		6,928		6.2	%
Service	53,586		49,662		3,924		7.9	%
Rental and other	20,860		24,079		(3,219)		(13.4)	%
Total Revenue	$	613,673	$	593,271	$	20,402	3.4	%

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

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~~The decrease in~~Total revenue for the ~~first nine~~six months of fiscal ~~2018~~2021 was primarily the result of our store closings associated with our Fiscal 2018 Restructuring Plan and the impact of incremental revenue associated with our expanded marketing of aged equipment inventory within our Agriculture and Construction segments inup 3.4% or $20.4 million compared to the first ~~nine~~six months of fiscal ~~2017. Approximately $41.0 million of~~2020 and was driven by increases in revenue from our equipment, ~~revenue was recognized~~parts and service businesses. These increases occurred in ~~the first nine months of fiscal 2017 as the result of~~ our ~~expanded marketing plan of aged equipment inventory. The decrease in~~ Agriculture ~~and Construction~~ segment ~~revenue was~~but were partially offset by ~~an increase in~~lower revenue in our Construction and International ~~segment.~~segments. Company-wide same-store sales increased 2.1% 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.

Gross Profit


	Six Months Ended July 31,									Increase/		Percent
	2020			2019			(Decrease)			Change
	(dollars in thousands)
Gross Profit
Equipment	$	43,881		$	44,529		$	(648)		(1.5)	%
Parts	35,419			32,594			2,825			8.7	%
Service	35,576			33,443			2,133			6.4	%
Rental and other	6,224			7,360			(1,136)			(15.4)	%
Total Gross Profit	$	121,100		$	117,926		$	3,174		2.7	%
Gross Profit Margin
Equipment	10.4		%	10.9		%	(0.5)		%	(4.6)	%
Parts	30.0		%	29.3		%	0.7		%	2.4	%
Service	66.4		%	67.3		%	(0.9)		%	(1.3)	%
Rental and other	29.8		%	30.6		%	(0.8)		%	(2.6)	%
Total Gross Profit Margin	19.7		%	19.9		%	(0.2)		%	(1.0)	%
Gross Profit Mix
Equipment	36.2		%	37.8		%	(1.6)		%	(4.2)	%
Parts	29.2		%	27.6		%	1.6		%	5.8	%
Service	29.4		%	28.4		%	1.0		%	3.5	%
Rental and other	5.2		%	6.2		%	(1.0)		%	(16.1)	%
Total Gross Profit Mix	100.0		%	100.0		%

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

The ~~$1.7~~$3.2 million ~~decrease~~increase in gross profit for the first ~~nine~~six months of fiscal ~~2018,~~2021, as compared to the same period last year, was primarily due to ~~lower~~higher parts and service revenue for the first ~~nine~~six months of fiscal ~~2018. The decrease in revenues was~~2021 partially offset by ~~an increase in gross profit margin percentage from 18.4% for the first nine months of fiscal 2017 to 18.9% for the first nine months of fiscal 2018, which was largely the result of improved~~lower equipment margins ~~during the first nine months of fiscal 2018.~~and lower revenues in our rental and other business.

Our company-wide absorption rate for the first ~~nine~~six months of fiscal ~~2018~~2021 increased to ~~81.6%~~77.0% as compared to ~~79.9%~~72.6% during the same period last year as ~~our decrease~~the increase in gross profit from parts, service and ~~rental~~combined with flat operating expenses and ~~other~~lower floorplan interest expense levels compared to that of the prior year six month period.

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Operating Expenses


	Six Months Ended July 31,									Increase/		Percent
	2020			2019			(Decrease)			Change
	(dollars in thousands)
Operating Expenses	$	106,137		$	107,410		$	(1,273)		(1.2)	%
Operating Expenses as a Percentage of Revenue	17.3		%	18.1		%	(0.8)		%	(4.4)	%

Our operating expenses for the first six months of fiscal 2021 decreased $1.3 million as compared to the first six months of fiscal 2020. The increased operating expenses of four acquired locations, which were not in ~~fiscal 2018~~the prior year six-month period, was more than offset by ~~a reduction~~managed expense reductions in our ~~fixed operating costs~~Construction and ~~floorplan interest expense.~~

~~Operating Expenses~~

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

~~The $6.2 million decrease in~~International segments and various lower operating expenses caused by COVID-19 such as ~~compared~~travel and fuel costs. Operating expenses as a percentage of revenue decreased to 17.3% in the ~~same period last year, was primarily~~first six months of fiscal 2021 from 18.1% in the ~~result~~first six months of ~~cost savings resulting from our Fiscal 2018 Restructuring Plan.~~fiscal 2020. The ~~consistent level of~~decrease in operating expenses as a percentage of total revenue was ~~primarily~~ due to the ~~decrease~~slightly lower expenses combined with the increase in total revenue in the first ~~nine~~six months of fiscal ~~2018,~~2021, as compared to the ~~same period last year,~~the first six months of fiscal 2020, which ~~negatively~~positively affected our ability to leverage our fixed operating costs.

Restructuring Costs

~~Table~~


	Six Months Ended July 31,						Increase/	Percent
	2020		2019		Decrease		Change
	(dollars in thousands)
Impairment of Long-Lived Assets	$	216	$	135	$	81	60.0%

We recognized $0.2 million and $0.1 million of ~~Contents~~

impairment charges on certain long-lived assets during first six months of fiscal 2021 and 2020.

Other Income (Expense)

~~Restructuring Costs~~


	Six Months Ended July 31,						Increase/		Percent
	2020		2019		(Decrease)		Change
	(dollars in thousands)
Interest income and other income (expense)	$	692	$	1,414	$	(722)	(51.1)	%
Floorplan interest expense	(2,054)		(2,276)		(222)		(9.8)	%
Other interest expense	(1,944)		(2,607)		(663)		(25.4)	%

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

~~The restructuring costs recognized~~ Floorplan interest expense decreased 9.8% for the first ~~nine~~six months of fiscal ~~2018,~~2021, as compared to the same period last year, are charges associated with the Company's restructuring plans and associated exit costs, including accruals for lease terminations and remaining lease obligations, termination benefits, and the costs associated with relocating certain assets ofdue to an overall lower interest rate environment as well as lower interest rate spread under our ~~closed stores. The Company anticipates recognizing approximately $1.5 million of additional restructuring costs during the remainder of fiscal 2018.~~

~~Other Income (Expense)~~

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

new five-year Bank Syndicate Agreement that was finalized in April 2020. The decrease in ~~floorplan~~other interest expense ~~for~~in the first ~~nine~~six months of fiscal ~~2018,~~2021, as compared to the ~~same period last year,~~first six months of fiscal 2020, is the result of our repayment in full of the outstanding balance of our senior convertible notes in May 2019. The decrease in interest income and other income (expense) was primarily due to foreign currency remeasurement losses in Ukraine, resulting from a ~~decrease in our average interest-bearing inventory~~devaluation of the Ukrainian hyrvnia in the first ~~nine months~~quarter of fiscal ~~2018. For~~2021. See the ~~first nine months~~Non-GAAP Financial Measures section below for the impact of fiscal 2017, other interest expense included $3.1 million of gains recognized as a result of our repurchases of $54.3 million face value of senior convertible notes. Interest expense associated with our senior convertible notes, which is reflected in other interest expense, decreased $2.2 million in the first nine months of fiscal 2018 compared to the first nine months of fiscal 2017 due to interest savings resulting from our repurchases of our senior convertible notes. Other interest expense also includes $0.4 million of debt issuance cost write-offs recognized in the first nine months of fiscal 2018 as a result of our election to reduce the maximum available credit under our Wells Fargo Credit Agreement.these costs on non-GAAP Diluted EPS.

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


	Six Months Ended July 31,						Increase/	Percent
	2020		2019		Decrease		Change
	(dollars in thousands)
Provision for Income Taxes	$	2,779	$	1,846	$	933	50.5%

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

Our effective tax rate was ~~25.6%~~24.3% for the first ~~nine~~six months of fiscal ~~2018~~2021 and ~~38.8%~~26.7% for the same period last year. ~~The difference in~~In the six-month period our effective tax rate isdiffered from the 21.0% domestic federal statutory tax rate primarily due to the ~~change in mix~~impact of ~~our domestic and foreign income or losses before income taxes in relation to our total loss before income~~state taxes and discreet items, such as the tax impact of ~~valuation allowances recognized for deferred~~share-based payments, offset by the tax ~~assets, including net operating losses, in certain~~impact of foreign currency fluctuations on our ~~domestic and international jurisdictions.~~Ukrainian business.

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Segment Results

~~Table of Contents~~


	Six Months Ended July 31,						Increase/		Percent
	2020		2019		(Decrease)		Change
	(dollars in thousands)
Revenue
Agriculture	$	362,700	$	319,464	$	43,236	13.5	%
Construction	137,833		154,782		(16,949)		(11.0)	%
International	113,140		119,025		(5,885)		(4.9)	%
Total	$	613,673	$	593,271	$	20,402	3.4	%

Income (Loss) Before Income Taxes
Agriculture	$	12,914	$	8,053	$	4,861	60.4	%
Construction	(1,498)		(888)		(610)		(68.7)	%
International	(711)		722		(1,433)		n/m
Segment income before income taxes	10,705		7,887		2,818		35.7	%
Shared Resources	736		(975)		1,711		n/m
Total	$	11,441	$	6,912	$	4,529	65.5	%

Agriculture

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

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

~~Agriculture~~

Agriculture segment revenue for the first ~~nine~~six months of fiscal ~~2018 decreased 9.2%~~2021 increased 13.5% compared to the same period last year. ~~The revenue decrease was primarily~~We experienced increases across our equipment, parts and service businesses.Equipment sales were supported by replacement demand and the delay of customer purchases from the fourth quarter of fiscal 2020 to the first quarter of the current year due to ~~a decrease~~the late and difficult harvest conditions in areas of our footprint.Parts and service revenue ~~resulting~~continued to benefit from an aging customer fleet and all sources of revenue in this segment benefited from the ~~impact~~addition of ~~our store closings associated with our Fiscal 2018 Restructuring Plan. Agriculture same-store~~four locations that were not in the prior year six-month period. Same-store sales ~~decreased 0.5%~~increased 9.4% for the first six months of fiscal 2021, as compared to the same period last year.

Agriculture segment ~~loss~~income before income taxes was ~~$5.9~~$12.9 million for the first ~~nine~~six months of fiscal ~~2018~~2021 compared to ~~loss before income taxes of $9.9~~$8.1 million over the first ~~nine~~six months of fiscal ~~2017.~~2020. The ~~decrease~~improvement in segment ~~loss before income taxes~~results was largely the result of ~~higher gross profit margins on equipment~~increased revenue, operating expense savings as a result of our Fiscal 2018 Restructuring Plan and a decrease in floorplan interest expense as the result of a decrease in our interest-bearing inventory in the first nine months of fiscal 2018. These cost savings werebut was partially offset by ~~$7.1 million of restructuring costs recognized in the first nine months of fiscal 2018.~~increased operating expenses.

Construction

Construction segment revenue for the first ~~nine~~six months of fiscal ~~2018~~2021 decreased ~~11.4% compared to the same period last year. The revenue decrease was due to a Construction same-store sales decrease of 10.7%~~11.0% compared to the same period last year, due to a same-store sales decrease of 8.0% and ~~was primarily~~our divestiture of the Albuquerque, New Mexico store in the fourth quarter of fiscal year 2020. All sources of revenue – equipment, parts, service and rental and other – declined in the current year six-month period, as compared to the prior year’s six-month period.The overall lower same-store sales are a result of decreased ~~equipment revenue resulting from the impact of the incremental revenue associated with our expanded marketing of aged equipment inventory that occurred~~customer sentiment, lower oil prices, and a general slowdown in the ~~first nine months of fiscal 2017, which totaled approximately $19.3 million.~~economy due to COVID-19.

Our Construction segment loss before income taxes was ~~$4.1 million for the first nine months of fiscal 2018 compared to~~ $1.5 million for the first ~~nine~~six months of fiscal ~~2017.~~2021 compared to $0.9 million for the first six months of fiscal 2020. The ~~decline~~decrease in segment results was primarily due to ~~the decrease in revenue noted above and increased restructuring costs,~~decreased lower revenues but partially offset by ~~decreases in~~decreased operating ~~expenses~~ and ~~floorplan~~ interest ~~expense. Restructuring costs recognized in the first nine months of fiscal 2018 were $2.0 million. The decrease in operating~~ expenses reflects cost savings associated with our Fiscal 2018 Restructuring Plan, and the decrease in floorplan interest expense is the result of a decrease in our average interest-bearing inventory in the first nine months of fiscal 2018 as compared to the ~~first nine months of fiscal 2017.~~prior year. The dollar utilization of our rental fleet decreased from 23.0% in the first ~~nine~~six months of fiscal ~~2018 was 23.8%, with the 24.4%~~2020 to 20.5% in the first ~~nine~~six months of fiscal ~~2017.~~2021.

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International

International segment revenue for the first ~~nine~~six months of fiscal ~~2018 increased 38.9%~~2021 decreased 4.9% compared to the same period last year ~~primarily~~as a result of lower equipment sales. Lower segment revenue was driven by decreased customer demand due to ~~increased equipment revenue. Equipment revenue increased~~below average small grain yields in ~~the first nine months~~certain areas of ~~fiscal 2018 primarily~~our International footprint as well as overall challenging economic and business conditions due to ~~the build-out of our footprint, availability of subvention funds and positive crop conditions in certain of our markets.~~COVID-19.

Our International ~~segment income before income taxes was $3.3 million for the first nine months of fiscal 2018 compared to~~ segment loss before income taxes was $0.7 million for the first six months of ~~$0.1~~fiscal 2021 compared to income before income taxes of $0.7 million for the same period last year. The ~~increase in~~lower segment ~~income before income taxes~~results was primarily due to ~~the increase in segment revenue as noted above, but partially offset by an increase in operating expenses resulting from the continued build-out of our footprint and presence in our European markets.~~

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decreased equipment revenue.

Shared Resources/Eliminations

We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments. Since these allocations are set early in the year, and a portion is planned to be unallocated, unallocated balances may occur. Shared ~~Resource~~Resources income before income taxes was $0.7 million for the first six months of fiscal 2021 compared to loss before income taxes ~~was $5.1 million for the first nine months~~ of ~~fiscal 2018 compared to income before income taxes of $1.2~~$1.0 million for the same period last year. ~~For the first nine months~~

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

Non-GAAP Financial Measures

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

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


	Three Months Ended July 31,						Six Months Ended July 31,
	2020		2019		2020		2019
	(dollars in thousands, except per share data)
Adjusted Net Income
Net Income (Loss)	$	6,400	$	5,511	$	8,662	$	5,066
Adjustments
ERP transition costs	763		1,701		1,484		2,716

Impairment charges	—		—		216		135
Ukraine remeasurement (gain) / loss	(130)		(141)		635		(153)
Total Pre-Tax Adjustments	633		1,560		2,335		2,698
Less: Tax Effect of Adjustments (1)	466		186		1,047		429

Total Adjustments	167		1,374		1,288		2,269
Adjusted Net Income	$	6,567	$	6,885	$	9,950	$	7,335

Adjusted Diluted EPS
Diluted EPS	$	0.28	$	0.25	$	0.39	$	0.23
Adjustments (2)
ERP transition costs	0.03		0.08		0.07		0.13

Impairment charges	—		—		0.01		—
Ukraine remeasurement (gain) / loss	—		(0.01)		0.02		(0.01)
Total Pre-Tax Adjustments	0.03		0.07		0.10		0.12
Less: Tax Effect of Adjustments (1)	0.02		0.01		0.05		0.02

Total Adjustments	0.01		0.06		0.05		0.10
Adjusted Diluted EPS	$	0.29	$	0.31	$	0.44	$	0.33

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

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

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

$ 264

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

Impairment 131

275

131

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

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

624

416

624
Restructuring Costs 2,456

—

10,349

271
Ukraine Remeasurement (1) —

—

—

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

(586 )
—

(586 )
Total Pre-Tax Adjustments 2,605

(715 )
11,505

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

(285 )
4,010

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

—

525

—
Total Adjustments 2,035

(430 )
8,020

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

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

Earnings (Loss) per Share - Diluted

Earnings (Loss) per Share - Diluted $ 0.11

$ 0.01

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

Impairment 0.01

0.01

0.01

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

(0.04 )
—

(0.15 )
Debt Issuance Cost Write-Off —

0.03

0.02

0.02
Restructuring Costs 0.11

—

0.48

0.01
Ukraine Remeasurement (1) —

—

—

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

(0.03 )
—

(0.03 )
Total Pre-Tax Adjustments 0.12

(0.03 )
0.54

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

(0.01 )
0.19

(0.04 )
Plus: Income Tax Valuation Allowance 0.01

—

0.02

—
Total Non-GAAP Adjustments 0.09

(0.02 )
0.37

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

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

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

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

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

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Liquidity and Capital Resources

Sources of Liquidity

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

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Equipment Inventory and Floorplan Payable Credit Facilities

As of ~~October~~July 31, ~~2017,~~2020, the Company had ~~discretionary~~ floorplan payable lines of credit for equipment purchases totaling ~~approximately $727.4~~$763.0 million, which ~~included a $140.0 million Floorplan Payable Line under the Wells Fargo Credit Agreement,~~is primarily comprised of a $450.0 million credit facility with CNH Industrial, ~~Capital,~~ a ~~$30.0~~$185.0 million floorplan payable line under the Bank Syndicate Agreement, and a $60.0 million credit facility with DLL Finance and the U.S. dollar equivalent of $107.4 million in credit facilities related to our foreign subsidiaries. Floorplan payables relating to these credit facilities totaled approximately $306.6 million of the total floorplan payable balance of $322.4 million outstanding as of October 31, 2017.Finance.

In May 2017, as a result of the Company's ongoing equipment inventory reduction and related reduction in floorplan financing needs, the Company provided notice to Wells Fargo of its election to reduce the maximum credit amount available under the Wells Fargo Credit Agreement from an aggregate of $275.0 million to an aggregate of $200.0 million, comprised of a $70.0 million reduction in the Floorplan Payable Line, from $210.0 million to $140.0 million, and a $5.0 million reduction in the Working Capital Line, from $65.0 million to $60.0 million. Also, in September 2017, the Company also provided notice to DLL Finance of its election to reduce the maximum credit amount available under the DLL Finance credit facility from $45.0 million to $30.0 million.

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

Our equipment inventory turnover ~~was~~decreased from 1.7 times for the four quarters ended October 31, 2017 compared to 1.1 for the four quarters ended October 31, 2016. The improvement in our equipment inventory turnover was driven by a 10.9% reduction in equipment inventory from October 31, 2016 to October 31, 2017; however, this decrease was partially offset by lower equipment sales in the four-quarter period ended ~~October~~July 31, ~~2017.~~2019 to 1.6 times for the four-quarter period ended July 31, 2020. The decrease in equipment turnover was attributable to a slight decrease in equipment sales volume and a 9.3% increase in our rolling 12 month average equipment inventory over the four-quarter period ended July 31, 2020 as compared to the four-quarter period ended July 31, 2019. Our equity in equipment inventory, which reflects the portion of our equipment inventory balance that is not financed by floorplan payables, decreased to ~~29.6%~~27.0% as of ~~October~~July 31, ~~2017~~2020 from ~~41.1%~~27.9% as of January 31, ~~2017.~~2020.

Long-Term Debt

During the third quarter 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.

Adequacy of Capital Resources

Our primary uses of cash have been to fund our operating activities, including the purchase of inventories and providing for other working capital needs, meeting our debt service requirements, making payments due under our various leasing arrangements, and funding capital expenditures, including rental fleet ~~assets, and, from time to time, opportunistically repurchasing our outstanding senior convertible notes.~~assets. Based on our current operational performance, we believe our cash flow from operations, available cash and available ~~borrowings~~borrowing capacity under our existing credit facilities will adequately provide for our liquidity needs for, at a minimum, the next 12 months. Our main financing arrangements, in which we had discretionary floorplan lines of credit totaling approximately $727.4 million as of October 31, 2017, are described in Note 4 of the notes to our consolidated financial statements.

As of ~~October~~July 31, ~~2017,~~2020, we were in compliance with the financial covenants under our CNH Industrial and DLL Finance credit agreements and we were not subject to the fixed charge coverage ratio covenant under the ~~Wells Fargo Credit~~Bank Syndicate Agreement as our adjusted excess availability plus eligible cash collateral (as defined therein) was not less than 15% of the ~~total~~lesser of (i) aggregate borrowing base and (ii) maximum credit amount ~~of the credit facility~~ as of ~~October~~July 31, ~~2017.~~2020. While not expected to occur, if anticipated operating results were to create the likelihood of a future covenant violation, we would expect to work with our lenders on an appropriate modification or amendment to our financing arrangements.

Cash Flow

Cash Flow Provided Byby (Used for) Operating Activities

Net cash provided by operating activities was ~~$56.0~~$13.0 million for the ~~nine~~first six months ~~ended October 31, 2017,~~of fiscal 2021, compared to ~~$74.4~~net cash used for operating activities of $6.3 million for the ~~nine~~first six months ~~ended October 31, 2016. Net~~of fiscal 2020. The change in net cash provided by (used for) operating activities is primarily the result of a reduction in inventory for the ~~nine month periods ending October 31, 2017 and 2016 was primarily attributable to a changing mix~~first six months of ~~manufacturer versus non-manufacturer~~fiscal 2021.

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floorplan financing, an increase in inventory of $51.5 million for the nine months ended October 31, 2017 compared to a decrease in inventory of $81.8 million for the nine months ended October 31, 2016, and other changes in working capital.

We evaluate our cash flow from operating activities net of all floorplan activity and maintaining a constant level of equity in our equipment inventory. Taking these adjustments into account, our adjusted cash flow ~~used~~provided by operating activities was ~~$10.8~~$16.1 million for the ~~nine~~first six months ~~ended October 31, 2017 and~~of fiscal 2021 compared to an adjusted cash flow used for operating activities of $49.3 million for the first six months of fiscal 2020. The change in adjusted cash flow provided by (used for) operating activities ~~was $34.4 million for the nine months ended October 31, 2016. The decrease in adjusted cash flow~~ is ~~primarily~~primarly the result of ~~a higher~~increased equipment inventory stocking ~~of new equipment~~during the previous fiscal year compared to reducing inventories induring the first ~~nine~~six months of fiscal ~~2018 and the impact of cash generated from the sale of no trade equipment arising from our expanded marketing of aged equipment inventory in fiscal 2017.~~2021. See the Adjusted Cash Flow Reconciliation below for a reconciliation of ~~this non-GAAP financial measure~~adjusted cash flow used for operating activities to the GAAP measure of cash flow ~~provided by~~used for operating activities.

Cash Flow Used ~~For~~for Investing Activities

Net cash used for investing activities was ~~$18.9~~$16.8 million for the ~~nine~~first six months ~~ended October 31, 2017,~~of fiscal 2021, compared to ~~$7.0~~$14.6 million for the ~~nine~~first six months ~~ended October 31, 2016. Cash~~of fiscal 2020. The increase in cash used for investing activities was primarily the result of an increase in cash outflows for acquisitions as compared to the ~~purchase~~first six months of ~~rental fleet and property and equipment, net of any proceeds from the sale of property and equipment.~~fiscal 2020.

Cash Flow ~~Used For~~Provided by Financing Activities

Net cash ~~used for~~provided by financing activities was ~~$46.9~~$4.5 million for the ~~nine~~first six months ~~ended October 31, 2017~~of fiscal 2021 compared to ~~$104.6~~$13.6 million for the ~~nine~~first six months ~~ended October 31, 2016. For the nine months ended October 31, 2017, net~~of fiscal 2020. The decrease in cash ~~used for~~provided by financing activities was primarily the result of ~~paying down our~~

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higher non-manufacturer floorplan ~~payables~~ and long-term debt borrowings in the ~~use~~prior year, which was partially offset by the payoff of ~~$29.1 million of cash to repurchase senior convertible notes. We may, from time to time, continue to repurchase our~~the senior convertible notes depending on prevailing market conditions, our available liquidity and other factors. These repurchases may be material to our consolidated financial statements. For the nine months ended October 31, 2016, net cash used for financing activities primarily resulted from paying down our non-manufacturer floorplan payables and the use of $46.0 million to repurchase senior convertible notes.in May 2019.

Adjusted Cash Flow Reconciliation

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

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

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

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

Our equity in equipment inventory decreased to 27.0% as of July 31, 2020 from 27.9% as of January 31, 2020, and decreased to 17.4% as of July 31, 2019 from 34.4% as of January 31, 2019.

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

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~~for) financing activities.~~

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

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


	Net Cash Provided by (Used for) Operating Activities						Net Cash Provided by (Used for) Financing Activities
	Six Months Ended July 31, 2020		Six Months Ended July 31, 2019		Six Months Ended July 31, 2020		Six Months Ended July 31, 2019
	(in thousands)						(in thousands)
Cash Flow, As Reported	$	13,035	$	(6,303)	$	4,519	$	13,647
Adjustment for Non-Manufacturer Floorplan	7,229		49,937		(7,229)		(49,937)
Adjustment for Constant Equity in Equipment Inventory	(4,191)		(92,977)		—		—
Adjusted Cash Flow	$	16,073	$	(49,343)	$	(2,710)	$	(36,290)

Certain Information Concerning Off-Balance Sheet Arrangements

As of ~~October~~July 31, ~~2017,~~2020, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We are, therefore, not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships. ~~In the normal course of our business activities, we lease real estate, vehicles and equipment under operating leases.~~

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Forward-looking statements are contained in this Quarterly Report on Form 10-Q, including in “Management’s Discussion ~~And~~and Analysis Ofof Financial Condition ~~And~~and Results Ofof Operations,” as well as in our Annual Report on Form 10-K for the year ended January 31, ~~2017,~~2020, and in other materials filed or to be filed by the Company with the Securities and Exchange Commission (and included in oral statements or other written statements made or to be made by the Company).

Forward-looking statements are statements based on future expectations and specifically may include, among other things, ~~all~~ statements relating to our expectations regarding exchange rate and interest rate impact on our business, the impact of farm income levels on ~~our customers'~~customer demand for agricultural equipment and services, the impact of oil prices 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

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statements are based upon the current beliefs and expectations of our management. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, 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 those discussed in our Form 10-K, that we currently anticipate will cause our forward-looking statements to differ materially from our future actual results, or materially affect the Company’s financial condition or future results, additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially adversely affect our business, financial condition and/or operating results.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, including changes in interest rates and foreign currency exchange rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates.

Interest Rate Risk

Exposure to changes in interest rates results from borrowing activities used to fund operations. For fixed rate debt, interest rate changes affect the fair value of financial instruments but do not impact earnings or cash flows. Conversely, for floating rate debt, interest rate changes generally do not affect the fair market value but do impact future earnings and cash flows, assuming other factors are held constant. We have both fixed and floating rate financing. Some of our floating rate credit facilities contain minimum rates of interest to be charged. Based upon our interest-bearing balances and interest rates as of ~~October~~July 31, ~~2017,~~2020, holding other variables constant, a one percentage point increase in interest rates for the next 12-month period would decrease pre-tax earnings and cash flow by approximately ~~$1.6~~$1.7 million. Conversely, a one percentage point decrease in interest rates for the next 12-month period would result in an increase to pre-tax earnings and cash flow of approximately ~~$1.6~~$1.7 million. At ~~October~~July 31, ~~2017,~~2020, we had floorplan payables of ~~$322.4~~$352.2 million, of which approximately ~~$148.3~~$167.2 million was variable-rate floorplan payable and ~~$174.1~~$185.0 million was non-interest bearing. In addition, at ~~October~~July 31, ~~2017,~~2020, we had total long-term debt, including ~~our senior convertible notes,~~finance lease obligations, of ~~$98.2~~$60.0 million, of which ~~$13.0~~$12.0 million was ~~variable-rate~~variable rate debt and ~~$85.2~~$48.0 million was fixed rate debt.

Foreign Currency Exchange Rate Risk

Our foreign currency exposures arise as the result of our foreign operations. We are exposed to transactional foreign currency exchange rate risk through our foreign entities’ holding assets and liabilities denominated in currencies other than their functional currency. In addition, the Company is exposed to foreign currency transaction risk as a result of certain intercompany financing transactions. The Company attempts to manage its transactional foreign currency exchange rate risk through the use of derivative financial instruments, primarily foreign exchange forward contracts, or through natural hedging instruments. Based upon balances and exchange rates as of ~~October~~July 31, ~~2017,~~2020, holding other variables constant, we believe that a hypothetical 10% increase or decrease in all applicable foreign exchange rates would not have a material impact on our results of operations or cash flows. As of ~~October~~July 31, ~~2017,~~2020, our Ukrainian subsidiary had ~~$2.8~~$5.2 million of net monetary assets denominated in Ukrainian hryvnia ~~(UAH)~~("UAH"). We have attempted to minimize our net monetary asset position in Ukraine through reducing overall asset levels in Ukraine and at times through borrowing in UAH which serves as a natural hedging instrument offsetting our net UAH denominated assets. At certain times, currency and payment controls imposed by the National Bank of Ukraine have limited our ability to manage our net monetary asset position. The UAH devalued significantly during the six month period ended July 31, 2015, but has remained relatively stable since that time. Continued and significant devaluation of the UAH could have a material impact on our results of operations and cash flows.

In addition to transactional foreign currency exchange rate risk, we are also exposed to translational foreign currency exchange rate risk as we translate the results of operations and assets and liabilities of our foreign operations from their functional currency to the U.S. dollar. As a result, our results of operations, cash flows and net investment in our foreign operations may be adversely impacted by fluctuating foreign currency exchange rates. We believe that a hypothetical 10% increase or decrease in all applicable foreign exchange rates, holding all other variables constant, would not have a material impact on our results of operations or cash flows.

ITEM 4. CONTROLS AND PROCEDURES

(a)Evaluation of disclosure controls and procedures. After evaluating the effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer, with the participation of the Company’s management, have concluded that the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) are effective.

(b)Changes in internal controls. There has not been any change in the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during its most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report, including the important information in “Forward-Looking Statements,” you should carefully consider the “Risk Factors” discussed in our Form 10-K for the fiscal year ended January 31, ~~2017, as supplemented in our Form 10-Q for the quarterly period ended April 30, 2017,~~2020, as filed with the Securities and Exchange Commission. Those factors, if they were to occur, could cause our actual results to differ materially from those expressed in our forward-looking statements in this report, and may materially adversely affect our financial condition or future results. ~~Although we~~

We are ~~not aware of any other~~supplementing the risk factors ~~aside from those discussed~~described under “Item 1A. Risk Factors” in our 2020 Annual Report on Form 10-K ~~that we currently anticipate will cause~~with the additional risk factor set forth below, which supplements, and to the extent inconsistent, supersedes such risk factors.

COVID-19 has disrupted, and may continue to disrupt, our forward-looking statements to differ materially from our future actual results, or materially affect the Company’s financial condition or future results, additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materiallybusiness, which could adversely affect our financial performance.

The COVID-19 pandemic has adversely impacted the global economy and disrupted our business. Governmental authorities have taken severe countermeasures to slow the spread 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 will have a significant negative impact on our business, the magnitude of such impact cannot be predicted 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 ~~condition and/~~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 ~~operating results.~~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 ERP Platform or other facilities or equipment.

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

~~We did not have any unregistered sales of equity securities during the fiscal quarter ended October 31, 2017.~~None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

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

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EXHIBIT INDEX

TITAN MACHINERY INC.

FORM 10-Q


No.			Description

~~No.~~		~~Description~~


~~10.1~~31.1		~~Amendment No. 7 to the Amended and Restated Wholesale Financing Plan, dated as of October 5, 2017, by and between the registrant and DLL Finance LLC (f/k/a Agricredit Acceptance LLC)~~

~~10.2~~	Amendment dated October 5, 2017 to the Amended and Restated Wholesale Floor Plan Credit Facility and Security Agreement dated November 13, 2007, by and between the registrant and CNH Industrial Capital America LLC

~~31.1~~	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2			Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1			Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2			Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101			Financial statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended ~~October~~July 31, ~~2017,~~2020, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to the Consolidated Financial Statements.

101.SCH*			Inline XBRL Taxonomy Extension Schema Document

101.CAL*			Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB*			Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*			Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF*			Inline XBRL Taxonomy Extension Definition Linkbase Document

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

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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 7, 2017~~September 3, 2020

TITAN MACHINERY INC.

/s/ Mark Kalvoda

Mark Kalvoda

Chief Financial Officer

(Principal Financial Officer)



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



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

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

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



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



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



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



	October 31, 2017						January 31, 2017
	Estimated Fair Value		Carrying Value		Face Value		Estimated Fair Value		Carrying Value		Face Value
	(in thousands)						(in thousands)
Senior convertible notes	$	65,000	$	62,277	$	65,644	$	87,000	$	88,501	$	95,725



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



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



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