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, ~~2021~~2022

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

For the transition period from ____ to ____

Commission File No. 001-33866

TITAN MACHINERY INC.

(Exact name of registrant as specified in its charter)


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

644 East Beaton Drive

West Fargo, ND 58078-2648

(Address of Principal Executive Offices)

Registrant’s telephone number (701) 356-0130

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


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ~~YES~~Yes ☐ NONo ☒

As of ~~November 29, 2021, 22,590,916~~August 31, 2022, 22,567,932 shares of Common Stock, $0.00001 par value, of the registrant were outstanding.

Table of C ~~ontents~~Contents

TITAN MACHINERY INC.

QUARTERLY REPORT ON FORM 10-Q

Table of Contents


		Page No.
PART I.	FINANCIAL INFORMATION	3
ITEM 1.	FINANCIAL STATEMENTS	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Stockholders' Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2221
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	36
ITEM 4.	CONTROLS AND PROCEDURES	36
PART II.	OTHER INFORMATION	37
ITEM 1.	LEGAL PROCEEDINGS	37
ITEM 1A.	RISK FACTORS	37
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	37
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	37
ITEM 4.	MINE SAFETY DISCLOSURES	37
ITEM 5.	OTHER INFORMATION	37
ITEM 6.	EXHIBITS	37
Exhibit Index		38
Signatures		39

Table of C ~~ontents~~Contents

PART I. — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share data)


		October 31, 2021		January 31, 2021			July 31, 2022		January 31, 2022

Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash	Cash	$	90,540	$	78,990	Cash	$	142,057	$	146,149
Receivables, net of allowance for expected credit losses	Receivables, net of allowance for expected credit losses	85,842		69,109		Receivables, net of allowance for expected credit losses	96,369		94,287
Inventories		412,674		418,458
Inventories, net						Inventories, net	556,383		421,758
Prepaid expenses and other	Prepaid expenses and other	15,121		13,677		Prepaid expenses and other	17,736		28,135

Total current assets	Total current assets	604,177		580,234		Total current assets	812,545		690,329
Noncurrent Assets	Noncurrent Assets					Noncurrent Assets
Property and equipment, net of accumulated depreciation	Property and equipment, net of accumulated depreciation	175,328		147,165		Property and equipment, net of accumulated depreciation	188,964		178,243
Operating lease assets	Operating lease assets	59,950		74,445		Operating lease assets	51,888		56,150
Deferred income taxes	Deferred income taxes	6,726		3,637		Deferred income taxes	2,239		1,328
Goodwill	Goodwill	1,433		1,433		Goodwill	9,535		8,952
Intangible assets, net of accumulated amortization	Intangible assets, net of accumulated amortization	6,535		7,785		Intangible assets, net of accumulated amortization	11,480		10,624
Other	Other	1,070		1,090		Other	1,220		1,041
Total noncurrent assets	Total noncurrent assets	251,042		235,555		Total noncurrent assets	265,326		256,338
Total Assets	Total Assets	$	855,219	$	815,789	Total Assets	$	1,077,871	$	946,667

Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Current Liabilities	Current Liabilities					Current Liabilities
Accounts payable	Accounts payable	$	24,312	$	20,045	Accounts payable	$	28,344	$	25,644
Floorplan payable	Floorplan payable	174,659		161,835		Floorplan payable	274,244		135,415

Current maturities of long-term debt	Current maturities of long-term debt	5,667		4,591		Current maturities of long-term debt	6,650		5,876
Current operating lease liabilities	Current operating lease liabilities	9,922		11,772		Current operating lease liabilities	9,465		9,601
Deferred revenue	Deferred revenue	35,207		59,418		Deferred revenue	91,819		134,146
Accrued expenses and other	Accrued expenses and other	49,133		48,791		Accrued expenses and other	42,856		59,339
Income taxes payable	Income taxes payable	6,783		11,048		Income taxes payable	6,289		4,700
Total current liabilities	Total current liabilities	305,683		317,500		Total current liabilities	459,667		374,721
Long-Term Liabilities	Long-Term Liabilities					Long-Term Liabilities
Long-term debt, less current maturities	Long-term debt, less current maturities	70,502		44,906		Long-term debt, less current maturities	86,500		74,772
Operating lease liabilities	Operating lease liabilities	59,264		73,567		Operating lease liabilities	50,998		55,595

Deferred income taxes						Deferred income taxes	1,991		2,006
Other long-term liabilities	Other long-term liabilities	6,192		8,535		Other long-term liabilities	4,438		4,374
Total long-term liabilities	Total long-term liabilities	135,958		127,008		Total long-term liabilities	143,927		136,747
Commitments and Contingencies (Note 16)		0		0
Commitments and Contingencies (Note 15)						Commitments and Contingencies (Note 15)
Stockholders' Equity	Stockholders' Equity					Stockholders' Equity
Common stock, par value $.00001 per share, 45,000 shares authorized; 22,592 shares issued and outstanding at October 31, 2021; 22,553 shares issued and outstanding at January 31, 2021		—		—
Common stock, par value $.00001 per share, 45,000 shares authorized; 22,695 shares issued and outstanding at July 31, 2022; 22,588 shares issued and outstanding at January 31, 2022						Common stock, par value $.00001 per share, 45,000 shares authorized; 22,695 shares issued and outstanding at July 31, 2022; 22,588 shares issued and outstanding at January 31, 2022	—		—
Additional paid-in-capital	Additional paid-in-capital	253,782		252,913		Additional paid-in-capital	255,188		254,455
Retained earnings	Retained earnings	160,482		116,869		Retained earnings	225,415		182,916
Accumulated other comprehensive income (loss)		(686)		1,499
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(6,326)		(2,172)
Total stockholders' equity	Total stockholders' equity	413,578		371,281		Total stockholders' equity	474,277		435,199
Total Liabilities and Stockholders' Equity	Total Liabilities and Stockholders' Equity	$	855,219	$	815,789	Total Liabilities and Stockholders' Equity	$	1,077,871	$	946,667

See Notes to Condensed Consolidated Financial Statements

Table of C ~~ontents~~Contents

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2021		2020		2021		2020			2022		2021		2022		2021
Revenue	Revenue									Revenue
Equipment	Equipment	$	329,814	$	240,901	$	878,528	$	662,060	Equipment	$	375,216	$	272,733	$	731,582	$	548,713
Parts	Parts	80,521		76,778		208,464		194,846		Parts	77,693		65,317		146,255		127,942
Service	Service	32,026		30,696		89,405		84,282		Service	33,365		29,676		62,887		57,379
Rental and other	Rental and other	11,614		12,497		27,914		33,357		Rental and other	10,269		9,904		16,825		16,300
Total Revenue	Total Revenue	453,975		360,872		1,204,311		974,545		Total Revenue	496,543		377,630		957,549		750,334
Cost of Revenue	Cost of Revenue									Cost of Revenue
Equipment	Equipment	288,576		215,770		772,584		593,048		Equipment	323,988		240,332		634,222		484,008
Parts	Parts	55,654		53,556		146,184		136,205		Parts	52,706		46,089		100,015		90,529
Service	Service	10,249		10,254		29,314		28,263		Service	11,072		9,771		21,832		19,065
Rental and other	Rental and other	7,016		8,741		17,754		23,379		Rental and other	6,078		6,420		10,087		10,737
Total Cost of Revenue	Total Cost of Revenue	361,495		288,321		965,836		780,895		Total Cost of Revenue	393,844		302,612		766,156		604,339
Gross Profit	Gross Profit	92,480		72,551		238,475		193,650		Gross Profit	102,699		75,018		191,393		145,995
Operating Expenses	Operating Expenses	62,943		54,115		176,460		160,252		Operating Expenses	68,828		57,074		132,980		113,516
Impairment of Goodwill		—		1,453		—		1,453

Impairment of Intangible and Long-Lived Assets	Impairment of Intangible and Long-Lived Assets	—		1,102		1,498		1,318		Impairment of Intangible and Long-Lived Assets	—		1,498		—		1,498

Income from Operations	Income from Operations	29,537		15,881		60,517		30,627		Income from Operations	33,871		16,446		58,413		30,981
Other Income (Expense)	Other Income (Expense)									Other Income (Expense)
Interest and other income (expense)		616		(360)		1,935		333
Interest and other income										Interest and other income	873		654		1,365		1,320
Floorplan interest expense	Floorplan interest expense	(259)		(757)		(1,027)		(2,811)		Floorplan interest expense	(245)		(350)		(499)		(768)
Other interest expense	Other interest expense	(1,071)		(940)		(3,292)		(2,884)		Other interest expense	(1,349)		(1,118)		(2,545)		(2,222)
Income Before Income Taxes	Income Before Income Taxes	28,823		13,824		58,133		25,265		Income Before Income Taxes	33,150		15,632		56,734		29,311
Provision for Income Taxes	Provision for Income Taxes	7,007		3,912		14,521		6,691		Provision for Income Taxes	8,191		4,383		14,235		7,515
Net Income	Net Income	$	21,816	$	9,912	$	43,612	$	18,574	Net Income	$	24,959	$	11,249	$	42,499	$	21,796

Earnings per Share:	Earnings per Share:									Earnings per Share:
Basic	Basic	$	0.97	$	0.44	$	1.93	$	0.83	Basic	$	1.10	$	0.50	$	1.88	$	0.97
Diluted	Diluted	$	0.97	$	0.44	$	1.93	$	0.83	Diluted	$	1.10	$	0.50	$	1.88	$	0.97

Weighted Average Common Shares:	Weighted Average Common Shares:									Weighted Average Common Shares:
Basic	Basic	22,213		22,132		22,228		22,089		Basic	22,387		22,261		22,350		22,209
Diluted	Diluted	22,222		22,137		22,238		22,091		Diluted	22,392		22,276		22,357		22,220

See Notes to Condensed Consolidated Financial Statements

Table of C ~~ontents~~Contents

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2021		2020		2021		2020			2022		2021		2022		2021
Net Income	Net Income	$	21,816	$	9,912	$	43,612	$	18,574	Net Income	$	24,959	$	11,249	$	42,499	$	21,796
Other Comprehensive Income (Loss)	Other Comprehensive Income (Loss)									Other Comprehensive Income (Loss)
Foreign currency translation adjustments	Foreign currency translation adjustments	(744)		2,181		(2,185)		2,431		Foreign currency translation adjustments	(2,963)		937		(4,153)		(1,441)
Comprehensive Income	Comprehensive Income	$	21,072	$	12,093	$	41,427	$	21,005	Comprehensive Income	$	21,996	$	12,186	$	38,346	$	20,355

See Notes to Condensed Consolidated Financial Statements

Table of C ~~ontents~~Contents

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

(in thousands)


		Common Stock			Additional Paid-In Capital				Retained Earnings			Accumulated Other Comprehensive Income (Loss)				Total Stockholders' Equity				Common Stock					Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
		Shares Outstanding	Amount								Shares Outstanding								Amount
BALANCE, January 31, 2020		22,335	$	—			$	250,607						$	97,717			$	(3,220)		$	345,104
Cumulative-effect adjustment of adopting ASC 326, Financial Instruments - Credit Losses		—	—		—				(204)			—				(204)
BALANCE, January 31, 2021																			BALANCE, January 31, 2021	22,553			$	—		$	252,913		$	116,869		$	1,499		$	371,281
Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	(21)	—		(201)				—			—				(201)			Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	(33)			—		(975)			—			—			(975)
Stock-based compensation expense	Stock-based compensation expense	—	—		645				—			—				645			Stock-based compensation expense	—			—		609			—			—			609
Net Income	Net Income	—	—		—				2,262			—				2,262			Net Income	—			—		—			10,547			—			10,547
Other comprehensive loss	Other comprehensive loss	—	—		—				—			(528)				(528)			Other comprehensive loss	—			—		—			—			(2,379)			(2,379)
BALANCE, April 30, 2020		22,314	—		251,051				99,775			(3,748)				347,078
BALANCE, April 30, 2021																			BALANCE, April 30, 2021	22,520			$	—	$	252,547		$	127,416		$	(880)		$	379,083
Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	239	—		—				—			—				—			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	76			—		(2)			—			—			(2)
Stock-based compensation expense	Stock-based compensation expense	—	—		536				—			—				536			Stock-based compensation expense	—			—		584			—			—			584
Net Income	Net Income	—	—		—				6,400			—				6,400			Net Income	—			—		—			11,249			—			11,249
Other comprehensive income	Other comprehensive income	—	—		—				—			778				778			Other comprehensive income	—			—		—			—			938			938
BALANCE, July 31, 2020		22,553	—		251,587				106,175			(2,970)				354,792
Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax		2	—		(8)				—			—				(8)
Stock-based compensation expense		—	—		691				—			—				691
Net Income		—	—		—				9,912			—				9,912
Other comprehensive income		—	—		—				—			2,181				2,181
BALANCE, October 31, 2020		22,555	$	—	$	252,270			$	116,087		$	(789)			$	367,568
BALANCE, July 31, 2021																			BALANCE, July 31, 2021	22,596			—		253,129			138,665			58			391,852


		Common Stock			Additional Paid-In Capital				Retained Earnings			Accumulated Other Comprehensive Income (Loss)				Total Stockholders' Equity				Common Stock					Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
		Shares Outstanding	Amount								Shares Outstanding								Amount
BALANCE, January 31, 2021		22,553	$	—			$	252,913						$	116,869			$	1,499		$	371,281
BALANCE, January 31, 2022																			BALANCE, January 31, 2022	22,588			$	—		$	254,455		$	182,916		$	(2,172)		$	435,199
Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	(33)	—		(975)				—			—				(975)			Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	(19)			—		(685)			—			—			(685)
Stock-based compensation expense	Stock-based compensation expense	—	—		609				—			—				609			Stock-based compensation expense	—			—		620			—			—			620
Net income	Net income	—	—		—				10,547			—				10,547			Net income	—			—		—			17,540			—			17,540
Other comprehensive loss	Other comprehensive loss	—	—		—				—			(2,379)				(2,379)			Other comprehensive loss	—			—		—			—			(1,191)			(1,191)
BALANCE, April 30, 2021		22,520	—		252,547				127,416			(880)				379,083
BALANCE, April 30, 2022																			BALANCE, April 30, 2022	22,569			$	—	$	254,390		$	200,456		$	(3,363)		$	451,483
Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	76	—		(2)				—			—				(2)			Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	126			—		(5)			—			—			(5)
Stock-based compensation expense	Stock-based compensation expense	—	—		584				—			—				584			Stock-based compensation expense	—			—		803			—			—			803
Net income	Net income	—	—		—				11,249			—				11,249			Net income	—			—		—			24,959			—			24,959
Other comprehensive income	Other comprehensive income	—	—		—				—			938				938			Other comprehensive income	—			—		—			—			(2,963)			(2,963)
BALANCE, July 31, 2021		22,596	—		253,129				138,665			58				391,852
Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax		(4)	—		(4)				—			—				(4)
Stock-based compensation expense		—	—		657				—			—				657
Net income		—	—		—				21,816			—				21,816
Other comprehensive income		—	—		—				—			(744)				(744)
BALANCE, October 31, 2021		22,592	$	—	$	253,782			$	160,482		$	(686)			$	413,578
BALANCE, July 31, 2022																			BALANCE, July 31, 2022	22,695			—		255,188			225,415			(6,326)			474,277

See Notes to Condensed Consolidated Financial Statements

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


		Nine Months Ended October 31,					Six Months Ended July 31,
		2021		2020			2022		2021
Operating Activities	Operating Activities					Operating Activities
Net income	Net income	$	43,612	$	18,574	Net income	$	42,499	$	21,796
Adjustments to reconcile net income to net cash provided by (used for) operating activities
Adjustments to reconcile net income to net cash provided by operating activities						Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	Depreciation and amortization	16,336		17,731		Depreciation and amortization	10,987		10,602
Impairment	Impairment	1,498		2,771		Impairment	—		1,498
Deferred income taxes	Deferred income taxes	(3,116)		2,117		Deferred income taxes	(1,005)		(1,645)
Stock-based compensation expense	Stock-based compensation expense	1,850		1,872		Stock-based compensation expense	1,423		1,193
Noncash interest expense	Noncash interest expense	163		125		Noncash interest expense	121		110
Noncash lease expense		7,558		8,613

Other, net	Other, net	690		(694)		Other, net	4,583		5,235
Changes in assets and liabilities	Changes in assets and liabilities					Changes in assets and liabilities
Receivables, prepaid expenses and other assets	Receivables, prepaid expenses and other assets	(18,463)		4,479		Receivables, prepaid expenses and other assets	5,444		(12,384)
Inventories	Inventories	3,181		76,495		Inventories	(137,708)		(17,166)
Manufacturer floorplan payable	Manufacturer floorplan payable	45,801		(46,466)		Manufacturer floorplan payable	105,415		56,436
Accounts payable, deferred revenue, accrued expenses and other and other long-term liabilities		(18,532)		(15,555)
Deferred Revenue						Deferred Revenue	(43,530)		(21,063)
Accounts payable, accrued expenses and other and other long-term liabilities						Accounts payable, accrued expenses and other and other long-term liabilities	(9,182)		(16,051)

Operating lease liabilities		(8,303)		(9,248)
Net Cash Provided by Operating Activities		72,275		60,814

Net Cash Provided by (Used for) Operating Activities						Net Cash Provided by (Used for) Operating Activities	(20,953)		28,561
Investing Activities	Investing Activities					Investing Activities
Rental fleet purchases	Rental fleet purchases	(12,159)		(6,799)		Rental fleet purchases	(6,020)		(8,946)
Property and equipment purchases (excluding rental fleet)	Property and equipment purchases (excluding rental fleet)	(17,534)		(9,406)		Property and equipment purchases (excluding rental fleet)	(8,487)		(10,888)
Proceeds from sale of property and equipment	Proceeds from sale of property and equipment	667		795		Proceeds from sale of property and equipment	1,628		420
Acquisition consideration, net of cash acquired	Acquisition consideration, net of cash acquired	—		(6,790)		Acquisition consideration, net of cash acquired	(7,675)		—
Other, net	Other, net	20		(16)		Other, net	(182)		12
Net Cash Used for Investing Activities	Net Cash Used for Investing Activities	(29,006)		(22,216)		Net Cash Used for Investing Activities	(20,736)		(19,402)
Financing Activities	Financing Activities					Financing Activities
Net change in non-manufacturer floorplan payable	Net change in non-manufacturer floorplan payable	(30,104)		(40,779)		Net change in non-manufacturer floorplan payable	35,716		(22,731)

Proceeds from long-term debt borrowings	Proceeds from long-term debt borrowings	6,380		5,326		Proceeds from long-term debt borrowings	8,415		6,451
Principal payments on long-term debt and finance leases	Principal payments on long-term debt and finance leases	(6,593)		(4,417)		Principal payments on long-term debt and finance leases	(3,879)		(5,117)
Payment of debt issuance costs	Payment of debt issuance costs	—		(700)		Payment of debt issuance costs	—		—
Other, net	Other, net	(998)		(209)		Other, net	(689)		(976)
Net Cash Used for Financing Activities		(31,315)		(40,779)
Net Cash Provided by (Used for) Financing Activities						Net Cash Provided by (Used for) Financing Activities	39,563		(22,373)
Effect of Exchange Rate Changes on Cash	Effect of Exchange Rate Changes on Cash	(404)		268		Effect of Exchange Rate Changes on Cash	(1,966)		(192)
Net Change in Cash	Net Change in Cash	11,550		(1,913)		Net Change in Cash	(4,092)		(13,406)
Cash at Beginning of Period	Cash at Beginning of Period	78,990		43,721		Cash at Beginning of Period	146,149		78,990
Cash at End of Period	Cash at End of Period	$	90,540	$	41,808	Cash at End of Period	$	142,057	$	65,584
Supplemental Disclosures of Cash Flow Information	Supplemental Disclosures of Cash Flow Information					Supplemental Disclosures of Cash Flow Information
Cash paid during the period	Cash paid during the period					Cash paid during the period
Income taxes, net of refunds	Income taxes, net of refunds	$	22,130	$	31	Income taxes, net of refunds	$	11,116	$	17,378
Interest	Interest	$	4,091	$	5,813	Interest	$	2,851	$	2,797
Supplemental Disclosures of Noncash Investing and Financing Activities	Supplemental Disclosures of Noncash Investing and Financing Activities					Supplemental Disclosures of Noncash Investing and Financing Activities
Net property and equipment financed with long-term debt, finance leases, accounts payable and accrued liabilities	Net property and equipment financed with long-term debt, finance leases, accounts payable and accrued liabilities	$	15,795	$	8,555	Net property and equipment financed with long-term debt, finance leases, accounts payable and accrued liabilities	$	2,667	$	9,014
Long-term debt to acquire finance leases	Long-term debt to acquire finance leases	$	7,761	$	—	Long-term debt to acquire finance leases	$	6,776	$	7,454
Net transfer of assets from (to) property and equipment to (from) inventories	Net transfer of assets from (to) property and equipment to (from) inventories	$	2,168	$	2,731	Net transfer of assets from (to) property and equipment to (from) inventories	$	(2,849)	$	1,269

See Notes to Condensed Consolidated Financial Statements

Table of C ~~ontents~~Contents

TITAN MACHINERY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 - BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. The quarterly operating results for Titan Machinery Inc. (the “Company”) are subject to fluctuation due to varying weather patterns, which may impact the timing and amount of equipment purchases, rentals, and after-sales parts and service purchases by the Company’s ~~Agriculture, Construction~~agriculture, construction and ~~International~~international customers. Therefore, operating results for the ~~nine-month period~~six-months ended ~~October~~July 31, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, ~~2022.~~2023. The information contained in the consolidated balance sheet as of January 31, ~~2021~~2022 was derived from the audited consolidated financial statements of the Company for the fiscal year then ended. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, ~~2021~~2022 as filed with the SEC.

Nature of Business

The Company is engaged in the retail sale, service and rental of agricultural and construction machinery through its stores in the United States and Europe. The Company’s North American stores are located in Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota, Washington, Wisconsin, and Wyoming and its European stores are located in Bulgaria, Germany, Romania, and Ukraine.

~~Impact of~~Russia/Ukraine Geopolitical Conflict

In February, 2022, the ~~COVID-19 Pandemic~~

~~In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic,~~ongoing Russia/Ukraine conflict significantly intensified, 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~~sustained conflict and halting of commercial and interpersonal activity as governments imposed regulations in efforts to control the spread of the pandemic, such as shelter-in-place orders and quarantines. The Company's products and services were determined to be essentialdisruption in the ~~markets we serve~~region is ongoing. Titan Machinery Ukraine, LLC ("Titan Machinery Ukraine"), the Company's wholly owned Ukrainian subsidiary, has ten locations throughout Ukraine primarily in western and ~~accordingly~~central Ukraine. The conflict has caused disruptions in our Ukrainian operations, with our revenues for the six-months ended July 31, 2022 down 37.7% from the prior year period. These disruptions have not been ~~allowed~~material to ~~continue throughout~~ the ~~pandemic. The extent~~Company's consolidated financial statements. However, if the conflict intensifies in western and duration of the impact of COVID-19 on the operations and financial position of the Company and on the global economy is uncertain. Uncertainty remains regarding the magnitude and duration of the pandemic and resulting financial effects. Increased infection rates and any future responses to mitigate the spread of the virus, including any potential vaccination mandates that would apply to our employees, could impact our business and our financial results in future periods.

Recently, the Department of Labor's Occupational Safety and Health Administration ("OSHA") announced an emergency temporary standard requiring all employers with at least 100 employees to ensure their employees are fully vaccinated or require weekly testing for unvaccinated employees. This standard became effective in November 2021, giving companies 30 days to comply with most requirements and 60 days to comply with the testing requirements. In response to a court ruling, in mid-November 2021, OSHA announced that it had suspended all activities related to implementation of this new regulation pending further litigation. The exact impact that this new regulation could have on our Company is uncertain at this time. However,central Ukraine, it could ~~result in employee attrition, difficulty in fulfilling future labor needs, additional costs related to compliance and may have an~~significantly increase the adverse effect on ~~our future operating results.~~

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

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in future periods.

Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates, particularly related to realization of inventory, impairment of long-lived assets, goodwill, or indefinite lived intangible assets, collectability of receivables, and income taxes.

Principles of Consolidation

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

~~Accounting Guidance Not Yet Adopted~~

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

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NOTE 2 - EARNINGS PER SHARE

The following table sets forth the calculation of basic and diluted earnings per share (EPS):


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2021		2020		2021		2020			2022		2021		2022		2021
		(in thousands, except per share data)									(in thousands, except per share data)
Numerator:	Numerator:									Numerator:
Net income	Net income	$	21,816	$	9,912	$	43,612	$	18,574	Net income	$	24,959	$	11,249	$	42,499	$	21,796
Allocation to participating securities	Allocation to participating securities	(309)		(186)		(655)		(301)		Allocation to participating securities	(291)		(156)		(502)		(334)
Net income attributable to Titan Machinery Inc. common stockholders	Net income attributable to Titan Machinery Inc. common stockholders	$	21,507	$	9,726	$	42,957	$	18,273	Net income attributable to Titan Machinery Inc. common stockholders	$	24,668	$	11,093	$	41,997	$	21,462
Denominator:	Denominator:									Denominator:
Basic weighted-average common shares outstanding	Basic weighted-average common shares outstanding	22,213		22,132		22,228		22,089		Basic weighted-average common shares outstanding	22,387		22,261		22,350		22,209
Plus: incremental shares from vesting of restricted stock units	Plus: incremental shares from vesting of restricted stock units	9		5		10		2		Plus: incremental shares from vesting of restricted stock units	5		15		7		11
Diluted weighted-average common shares outstanding	Diluted weighted-average common shares outstanding	22,222		22,137		22,238		22,091		Diluted weighted-average common shares outstanding	22,392		22,276		22,357		22,220

Earnings Per Share:	Earnings Per Share:									Earnings Per Share:
Basic	Basic	$	0.97	$	0.44	$	1.93	$	0.83	Basic	$	1.10	$	0.50	$	1.88	$	0.97
Diluted	Diluted	$	0.97	$	0.44	$	1.93	$	0.83	Diluted	$	1.10	$	0.50	$	1.88	$	0.97

NOTE 3 - REVENUE

Revenues are recognized when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration we expect to collect in exchange for those goods or services. Sales, value added and other taxes collected from our customers concurrent with our revenue activities are excluded from revenue.

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The following tables present our revenue disaggregated by revenue source and segment:


		Three Months Ended October 31, 2021								Three Months Ended October 31, 2020									Three Months Ended July 31, 2022								Six Months Ended July 31, 2022
		Agriculture		Construction		International		Total		Agriculture		Construction		International		Total			Agriculture		Construction		International		Total		Agriculture		Construction		International		Total
		(in thousands)								(in thousands)									(in thousands)								(in thousands)
Equipment	Equipment	$	205,230	$	49,679	$	74,905	$	329,814	$	146,410	$	47,766	$	46,725	$	240,901	Equipment	$	270,472	$	43,184	$	61,560	$	375,216	$	521,565	$	87,002	$	123,015	$	731,582
Parts	Parts	52,090		13,413		15,018		80,521		50,527		14,072		12,179		76,778		Parts	52,548		11,816		13,329		77,693		97,054		23,879		25,322		146,255
Service	Service	23,003		6,819		2,204		32,026		22,316		6,497		1,883		30,696		Service	24,730		6,302		2,333		33,365		46,683		12,125		4,079		62,887
Other	Other	824		622		132		1,578		824		628		102		1,554		Other	880		500		246		1,626		1,679		803		451		2,933
Revenue from contracts with customers	Revenue from contracts with customers	281,147		70,533		92,259		443,939		220,077		68,963		60,889		349,929		Revenue from contracts with customers	348,630		61,802		77,468		487,900		666,981		123,809		152,867		943,657
Rental	Rental	359		9,202		475		10,036		548		10,067		328		10,943		Rental	326		8,220		97		8,643		522		13,177		193		13,892
Total revenues	Total revenues	$	281,506	$	79,735	$	92,734	$	453,975	$	220,625	$	79,030	$	61,217	$	360,872	Total revenues	$	348,956	$	70,022	$	77,565	$	496,543	$	667,503	$	136,986	$	153,060	$	957,549


		Nine Months Ended October 31, 2021								Nine Months Ended October 31, 2020									Three Months Ended July 31, 2021								Six Months Ended July 31, 2021
		Agriculture		Construction		International		Total		Agriculture		Construction		International		Total			Agriculture		Construction		International		Total		Agriculture		Construction		International		Total
		(in thousands)								(in thousands)									(in thousands)								(in thousands)
Equipment	Equipment	$	530,895	$	148,511	$	199,122	$	878,528	$	396,759	$	130,497	$	134,804	$	662,060	Equipment	$	156,408	$	54,020	$	62,305	$	272,733	$	325,664	$	98,832	$	124,217	$	548,713
Parts	Parts	132,515		37,449		38,500		208,464		123,077		38,548		33,221		194,846		Parts	40,742		11,928		12,647		65,317		80,425		24,036		23,481		127,942
Service	Service	63,908		19,773		5,724		89,405		59,466		19,514		5,302		84,282		Service	21,150		6,585		1,941		29,676		40,904		12,954		3,521		57,379
Other	Other	2,301		1,477		413		4,191		2,386		1,871		325		4,582		Other	758		490		188		1,436		1,478		855		281		2,614
Revenue from contracts with customers	Revenue from contracts with customers	729,619		207,210		243,759		1,180,588		581,688		190,430		173,652		945,770		Revenue from contracts with customers	219,058		73,023		77,081		369,162		448,471		136,677		151,500		736,648
Rental	Rental	803		22,076		844		23,723		1,638		26,432		705		28,775		Rental	306		7,920		242		8,468		444		12,873		369		13,686
Total revenues	Total revenues	$	730,422	$	229,286	$	244,603	$	1,204,311	$	583,326	$	216,862	$	174,357	$	974,545	Total revenues	$	219,364	$	80,943	$	77,323	$	377,630	$	448,915	$	149,550	$	151,869	$	750,334

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Unbilled Receivables and Deferred Revenue

Unbilled receivables from contracts with customers amounted to ~~$21.8~~$24.4 million and ~~$12.9~~$17.1 million as of ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021,~~2022, respectively. This increase in unbilled receivables is primarily the result of a seasonal increase in the volume of our service transactions in which we recognize revenue as our work is performed and prior to customer invoicing.

Deferred revenue from contracts with customers amounted to ~~$34.1~~$90.7 million and ~~$57.7~~$132.2 million as of ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021,~~2022, respectively. Our deferred revenue most often increases in the fourth quarter of each fiscal year due to a higher level of customer down payments or prepayments and longer time periods between customer payment and delivery of the equipment asset, and the related recognition of equipment revenue, prior to its seasonal use. During the ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020,~~2021, the Company recognized ~~$55.8~~$105.1 million and ~~$40.9~~$50.8 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, ~~2021~~2022 and January 31, ~~2020,~~2021, respectively. No material amount of revenue was recognized during the ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 or ~~2020~~2021 from performance obligations satisfied in previous periods.

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

NOTE 4 - RECEIVABLES

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

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

Trade receivables from finance companies, other receivables due from manufacturers, and other receivables have not historically resulted in any credit losses to the Company. These receivables are short-term in nature and deemed to be of good

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credit quality and have no need for any allowance for expected credit losses. Management continually monitors these receivables and should information be obtained that identifies potential credit risk, an adjustment to the allowance would be made if deemed appropriate.

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

Table of Contents
October 31, 2021 January 31, 2021
(in thousands)
Trade and unbilled receivables from contracts with customers
Trade receivables due from customers $ 36,280 $ 31,664
Unbilled receivables 21,842 12,909
Less allowance for expected credit losses 2,600 2,994
55,522 41,579
Trade receivables due from finance companies 14,899 14,133
Trade and unbilled receivables from rental contracts
Trade receivables 5,520 4,329
Unbilled receivables 1,025 520
Less allowance for expected credit losses 1,892 1,939
4,653 2,910
Other receivables
Due from manufacturers 9,200 8,720
Other 1,568 1,767
10,768 10,487
Receivables, net of allowance for expected credit losses $ 85,842 $ 69,109


	July 31, 2022		January 31, 2022
	(in thousands)
Trade and unbilled receivables from contracts with customers
Trade receivables due from customers	$	37,271	$	30,041
Unbilled receivables	24,435		17,129
Less allowance for expected credit losses	2,722		1,979
	58,984		45,191

Trade receivables due from finance companies	15,096		17,937

Trade and unbilled receivables from rental contracts
Trade receivables	3,832		3,055
Unbilled receivables	1,057		538
Less allowance for expected credit losses	375		469
	4,514		3,124
Other receivables
Due from manufacturers	14,556		22,979
Other	3,219		5,056
	17,775		28,035
Receivables, net of allowance for expected credit losses	$	96,369	$	94,287

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


		Agriculture		Construction		International		Total			Agriculture		Construction		International		Total
		(in thousands)									(in thousands)
Balance at January 31, 2021		$	228	$	1,074	$	1,690	$	2,992
Balance at January 31, 2022										Balance at January 31, 2022	$	244	$	193	$	1,542	$	1,979
Current expected credit loss provision	Current expected credit loss provision	30		68		(2)		96		Current expected credit loss provision	79		35		846		960
Write-offs charged against allowance	Write-offs charged against allowance	17		84		38		139		Write-offs charged against allowance	30		97		61		188
Credit loss recoveries collected	Credit loss recoveries collected	—		4		—		4		Credit loss recoveries collected	16		4		—		20
Foreign exchange impact	Foreign exchange impact	—		—		(50)		(50)		Foreign exchange impact	—		—		(49)		(49)
Balance at April 30, 2021		241		1,062		1,600		2,903
Current expected credit loss provision		84		50		(225)		(91)
Write-offs charged against allowance		33		64		21		118
Credit loss recoveries collected		7		1		—		8
Foreign exchange impact		—		—		19		19
Balance at July 31, 2021		299		1,049		1,373		2,721
Current expected credit loss provision		(3)		26		(8)		15
Write-offs charged against allowance		87		29		6		122
Credit loss recoveries collected		2		3		—		5
Foreign exchange impact		—		—		(19)		(19)
Balance at October 31, 2021		$	211	$	1,049	$	1,340	$	2,600
Balance at July 31, 2022										Balance at July 31, 2022	$	309	$	135	$	2,278	$	2,722


	Agriculture		Construction		International		Total
	(in thousands)
Balance at January 31, 2021	$	228	$	1,074	$	1,690	$	2,992
Current expected credit loss provision	114		118		(227)		5
Write-offs charged against allowance	50		147		60		257
Credit loss recoveries collected	7		5		—		12
Foreign exchange impact	—		—		(31)		(31)
Balance at July 31, 2021	$	299	$	1,050	$	1,372	$	2,721

~~Table~~ The increase in the credit loss provision in the International segment, during the six months ended July 31, 2022, was driven by a $0.7 million bad debt provision placed on the accounts receivables due from customers of C ~~ontents~~

Agriculture Construction International Total
(in thousands)
Balance at February 1, 2020 $ 181 $ 1,016 $ 1,746 $ 2,943
Current expected credit loss provision 14 113 226 353
Write-offs charged against allowance 5 71 133 209
Credit loss recoveries collected 40 4 6 50
Foreign exchange impact — — (29) (29)
Balance at April 30, 2020 230 1,062 1,816 3,108
Current expected credit loss provision 16 95 265 376
Write-offs charged against allowance 47 78 98 223
Credit loss recoveries collected 9 — — 9
Foreign exchange impact — — 23 23
Balance at July 31, 2020 208 1,079 2,006 3,293
Current expected credit loss provision 30 12 (256) (215)
Write-offs charged against allowance 44 21 48 114
Credit loss recoveries collected 2 18 — 20
Foreign exchange impact — — 67 67
Balance at October 31, 2020 $ 196 $ 1,088 $ 1,769 $ 3,053
Titan Machinery Ukraine, primarily due to the ongoing Russia-Ukraine conflict.

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


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2021		2020		2021		2020			2022		2021		2022		2021
		(in thousands)									(in thousands)
Impairment losses (recoveries) on:	Impairment losses (recoveries) on:									Impairment losses (recoveries) on:
Receivables from sales contracts	Receivables from sales contracts	$	20	$	(213)	$	340	$	307	Receivables from sales contracts	$	186	$	222	$	999	$	320
Receivables from rental contracts	Receivables from rental contracts	54		(59)		24		92		Receivables from rental contracts	43		3		32		(30)
		$	74	$	(272)	$	364	$	399		$	229	$	225	$	1,031	$	290

NOTE 5 - INVENTORIES


		October 31, 2021		January 31, 2021			July 31, 2022		January 31, 2022
		(in thousands)					(in thousands)
New equipment	New equipment	$	235,585	$	206,683	New equipment	$	325,641	$	195,775
Used equipment	Used equipment	87,741		131,369		Used equipment	118,757		128,047
Parts and attachments	Parts and attachments	86,711		78,982		Parts and attachments	109,061		95,890
Work in process	Work in process	2,637		1,424		Work in process	2,924		2,046
		$	412,674	$	418,458		$	556,383	$	421,758

Table of C ~~ontents~~Contents

NOTE 6 - PROPERTY AND EQUIPMENT


		October 31, 2021		January 31, 2021			July 31, 2022		January 31, 2022
		(in thousands)					(in thousands)
Rental fleet equipment	Rental fleet equipment	$	81,676	$	77,530	Rental fleet equipment	$	73,014	$	65,117
Machinery and equipment	Machinery and equipment	23,570		23,354		Machinery and equipment	23,769		22,819
Vehicles	Vehicles	59,222		55,884		Vehicles	62,251		58,650
Furniture and fixtures	Furniture and fixtures	43,717		43,678		Furniture and fixtures	51,400		50,228
Land, buildings, and leasehold improvements	Land, buildings, and leasehold improvements	117,606		90,730		Land, buildings, and leasehold improvements	129,102		123,323
		325,791		291,176			339,536		320,137
Less accumulated depreciation	Less accumulated depreciation	150,463		144,011		Less accumulated depreciation	150,572		141,894
		$	175,328	$	147,165		$	188,964	$	178,243

The Company includes depreciation expense related to its rental fleet and its trucking fleet, for hauling equipment, in Cost of Revenue, which was ~~$2.6~~$2.0 million and ~~$3.1~~$2.1 million for the three months ended ~~October~~July 31, 2022 and 2021, and ~~2020 and $6.4~~$3.5 million and ~~$7.8~~$3.8 million for the ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020,~~2021, respectively. All other depreciation expense is included in Operating Expenses, which was ~~$2.9~~$3.6 million and $3.0 million for the three months ended ~~October~~July 31, 2022 and 2021 and ~~2020 and $8.9~~$7.1 million and ~~$8.5~~$6.0 million for the ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020,~~2021, respectively.

The Company reviews its long-lived assets for potential impairment whenever events or circumstances indicate that the carrying value of the long-lived asset (or asset group) may not be recoverable. During the three months ended ~~October~~July 31, ~~2021,~~2022, the Company identified notwo such asset ~~group~~groups in the Agriculture segment, and performed an impairment test, and concluded that no impairment was ~~recorded. The~~present, thus the Company ~~recognized $0.2 million million in~~did not recognize any impairment ~~charges~~ for the three and six months ended ~~October~~July 31, ~~2020~~. ~~For the~~ ~~nine~~ ~~months ended~~ ~~October 31, 2021~~ ~~and October 31, 2020, the~~2022. The Company ~~recognized~~did recognize impairment ~~charges~~of long-lived assets of $0.4 million in its International segment for the three and ~~$0.5 million, respectively.~~six months ended July 31, 2021.

NOTE 7 - INTANGIBLE ASSETS AND GOODWILL

Indefinite-Lived Intangible Assets

The Company's indefinite-lived intangible assets consist of distribution rights assets. The following is a summary of the changes in indefinite-lived intangible assets, by segment, for the ~~nine~~six months ended ~~October~~July 31, ~~2021:~~2022:
Agriculture Construction International Total
(in thousands)
January 31, 2021 $ 6,265 $ 72 $ 1,161 $ 7,498
Foreign currency translation — — (22) (22)
Impairment — — (1,139) (1,139)
October 31, 2021 $ 6,265 $ 72 $ — $ 6,337


	Agriculture		Construction		Total
	(in thousands)
January 31, 2022	$	10,136	$	72	$	10,208
Arising from business combinations	842		—		842


July 31, 2022	$	10,978	$	72	$	11,050

Goodwill

The ~~Company performs impairment testing, at least annually, of its indefinite-lived distribution rights intangible assets. There were no indicators of impairment~~following presents changes in the ~~three~~carrying amount of goodwill, by segment, for the six months ended ~~October~~July 31, 2021. The Company did not recognize any impairment charges for the three months ended October 31, 2021 and recognized $1.1 million in impairment charges for the nine months ended October 31, 2021, as it fully impaired the remaining indefinite-lived intangible assets2022:


	Agriculture		Total
	(in thousands)
January 31, 2022	$	8,952	$	8,952
Arising from business combinations	583		583


July 31, 2022	$	9,535	$	9,535

Table of ~~the German reporting unit in the second quarter.~~Contents

NOTE 8 - FLOORPLAN PAYABLE/LINES OF CREDIT

As of ~~October~~July 31, ~~2021,~~2022, the Company had floorplan lines of credit totaling ~~$753.0~~$743.0 million, which is primarily comprised of three ~~significant~~ floorplan lines of credit: (i) a $450.0 million credit facility with CNH Industrial, (ii) a $185.0 million line of credit under the Third Amended and Restated Credit Agreement (the "Bank Syndicate Agreement"), and (iii) a $50.0 million credit facility with DLL Finance LLC.

~~Table~~ Additionally, the Company amended its CNH Industrial floorplan line of C ~~ontents~~

credit as of August 1, 2022, increasing the total available domestic limit to $410 million and overall limit to $500 million.

The Company's outstanding balances of floorplan lines of credit as of ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021,~~2022, consisted of the following:


		October 31, 2021		January 31, 2021			July 31, 2022		January 31, 2022
		(in thousands)					(in thousands)
CNH Industrial	CNH Industrial	$	123,303	$	86,792	CNH Industrial	$	177,983	$	94,054

Bank Syndicate Agreement Floorplan Loan						Bank Syndicate Agreement Floorplan Loan	41,000		—
DLL Finance	DLL Finance	8,899		10,667		DLL Finance	9,187		8,558
Other outstanding balances with manufacturers and non-manufacturers	Other outstanding balances with manufacturers and non-manufacturers	42,457		64,376		Other outstanding balances with manufacturers and non-manufacturers	46,074		32,803
		$	174,659	$	161,835		$	274,244	$	135,415

AsIn anticipation of ~~October~~closing the Heartland acquisition on August 1, 2022, the Company drew $41.0 million on its Bank Syndicate Floorplan Loan, which had a variable interest rate of 3.21% as of July 31, ~~2021~~2022. Generally, all U.S. CNH Industrial and ~~January 31, 2021, the U.S. floorplan payables were generally all~~DLL Finance amounts outstanding are non-interest bearing. As of ~~October~~July 31, ~~2021,~~2022, foreign floorplan payables carried various interest rates primarily ranging from ~~1.40%~~1.92% to ~~4.48%~~8.36%, compared to a range of 1.40% to ~~4.82%~~6.11% as of January 31, ~~2021.~~2022. The Company had non-interest bearing floorplan payables of ~~$147.2~~$210.7 million and ~~$98.8~~$106.8 million, on ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021,~~2022, respectively. The Company has a compensating balance arrangement under one of its foreign floorplan credit facilities, which requires a minimum cash deposit to be maintained with the lender in the amount of $5.0 million for the term of the credit facility.

~~Bank Syndicate Credit Agreement~~

On June 4, 2021, the Bank Syndicate Agreement was amended to add a benchmark replacement reference rate when the LIBOR Rate is no longer published. The identified replacement reference rate is the secured overnight financing rate (SOFR). The benchmark transition event will occur at the earliest to occur of (i) the date that all available tenors of LIBOR have permanently ceased to be reported, (ii) June 30, 2023, or (iii) the date of agreement by the banks party to the Bank Syndicate agreement and the Company to replace the LIBOR Rate. The SOFR Rate is based upon one month, two month, three month, six month, and 12 month SOFR plus between 11.4 basis points and 71.5 basis points depending on the available tenor used. In no event will the SOFR Rate be less than zero. The applicable margin is determined based on excess availability under the Bank Syndicate Agreement and ranges from 1.5% to 2%. The Company does not believe implementation of this new benchmark rate will have a material effect on its results of operations. In addition, the amendment reduced the current floor of the LIBOR Rate from 0.5% to 0.0%

~~DLL Finance Floorplan Payable Line of Credit~~

In August 2021, the Company entered into an amendment to the credit facility with DLL Finance LLC. The amendment reduced the available borrowings under this facility from $60.0 million to $50.0 million, increased the variable interest rate on outstanding balances from three-month LIBOR plus an applicable margin of 2.85% per annum to three-month LIBOR plus an applicable margin of 3.0% per annum, and eliminated the 0.15% non-utilization fee. DLL Finance LLC may terminate the facility in its sole discretion at any time.

~~CNH Industrial Floorplan Payable Line of Credit~~

Effective October 1, 2021, CNH updated their interest rate structure on the Company's credit facility to a tier-based rate program. The new interest rate that will be payable by the Company on outstanding borrowings will be dependent on the Company's Retail Finance Market Share and will range from 0.5% to 2.75% plus the prime rate. Previously, the credit facility charged interest at a rate equal to the prime rate plus 3.25% for the financing of new and used equipment inventories and rental fleet assets.

~~Table of Contents~~

NOTE 9 - LONG TERM DEBT

The following is a summary of long-term debt as of ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021:~~2022:

Description Maturity Dates Interest Rates October 31, 2021 January 31, 2021
(in thousands)
Mortgage loans, secured Various through May 2039 2.1% to 5.1% $ 52,419 $ 22,916
Sale-leaseback financing obligations Various through December 2030 3.4% to 10.3% 13,246 16,505
Vehicle loans, secured Various through September 2027 2.1% to 3.9% 10,504 9,999
Other January 2021 2.6% — 77
Total debt 76,169 49,497
Less: current maturities 5,667 4,591
Long-term debt, net $ 70,502 $ 44,906

The Company purchased buildings and real estate assets of eleven of its U.S. dealer locations in the first quarter of fiscal 2022 and financed these purchases with long term debt of $17.7 million. In the third quarter of fiscal 2022, the Company purchased buildings and real estate assets of an additional eleven of its U.S. dealer locations and financed these purchases with $10.2 million of long term debt. All of these dealer locations were previously leased from third party lessors.


Description	Maturity Dates	Interest Rates	July 31, 2022		January 31, 2022
			(in thousands)
Mortgage loans, secured	Various through May 2039	2.1% to 5.1%	$	69,834	$	57,801
Sale-leaseback financing obligations	Various through December 2030	3.4% to 10.3%	11,826		12,382

Vehicle loans, secured	Various through September 2027	2.1% to 4.3%	11,490		10,465

Total debt			93,150		80,648
Less: current maturities			6,650		5,876
Long-term debt, net			$	86,500	$	74,772

NOTE 10 ~~- DERIVATIVE INSTRUMENTS~~

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

From time to time, the Company uses foreign currency forward contracts to hedge the effects of fluctuations in exchange rates on outstanding intercompany loans. The Company does not formally designate and document such derivative instruments as hedging instruments; however, the instruments are an effective economic hedge of the underlying foreign currency exposure. Both the gain or loss on the derivative instrument and the offsetting gain or loss on the underlying intercompany loan are recognized in earnings immediately, thereby eliminating or reducing the impact of foreign currency exchange rate fluctuations on net income. The Company's foreign currency forward contracts generally have three-month maturities, maturing on the last day of each fiscal quarter. The notional value of outstanding foreign currency contracts as of January 31, 2021 was $8.0 million. There were no outstanding foreign currency contracts as of October 31, 2021.

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

The following table sets forth the gains and losses recognized in income from the Company’s derivative instruments for the nine months ended October 31, 2021 and 2020. Gains and losses are recognized in Interest and other income in the consolidated statements of operations:
Three Months Ended October 31, Nine Months Ended October 31,
2021 2020 2021 2020
(in thousands)
Foreign currency contract gain (loss) $ — $ 471 $ (159) $ 660

~~Table of Contents~~

~~NOTE 11~~ - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following is a summary of the changes in accumulated other comprehensive income (loss), by component, for the ~~nine~~six month periods ended ~~October~~July 31, ~~2021~~2022 and ~~October~~July 31, ~~2020:~~2021:
Foreign Currency Translation Adjustment Net Investment Hedging Gain Total Accumulated Other Comprehensive Income (Loss)
(in thousands)
Balance, January 31, 2021 $ (1,212) $ 2,711 $ 1,499
Other comprehensive loss (2,379) — (2,379)
Balance, April 30, 2021 (3,591) 2,711 (880)
Other comprehensive income 938 — 938
Balance, July 31, 2021 (2,653) 2,711 58
Other comprehensive loss (744) — (744)
Balance, October 31, 2021 $ (3,397) $ 2,711 $ (686)


	Foreign Currency Translation Adjustment		Net Investment Hedging Gain		Total Accumulated Other Comprehensive Income (Loss)
	(in thousands)
Balance, January 31, 2022	$	(4,883)	$	2,711	$	(2,172)
Other comprehensive loss	(1,191)		—		(1,191)
Balance, April 30, 2022	(6,074)		2,711		(3,363)
Other comprehensive income	(2,963)		—		(2,963)
Balance, July 31, 2022	$	(9,037)	$	2,711	$	(6,326)

Foreign Currency Translation Adjustment Net Investment Hedging Gain Total Accumulated Other Comprehensive Income (Loss)
(in thousands)
Balance, January 31, 2020 $ (5,931) $ 2,711 $ (3,220)
Other comprehensive loss (528) — (528)
Balance, April 30, 2020 (6,459) 2,711 (3,748)
Other comprehensive income 778 — 778
Balance, July 31, 2020 (5,681) 2,711 (2,970)
Other comprehensive income 2,181 — 2,181
Balance, October 31, 2020 $ (3,500) $ 2,711 $ (789)

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

NOTE 1211 - LEASES

As Lessee

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

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

~~Table of Contents~~

The components of lease expense were as follows:


			Three Months Ended October 31,				Nine Months Ended October 31,						Three Months Ended July 31,				Six Months Ended July 31,
		Classification	2021		2020		2021		2020			Classification	2022		2021		2022		2021
			(in thousands)				(in thousands)						(in thousands)				(in thousands)
Finance lease cost:	Finance lease cost:										Finance lease cost:
Amortization of leased assets	Amortization of leased assets	Operating expenses	$	227	$	395	$	915	$	1,176	Amortization of leased assets	Operating expenses	$	207	$	243	$	415	$	688
Interest on lease liabilities	Interest on lease liabilities	Other interest expense	49		108		201		351		Interest on lease liabilities	Other interest expense	45		64		88		152
Operating lease cost	Operating lease cost	Operating expenses and rental and other cost of revenue	3,632		4,541		11,132		13,329		Operating lease cost	Operating expenses and rental and other cost of revenue	3,164		3,735		6,638		7,501
Short-term lease cost	Short-term lease cost	Operating expenses	66		81		198		270		Short-term lease cost	Operating expenses	44		66		70		132
Variable lease cost	Variable lease cost	Operating expenses	502		739		1,755		2,109		Variable lease cost	Operating expenses	473		639		1,018		1,252
Sublease income	Sublease income	Interest and other income	(226)		(136)		(643)		(419)		Sublease income	Interest and other income	(360)		(219)		(729)		(416)
			$	4,250	$	5,728	$	13,558	$	16,816			$	3,573	$	4,528	$	7,500	$	9,309

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Right-of-use lease assets and lease liabilities consist of the following:
Classification October 31, 2021 January 31, 2021
(in thousands)
Assets
Operating lease assets Operating lease assets $ 59,950 $ 74,445
Finance lease assets(a)
Property and equipment, net of accumulated depreciation 5,856 12,426
Total leased assets $ 65,806 $ 86,871
Liabilities
Current
Operating Current operating lease liabilities $ 9,922 $ 11,772
Finance Accrued expenses and other 4,078 9,823
Noncurrent
Operating Operating lease liabilities 59,264 73,567
Finance Other long-term liabilities 1,692 2,911
Total lease liabilities $ 74,956 $ 98,073


	Classification	July 31, 2022		January 31, 2022
		(in thousands)
Assets
Operating lease assets	Operating lease assets	$	51,888	$	56,150
Finance lease assets(a)	Property and equipment, net of accumulated depreciation	2,442		9,045
Total leased assets		$	54,330	$	65,195
Liabilities
Current
Operating	Current operating lease liabilities	$	9,465	$	9,601
Finance	Accrued expenses and other	554		7,466
Noncurrent
Operating	Operating lease liabilities	50,998		55,595
Finance	Other long-term liabilities	1,880		1,518
Total lease liabilities		$	62,897	$	74,180

(a)Finance lease assets are recorded net of accumulated amortization of ~~$1.7~~$1.8 million as of ~~October~~July 31, ~~2021~~2022 and ~~$3.0~~$1.7 million as of January 31, ~~2021.~~2022.

Maturities of lease liabilities as of ~~October~~July 31, ~~2021~~2022 are as follows:


		Operating		Finance					Operating		Finance
		Leases		Leases		Total			Leases		Leases		Total
Fiscal Year Ended January 31,	Fiscal Year Ended January 31,	(in thousands)						Fiscal Year Ended January 31,	(in thousands)
2022 (remainder)		$	3,546	$	3,562	$	7,108
2023		13,480		845		14,325
2023 (remainder)								2023 (remainder)	$	6,440	$	400	$	6,840
2024	2024	12,591		520		13,111		2024	12,484		607		13,091
2025	2025	11,978		439		12,417		2025	11,943		554		12,497
2026	2026	11,822		301		12,123		2026	11,552		460		12,012
2027	2027	11,091		270		11,361		2027	10,815		431		11,246
2028								2028	9,394		297		9,691
Thereafter	Thereafter	19,933		572		20,505		Thereafter	9,839		343		10,182
Total lease payments	Total lease payments	84,441		6,509		90,950		Total lease payments	72,467		3,092		75,559
Less: Interest	Less: Interest	15,255		739		15,994		Less: Interest	12,005		657		12,662
Present value of lease liabilities	Present value of lease liabilities	$	69,186	$	5,770	$	74,956	Present value of lease liabilities	$	60,462	$	2,435	$	62,897

The weighted-average lease term and discount rate as of ~~October~~July 31, ~~2021~~2022 are as follows:


	~~October~~July 31, ~~2021~~2022
Weighted-average remaining lease term (years):
Operating leases	~~6.7~~6.3
Financing leases	~~2.3~~5.2
Weighted-average discount rate:
Operating leases	~~6.1~~6.2	%
Financing leases	~~5.7~~8.2	%

~~Table of Contents~~

As Lessor

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

All of the Company's leasing arrangements as lessor are classified as operating leases. Rental revenue is recognized on a straight-line basis over the rental period. Rental revenue includes amounts charged for loss and damage insurance on rented equipment. In most cases, our rental arrangements include non-lease components, including delivery and pick-up services. The Company accounts for these non-lease components separate from the rental arrangement and recognizes the revenue associated with these components when the service is performed. The Company has elected to exclude from rental revenue all sales, value

Table of Contents

added and other taxes collected from our customers concurrent with our rental activities. Rental billings most often occur on a monthly basis and may be billed in advance or in arrears, thus creating unbilled rental receivables or deferred rental revenue amounts. The Company manages the residual value risk of its rented assets by (i) monitoring the quality, aging and anticipated retail market value of our rental fleet assets to determine the optimal period to remove an asset from the rental fleet, (ii) maintaining the quality of our assets through on-site parts and service support and (iii) requiring physical damage insurance of our lessee customers. We primarily dispose of our rental assets through the sale of the asset by our retail sales force.

Revenue generated from leasing activities is disclosed, by segment, in Note 3. The following is the balance of our dedicated rental fleet assets, included in Property and equipment, net of accumulated depreciation in the condensed consolidated balance sheet, of our Construction segment as of ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021:~~2022:


		October 31, 2021		January 31, 2021			July 31, 2022		January 31, 2022
		(in thousands)					(in thousands)
Rental fleet equipment	Rental fleet equipment	$	81,676	$	77,530	Rental fleet equipment	$	73,014	$	65,117
Less accumulated depreciation	Less accumulated depreciation	28,744		28,916		Less accumulated depreciation	25,205		23,501
		$	52,932	$	48,614		$	47,809	$	41,616

NOTE 1312 - FAIR VALUE MEASUREMENTS

As of October 31, 2021 and January 31, 2021, the fair value of the Company's foreign currency contracts, which are either assets or liabilities measured at fair value on a recurring basis, was not material. These foreign currency contracts were valued using a discounted cash flow analysis, which is an income approach, utilizing readily observable market data as inputs, which is classified as a Level 2 fair value measurement.

The Company also valued certain long-lived assets at fair value on a non-recurring basis as of January 31, ~~2021~~2022 as part of its long-lived asset impairment testing. The estimated fair value of such assets as of January 31, ~~2021~~2022 was ~~$0.8~~$3.1 million. Fair value was estimated through an income approach incorporating both observable and unobservable inputs, and are deemed to be Level 3 fair value inputs. The most significant unobservable inputs include forecasted net cash generated from the use of the assets and the discount rate applied to such cash flows to arrive at a fair value estimate. In addition, in certain instances, in the prior year, the Company estimated the fair value of long-lived assets to approximate zero as no future cash flows were assumed to be generated from the use of such assets and the expected value to be realized upon disposition was deemed to be nominal.

The Company also has financial instruments that are not recorded at fair value in the consolidated balance sheets, including cash, receivables, payables and long-term debt. The carrying amounts of these financial instruments approximated their fair values as of ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021.~~2022. Fair value of these financial instruments was estimated based on Level 2 fair value inputs. The estimated fair value of the Company's Level 2 long-term debt, which is provided for disclosure purposes only, is as follows:


		October 31, 2021		January 31, 2021		July 31, 2022		January 31, 2022
		(in thousands)	(in thousands)
Carrying amount	Carrying amount	62,923		32,992	Carrying amount	$	81,324	$	63,237
Fair value	Fair value	64,300		34,185	Fair value	$	72,516	$	68,267

~~Table of Contents~~

NOTE 1413 - INCOME TAXES

Our effective tax rate was ~~24.3%~~24.7% and ~~28.3%~~28.0% for the three months ended ~~October~~July 31, ~~2021~~2022 and ~~2020,~~2021, respectively and was ~~25.0%~~25.1% and ~~26.5%~~25.6% for the ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020,~~2021, respectively. The effective tax rate for the ~~three and nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020~~2021 were subject ~~to variation due~~ to various factors such as the impact of certain discrete items, mainly the vesting of share-based compensation, the mix of domestic and foreign income, and recognition of a valuation allowance on certain of our foreign deferred tax ~~assets and foreign currency gains and losses.~~assets.

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NOTE 1514 - BUSINESS COMBINATIONS

Fiscal ~~2021~~2023

On ~~May 4, 2020,~~April 1, 2022, the Company acquired certain assets of ~~HorizonWest~~Mark's Machinery, Inc. ~~This~~The acquired ~~CaseIH agriculture dealership complex~~business consisted of ~~three agriculture~~two agricultural equipment stores in ~~Scottsbluff~~Wagner and ~~Sidney, Nebraska and Torrington, Wyoming, which expanded~~Yankton, South Dakota. These locations are included in the Company's ~~agriculture presence in Nebraska and into Wyoming.~~Agriculture segment. The total cash consideration ~~paid~~transferred for the acquired business was ~~$6.8 million in cash.~~$7.7 million.

In connection with the acquisition, the Company acquired from CNH Industrial and certain other manufacturers equipment and parts inventory previously owned by ~~HorizonWest~~Mark's Machinery, Inc. Upon acquiring ~~those~~such inventories, the Company was offered floorplan financing by the ~~manufacturer.~~respective manufacturers. In total, the Company acquired inventory and recognized a corresponding financing liability of ~~$2.7~~$3.2 million. The recognition of these inventories and the associated financing liabilities are not included as part of the accounting for the business combination.

Fiscal 2022

On December 1, 2021, the Company acquired certain assets of Jaycox Implement, Inc. The acquired business consisted of three agricultural equipment stores in Worthington and Luverne, Minnesota and Lake Park, Iowa. These locations are included in the Company's Agriculture segment. The total cash consideration transferred for the acquired business was $28.2 million. The Company completed the real estate purchase on December 31, 2021 for a purchase price of $5.5 million, which was partially financed with long-term debt and the remainder was paid in cash.

In connection with the acquisition, the Company acquired from CNH Industrial and certain other manufacturers equipment and parts inventory previously owned by Jaycox Implement, Inc. Upon acquiring such inventories, the Company was offered floorplan financing by the respective manufacturers. In total, the Company acquired inventory and recognized a corresponding financing liability of $5.3 million. The recognition of these inventories and the associated financing liabilities are not included as part of the accounting for the business combination.

Purchase Price Allocation

~~The~~ Each of the above ~~acquisition~~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 the purchase price allocation was complete as~~As of ~~January~~July 31, ~~2021.~~2022, all business combinations completed in fiscal years 2023 and 2022 are preliminary. The following table presents the aggregate purchase price allocations for all acquisitions completed during the ~~HorizonWest acquisition completed as of~~fiscal year ended January 31, ~~2021:~~2022 and the period ended July 31, 2022:


	July 31, 2022		January 31, 2022
	(in thousands)
Assets acquired:
Cash	$	1	$	4
Receivables	478		1,197
Inventories	3,386		13,780
Prepaid expenses and other	66		47
Property and equipment	4,088		8,236

Intangible assets	917		4,121
Goodwill	583		7,519

	9,519		34,904

Liabilities assumed:



Deferred revenue	1,844		1,261





Net assets acquired	$	7,675	$	33,643

Goodwill recognized by segment:
Agriculture	$	583	$	7,519


Goodwill expected to be deductible for tax purposes	$	583	$	7,519

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

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

	~~8,796~~

~~Liabilities assumed:~~


~~Current operating lease liabilities~~	~~159~~



~~Operating lease liabilities~~	~~1,847~~

	~~2,006~~
~~Net assets acquired~~	$	~~6,790~~

~~Goodwill recognized by segment:~~
~~Agriculture~~	$	~~484~~


~~Goodwill expected to be deductible for tax purposes~~	$	~~484~~

The recognition of goodwill in the above business ~~combination~~combinations arose from the acquisition of an assembled workforce and anticipated synergies expected to be realized. For the ~~business combination occurring during the fiscal year ended January 31, 2021,~~Mark's Machinery acquisition the Company recognized a non-competition intangible asset of $0.1 million and a distribution rights intangible asset of ~~$0.2~~$0.8 million. For the Jaycox acquisition the Company recognized a non-competition intangible asset of $0.1 million and a distribution rights intangible asset of $3.9 million. The non-competition ~~asset~~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

~~Table of Contents~~

intangible assets using a multi-period excess earnings model, which is an income approach. Acquisition related costs, ~~were not material~~amounted to $0.5 million for the ~~fiscal year~~period ended July 31, 2022, primarily related to the Heartland acquisition, and acquisition related costs for the period ended January 31, ~~2021, and~~2022, were not material. All acquisition related costs have been expensed as incurred and recognized as ~~operating expenses~~Operating Expenses in the condensed consolidated statements of operations.

NOTE 1615 - CONTINGENCIES

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

NOTE 1716 - SEGMENT INFORMATION

The Company has 3three reportable segments: Agriculture, Construction and International. Revenue between segments is immaterial. The Company retains various unallocated income/(expense) items and assets at the general corporate level, which the Company refers to as “Shared Resources” in the table below. Shared Resources assets primarily consist of cash and property and equipment.

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


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2021		2020		2021		2020			2022		2021		2022		2021
		(in thousands)				(in thousands)					(in thousands)				(in thousands)
Revenue	Revenue									Revenue
Agriculture	Agriculture	$	281,506	$	220,625	$	730,422	$	583,326	Agriculture	$	348,956	$	219,364	$	667,503	$	448,915
Construction	Construction	79,735		79,030		229,286		216,862		Construction	70,022		80,943		136,986		149,550
International	International	92,734		61,217		244,603		174,357		International	77,565		77,323		153,060		151,869
Total	Total	$	453,975	$	360,872	$	1,204,311	$	974,545	Total	$	496,543	$	377,630	$	957,549	$	750,334

Income (Loss) Before Income Taxes	Income (Loss) Before Income Taxes									Income (Loss) Before Income Taxes
Agriculture	Agriculture	$	19,618	$	13,575	$	42,910	$	26,490	Agriculture	$	24,895	$	12,067	$	41,344	$	23,292
Construction	Construction	3,564		1,448		6,518		(50)		Construction	3,923		2,815		7,132		2,953
International	International	6,260		(2,424)		9,498		(3,136)		International	5,870		430		10,195		3,238
Segment income before income taxes	Segment income before income taxes	29,442		12,599		58,926		23,304		Segment income before income taxes	34,688		15,312		58,671		29,483
Shared Resources	Shared Resources	(619)		1,225		(793)		1,961		Shared Resources	(1,538)		320		(1,937)		(172)
Total	Total	$	28,823	$	13,824	$	58,133	$	25,265	Total	$	33,150	$	15,632	$	56,734	$	29,311

October 31, 2021 January 31, 2021
(in thousands)
Total Assets
Agriculture $ 393,775 $ 349,697
Construction 190,233 185,534
International 159,601 177,213
Segment assets 743,609 712,444
Shared Resources 111,610 103,345
Total $ 855,219 $ 815,789


	July 31, 2022		January 31, 2022
	(in thousands)
Total Assets
Agriculture	$	559,722	$	481,190
Construction	196,085		157,846
International	175,921		155,275
Segment assets	931,728		794,311
Shared Resources	146,143		152,356
Total	$	1,077,871	$	946,667

2019

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NOTE 1817 - SUBSEQUENT EVENTS

On ~~December 1, 2021,~~July 8, 2022, the Company ~~acquired certain assets of Jaycox Implement, Inc. The acquired business consisted of~~entered into a definitive purchase agreement to acquire three ~~agricultural equipment stores in Worthington~~entities, Heartland Agriculture, LLC, Heartland Solutions, LLC, and ~~Luverne, Minnesota and Lake Park, Iowa.~~Heartland Leverage Lender, LLC, collectively, the "Heartland Companies", which operate a twelve store CaseIH commercial application agriculture dealership complex . In its most ~~recent~~recently completed fiscal year ~~Jaycox Implement, Inc.~~ended December 31, 2021, Heartland Companies generated revenue of approximately ~~$91 million. These locations will be included in the Company's Agriculture segment. The total cash consideration paid for the acquired business was $28.2~~$214 million. The Company ~~has committed to acquire~~closed on the ~~real estate~~acquisition, on August 1, 2022 with cash consideration transferred of ~~Jaycox Implement, Inc., subject to customary closing conditions,~~$94.5 million. The Company primarily used cash on hand for athe funding of the purchase price and drew down on the floorplan loan with the Bank Syndicate for the remaining balance.

The acquisition will be accounted in accordance with Accounting Standards Codification ("ASC") Topic 805, "Business Combinations". As the acquisition was completed subsequent to July 31, 2022, the consolidated financials statements do not include the results or the financial position of ~~$5.5 million and anticipates completing~~ the ~~real estate acquisition by January 31, 2022. The~~Heartland Companies. Because the Company has ~~considered~~not completed the ~~disclosure requirements~~work of the purchase price allocation needed under ASC ~~805-10-50-2~~805, the initial accounting for the business combination was incomplete at the time of the issuance of the financial statements, therefore, the Company did not include all of the information regarding the effect of the business combination as permitted by ASC 805-10-50-4 and ASC ~~805-10-50-4 but has not included certain required disclosures in this report due to the timing of the transaction.~~805-30-50-3.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our interim unaudited condensed consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report, and the audited consolidated financial statements and related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2021.~~2022.

Overview

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

Demand for agricultural equipment and, to a lesser extent, parts and service support, ~~are~~is impacted by agricultural commodity prices and net farm income. Based on ~~September 2021~~February 2022 U.S. Department of Agriculture publications, the estimate of net farm income for calendar year ~~2021~~2022 indicated an approximate ~~19.5% increase~~4.5% decrease as compared to calendar year ~~2020,~~2021, and an approximate ~~19.6%~~25.1% increase in net farm income for calendar year ~~2020~~2021 as compared to calendar year ~~2019.~~2020.

For the ~~third~~second quarter of fiscal ~~2022,~~2023, our net income was ~~$21.8~~$25.0 million, or ~~$0.97~~$1.10 per diluted share, compared to a fiscal ~~2021 third~~2022 second quarter net income of ~~$9.9~~$11.2 million, or ~~$0.44~~$0.50 per diluted share. Our adjusted diluted earnings per share was ~~$0.96~~$1.10 for the ~~third~~second quarter of fiscal ~~2022,~~2023, compared to ~~$0.53~~$0.56 for the ~~third~~second quarter of fiscal ~~2021.~~2022. See the Non-GAAP Financial Measures section below for a reconciliation of adjusted diluted earnings per share to diluted earnings per share, the most comparable GAAP financial measure. Significant factors impacting the quarterly comparisons were:

•Revenue in the ~~third~~second quarter of fiscal ~~2022~~2023 increased by ~~25.8%~~31.5% compared to the ~~third~~second quarter of fiscal ~~2021.~~2022. Total ~~company~~Company same store sales increased ~~29.9%~~32.1% compared to the prior year ~~third~~second quarter. Same store sales increased in each of ~~the~~our three reporting segments.

•Gross profit in the ~~third~~second quarter of fiscal ~~2022~~2023 increased ~~27.5%~~36.9% compared to the ~~third~~second quarter of fiscal ~~2021.~~2022. The increase in gross profit was primarily the result of strong equipment sales and equipment gross profit margins ~~that increased~~increasing to ~~12.5%~~13.7% in the ~~third~~second quarter of fiscal ~~2022~~2023 from ~~10.4%~~11.9% in the ~~third~~second quarter of fiscal ~~2021.~~2022.

•~~Floorplan~~Gross profit was also positively impacted by strong parts sales, increasing by 30.0% from the prior year period, and ~~other interest expense decreased a combined 21.6%~~strong parts gross profit margins, which increased to 32.2% in the ~~third~~second quarter of fiscal ~~2022, as compared to~~2023 from 29.4% in the ~~third~~second quarter ~~last year, due to lower borrowings.~~of fiscal 2022.

~~Impact of the COVID-19 Pandemic on the Company~~Supply Chain

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

The Company continues to effectively execute its strategy while managing the ongoing effects of the COVID-19 pandemic. The Company's products and services were determined to be essential in the markets we serve and accordingly operations have been allowed to continue throughout the pandemic. Since the beginning of the COVID-19 pandemic, the safety of our employees and customers has been, andEquipment availability continues to be challenging as supply chain disruptions throughout 2021 and continuing into 2022, along with increased domestic and global demand for equipment inventory, have caused many manufacturers to be unable to produce enough equipment to meet demand. Many manufacturers have partially built equipment at their factories waiting for certain parts and components in order to finish production and ship the equipment to dealers. The timing as to the receipt of those parts and components may move completion of that equipment and the resulting delivery to the end customer from quarter to quarter or in some cases, year to year, thereby potentially impacting when we are able to receive the inventory, enter into sales transactions with our ~~top concern.~~

~~Recently,~~customers, and recognize the ~~Department of Labor's Occupational Safety~~revenue. These supply chain issues are further complicated by labor shortages including the ongoing strike at the CNH Industrial plants in Racine, Wisconsin and Health Administration ("OSHA") announced an emergency temporary standard requiring all employers with at least 100 employees to ensure their employees are fully vaccinated or require weekly testing for unvaccinated employees. In response to a court ruling, in mid-November 2021, OSHA announcedBurlington, Iowa, as well as the recent announcement by CNH Industrial that it ~~had suspended all activities related~~will be implementing an equipment allocation methodology to ~~implementation~~determine production slots starting in late calendar year 2022. All of ~~this new regulation pending further litigation.~~these factors may limit our ability to match customer demand on certain products in fiscal 2024. We will continue to work with our manufacturers to source future inventory to fulfill as much customer demand as possible.

Russian-Ukrainian Conflict

Since the onset of the active conflict in February 2022, most of Titan Machinery Ukraine's customers have been able to continue their work, although at a reduced capacity and schedule. The ~~exact impact that this new regulation~~Company's business systems in Ukraine have continued to function but could ~~have on~~be negatively impacted in the ~~our Company is uncertain at this time. However, it could result in employee attrition, difficulty in fulfilling future labor needs, additional costs related to compliance and may~~future. Some of Titan Machinery Ukraine's back office employees have ~~an adverse effect on our future operating results.~~

2221

Table of C ~~ontents~~Contents

~~Additionally, many~~been able to relocate outside of Ukraine and continue to work, while the customer support and sales teams have remained in Ukraine. For the six months ended July 31, 2022, Titan Machinery Ukraine's revenues are down approximately 37.7% from the prior year period.

As of July 31, 2022, the Company had total assets of $33.1 million in Ukraine. The physical assets (e.g. inventory and fixed assets) are almost exclusively located in central and western areas of the country. Total assets in Ukraine as of January 31, 2022, was $32.7 million.

The situation is highly complex and continues to evolve. If the Company cannot provide efficient and uninterrupted services, this could worsen the conflict's adverse effect on the Company's operations and business in Ukraine. In addition, the Company's ability to maintain adequate liquidity for our ~~supply vendors are facing production, supply chain~~operations in Ukraine is dependent on a number of factors, including Titan Machinery Ukraine's revenue and ~~staffing challenges as they work to increase production capacity. We~~earnings, which have been and ~~expect to~~could continue to be ~~proactive~~significantly impacted by the conflict. Further, any additional military movement back into central and western Ukraine or any major threat to civilians in ~~ordering inventory, parts,~~those areas or international banking disruption could materially impact the operations and ~~components~~liquidity of Titan Machinery Ukraine.

Acquisitions

Fiscal 2023

On August 1, 2022, the Company acquired all interests of three entities, Heartland Agriculture, LLC, Heartland Solutions, LLC, and Heartland Leveraged Lender, LLC, (collectively referred to ~~seek to ensure work will continue without delay; however we have experienced price increases, disruptions~~as "Heartland Companies") for $94.5 million in cash consideration. The Heartland Companies consist of twelve CaseIH commercial application agriculture locations, in Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota, Washington, and ~~delays on delivery of certain products.~~

~~Although there~~Wisconsin. The Heartland Companies have been ~~logistical~~a successful CaseIH commercial application dealer group and ~~other challenges as a result~~our acquisition of these entities provides the ~~COVID-19 pandemic, there were no material adverse impacts on~~Company the ~~Company's results of operations~~opportunity for ~~the three and nine months ended October 31, 2021 or 2020. However,~~synergies due to the ~~uncertainty~~overlap of our footprints, which will allow us to package deals that will include both commercial application equipment as well as other agricultural and construction equipment to commercial customers within our core footprint. In the ~~economic outlook resulting from~~most recent completed fiscal year, the ~~COVID-19 pandemic,~~Heartland Companies generated revenue of approximately $214 million.

On April 1, 2022, the Company ~~continues to monitor~~acquired certain assets of Mark's Machinery, Inc. The acquired business consisted of two agricultural equipment stores in Wagner and Yankton, South Dakota. These locations are included in our Agriculture segment. In its most recent fiscal year, Mark's Machinery, Inc. generated revenue of approximately $34.0 million. The total cash consideration paid for the ~~situation closely.~~

~~Acquisitions~~acquired business was $7.7 million.

Fiscal 2022

On December 1, 2021, the Company acquired certain assets of Jaycox Implement, Inc. The acquired business consisted of three agricultural equipment stores in Worthington and Luverne, Minnesota and Lake Park, Iowa. These locations ~~will be~~are included in our ~~agriculture segment upon closing, starting in the fourth quarter of fiscal 2022.~~Agriculture segment. In its most recent fiscal year, Jaycox Implement, Inc. generated revenue of approximately $91 million. The total cash consideration paid for the acquired business was ~~$28.2~~$33.6 million.

~~Fiscal 2021~~

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

ERP Transition

The Company is in the process of converting to a new Enterprise Resource Planning ("ERP") application. The new ERP application is expected to provide data-driven and mobile-enabled sales and support tools to improve employee efficiency and deliver an enhanced customer experience. The Company integrated one pilot store on the new ERP system in the second quarter of fiscal ~~2021; we anticipate~~2021 and also integrated the five stores acquired through the Jaycox Implement and Mark's Machinery acquistions in December 2021 and April 2022, respectively. In June, the Company began the phased roll-out integrating three existing location to the new ERP. We will continue our phased roll-out to the remaining domestic ~~stores to be converted to~~locations, over the ~~ERP within the next 12 months.~~second half of fiscal 2023 and continue into fiscal 2024.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are included in the Management's Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2021.~~2022. There have been no changes in our critical accounting policies and estimates since January 31, ~~2021.~~2022.

Table of Contents

Results of Operations

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

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

~~Table of Contents~~

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


		Three Months Ended October 31,						Nine Months Ended October 31,							Three Months Ended July 31,						Six Months Ended July 31,
		2021			2020			2021			2020				2022			2021			2022			2021
		(dollars in thousands)						(dollars in thousands)							(dollars in thousands)						(dollars in thousands)
Equipment	Equipment													Equipment
Revenue	Revenue	$	329,814		$	240,901		$	878,528		$	662,060		Revenue	$	375,216		$	272,733		$	731,582		$	548,713
Cost of revenue	Cost of revenue	288,576			215,770			772,584			593,048			Cost of revenue	323,988			240,332			634,222			484,008
Gross profit	Gross profit	$	41,238		$	25,131		$	105,944		$	69,012		Gross profit	$	51,228		$	32,401		$	97,360		$	64,705
Gross profit margin	Gross profit margin	12.5		%	10.4		%	12.1		%	10.4		%	Gross profit margin	13.7		%	11.9		%	13.3		%	11.8		%
Parts	Parts													Parts
Revenue	Revenue	$	80,521		$	76,778		$	208,464		$	194,846		Revenue	$	77,693		$	65,317		$	146,255		$	127,942
Cost of revenue	Cost of revenue	55,654			53,556			146,184			136,205			Cost of revenue	52,706			46,089			100,015			90,529
Gross profit	Gross profit	$	24,867		$	23,222		$	62,280		$	58,641		Gross profit	$	24,987		$	19,228		$	46,240		$	37,413
Gross profit margin	Gross profit margin	30.9		%	30.2		%	29.9		%	30.1		%	Gross profit margin	32.2		%	29.4		%	31.6		%	29.2		%
Service	Service													Service
Revenue	Revenue	$	32,026		$	30,696		$	89,405		$	84,282		Revenue	$	33,365		$	29,676		$	62,887		$	57,379
Cost of revenue	Cost of revenue	10,249			10,254			29,314			28,263			Cost of revenue	11,072			9,771			21,832			19,065
Gross profit	Gross profit	$	21,777		$	20,442		$	60,091		$	56,019		Gross profit	$	22,293		$	19,905		$	41,055		$	38,314
Gross profit margin	Gross profit margin	68.0		%	66.6		%	67.2		%	66.5		%	Gross profit margin	66.8		%	67.1		%	65.3		%	66.8		%
Rental and other	Rental and other													Rental and other
Revenue	Revenue	$	11,614		$	12,497		$	27,914		$	33,357		Revenue	$	10,269		$	9,904		$	16,825		$	16,300
Cost of revenue	Cost of revenue	7,016			8,741			17,754			23,379			Cost of revenue	6,078			6,420			10,087			10,737
Gross profit	Gross profit	$	4,598		$	3,756		$	10,160		$	9,978		Gross profit	$	4,191		$	3,484		$	6,738		$	5,563
Gross profit margin	Gross profit margin	39.6		%	30.1		%	36.4		%	29.9		%	Gross profit margin	40.8		%	35.2		%	40.0		%	34.1		%

Table of Contents

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


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2021		2020		2021		2020			2022		2021		2022		2021
Revenue	Revenue									Revenue
Equipment	Equipment	72.7	%	66.8	%	72.9	%	67.9	%	Equipment	75.6	%	72.2	%	76.4	%	73.1	%
Parts	Parts	17.7	%	21.3	%	17.3	%	20.0	%	Parts	15.6	%	17.3	%	15.3	%	17.1	%
Service	Service	7.1	%	8.5	%	7.4	%	8.6	%	Service	6.7	%	7.9	%	6.6	%	7.6	%
Rental and other	Rental and other	2.6	%	3.5	%	2.3	%	3.4	%	Rental and other	2.1	%	2.6	%	1.7	%	2.2	%
Total Revenue	Total Revenue	100.0	%	100.0	%	100.0	%	100.0	%	Total Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Total Cost of Revenue	Total Cost of Revenue	79.6	%	79.9	%	80.2	%	80.1	%	Total Cost of Revenue	79.3	%	80.1	%	80.0	%	80.5	%
Gross Profit Margin	Gross Profit Margin	20.4	%	20.1	%	19.8	%	19.9	%	Gross Profit Margin	20.7	%	19.9	%	20.0	%	19.5	%
Operating Expenses	Operating Expenses	13.9	%	15.0	%	14.7	%	16.4	%	Operating Expenses	13.9	%	15.1	%	13.9	%	15.1	%
Impairment of Goodwill		—	%	0.4	%	—	%	0.1	%
Impairment of Intangible and Long-Lived Assets		—	%	0.3	%	0.1	%	0.1	%

Income from Operations	Income from Operations	6.5	%	4.4	%	5.0	%	3.1	%	Income from Operations	6.8	%	4.4	%	6.1	%	4.1	%
Other Income (Expense)	Other Income (Expense)	(0.2)	%	(0.6)	%	(0.2)	%	(0.6)	%	Other Income (Expense)	(0.1)	%	(0.2)	%	(0.2)	%	(0.2)	%
Income Before Income Taxes	Income Before Income Taxes	6.3	%	3.8	%	4.8	%	2.6	%	Income Before Income Taxes	6.7	%	4.1	%	5.9	%	3.9	%
Provision for Income Taxes	Provision for Income Taxes	1.5	%	1.1	%	1.2	%	0.7	%	Provision for Income Taxes	1.6	%	1.2	%	1.5	%	1.0	%
Net Income	Net Income	4.8	%	2.7	%	3.6	%	1.9	%	Net Income	5.0	%	3.0	%	4.4	%	2.9	%

Three Months Ended July 31, 2022 Compared to Three Months Ended July 31, 2021

Consolidated Results

Revenue


	Three Months Ended July 31,				Increase/		Percent
	2022		2021		(Decrease)		Change
	(dollars in thousands)
Equipment	$	375,216	$	272,733	$	102,483	37.6	%
Parts	77,693		65,317		12,376		18.9	%
Service	33,365		29,676		3,689		12.4	%
Rental and other	10,269		9,904		365		3.7	%
Total Revenue	$	496,543	$	377,630	$	118,913	31.5	%

Table of C ~~ontents~~Contents

~~Three Months Ended October 31, 2021 Compared to Three Months Ended October 31, 2020~~

~~Consolidated Results~~

~~Revenue~~
Three Months Ended October 31, Increase/ Percent
2021 2020 (Decrease) Change
(dollars in thousands)
Equipment $ 329,814 $ 240,901 $ 88,913 36.9 %
Parts 80,521 76,778 3,743 4.9 %
Service 32,026 30,696 1,330 4.3 %
Rental and other 11,614 12,497 (883) (7.1) %
Total Revenue $ 453,975 $ 360,872 $ 93,103 25.8 %

Total revenue for the ~~third~~second quarter of fiscal 2023 was 31.5% or $118.9 million higher than the second quarter of fiscal 2022 ~~was 25.8% or $93.1 million higher than the third quarter of fiscal 2021~~ driven primarily by ~~increased demand for equipment, resulting~~an increase in ~~equipment revenue being 36.9% higher than the prior year period.~~Company-wide same-store sales of 32.1% and our acquistions of Jaycox Implement and Mark's Machinery, completed in December 2021 and April 2022, respectively. The ~~increased equipment demand~~same-store sales increase was ~~due to higher~~primarily driven by favorable commodity prices, higher net farm income and ~~good growing conditions~~increased construction activity in our ~~international~~ footprint. ~~Company-wide same-store sales in the third quarter of fiscal 2022 increased 29.9% versus the comparable period in fiscal 2021.~~

~~Gross Profit~~


		Three Months Ended October 31,						Increase/			Percent			Three Months Ended July 31,						Increase/			Percent
		2021			2020			(Decrease)			Change			2022			2021			(Decrease)			Change
		(dollars in thousands)												(dollars in thousands)
Gross Profit	Gross Profit												Gross Profit
Equipment	Equipment	$	41,238		$	25,131		$	16,107		64.1	%	Equipment	$	51,228		$	32,401		$	18,827		58.1	%
Parts	Parts	24,867			23,222			1,645			7.1	%	Parts	24,987			19,228			5,759			30.0	%
Service	Service	21,777			20,442			1,335			6.5	%	Service	22,293			19,905			2,388			12.0	%
Rental and other	Rental and other	4,598			3,756			842			22.4	%	Rental and other	4,191			3,484			707			20.3	%
Total Gross Profit	Total Gross Profit	$	92,480		$	72,551		$	19,929		27.5	%	Total Gross Profit	$	102,699		$	75,018		$	27,681		36.9	%
Gross Profit Margin	Gross Profit Margin												Gross Profit Margin
Equipment	Equipment	12.5		%	10.4		%	2.1		%	20.2	%	Equipment	13.7		%	11.9		%	1.8		%	15.1	%
Parts	Parts	30.9		%	30.2		%	0.7		%	2.3	%	Parts	32.2		%	29.4		%	2.8		%	9.5	%
Service	Service	68.0		%	66.6		%	1.4		%	2.1	%	Service	66.8		%	67.1		%	(0.3)		%	(0.4)	%
Rental and other	Rental and other	39.6		%	30.1		%	9.5		%	31.6	%	Rental and other	40.8		%	35.2		%	5.6		%	15.9	%
Total Gross Profit Margin	Total Gross Profit Margin	20.4		%	20.1		%	0.3		%	1.5	%	Total Gross Profit Margin	20.7		%	19.9		%	0.8		%	4.0	%
Gross Profit Mix	Gross Profit Mix												Gross Profit Mix
Equipment	Equipment	44.6		%	34.6		%	10.0		%	28.9	%	Equipment	49.9		%	43.2		%	6.7		%	15.5	%
Parts	Parts	26.9		%	32.0		%	(5.1)		%	(15.9)	%	Parts	24.3		%	25.6		%	(1.3)		%	(5.1)	%
Service	Service	23.5		%	28.2		%	(4.7)		%	(16.7)	%	Service	21.7		%	26.5		%	(4.8)		%	(18.1)	%
Rental and other	Rental and other	5.0		%	5.2		%	(0.2)		%	(3.8)	%	Rental and other	4.1		%	4.7		%	(0.6)		%	(12.8)	%
Total Gross Profit Mix	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 ~~2022~~2023 increased ~~27.5%~~36.9% or ~~$19.9~~$27.7 million, as compared to the same period last year. Gross profit margin also improved to ~~20.4%~~20.7% in the current quarter from ~~20.1%~~19.9% in the prior year quarter. The increase in gross profit margin was primarily due to stronger equipment margins, which were positively impacted by a healthy inventory, ~~and~~ favorable end market ~~conditions.~~conditions, and a $2.6 million benefit recognized on the expected achievement of annual manufacturer incentive programs. The increase in equipment margins, was partially offset by the gross profit mix shift, to lower margin equipment sales relative to parts, service, and rental sales.

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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 ~~97.8%~~90.6% for the ~~third~~second quarter of fiscal ~~2022~~2023 compared to ~~94.2%~~86.2% during the same period last year as the increase in gross profit from parts, rental fleet, and service in the ~~third~~second quarter of fiscal ~~2022~~2023 combined with lower floorplan interest expenses more than offset the increase in operating expenses during the period.

Operating Expenses


		Three Months Ended October 31,						Increase/			Percent			Three Months Ended July 31,						Increase/			Percent
		2021			2020			(Decrease)			Change			2022			2021			(Decrease)			Change
		(dollars in thousands)												(dollars in thousands)
Operating Expenses	Operating Expenses	$	62,943		$	54,115		$	8,828		16.3	%	Operating Expenses	$	68,828		$	57,074		$	11,754		20.6	%
Operating Expenses as a Percentage of Revenue	Operating Expenses as a Percentage of Revenue	13.9		%	15.0		%	(1.1)		%	(7.3)	%	Operating Expenses as a Percentage of Revenue	13.9		%	15.1		%	(1.2)		%	(7.9)	%

Our operating expenses in the ~~third~~second quarter of fiscal ~~2022~~2023 increased ~~16.3%~~20.6% as compared to the ~~third~~second quarter of fiscal ~~2021.~~2022. The increase in operating expenses was primarily ~~due to~~the result of an increase in variable expenses associated with increased sales. Operating expenses as a percentage of revenue decreased to 13.9% in the ~~third~~second quarter of fiscal ~~2022~~2023 from ~~15.0%~~15.1% in the ~~third~~second quarter of fiscal ~~2021.~~2022. The decrease in operating expenses as a percentage of revenue was due to the increase in total revenue in the ~~third~~second quarter of fiscal ~~2022,~~2023, as compared to the ~~third~~second quarter of fiscal ~~2021,~~2022, which positively affected our ability to leverage our fixed operating costs.

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Impairment Charges
Three Months Ended October 31, Increase/ Percent
2021 2020 (Decrease) Change
(dollars in thousands)
Impairment of Goodwill $ — $ 1,453 $ (1,453) (100.0) %
Impairment of Intangible and Long-Lived Assets — 1,102 (1,102) (100.0) %


	Three Months Ended July 31,		Increase/	Percent
	2022	2021	(Decrease)	Change
	(dollars in thousands)

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

~~The Company~~We did not recognize any impairment ~~expense~~charges in the ~~third~~second quarter of fiscal ~~2022.~~2023. In the ~~third~~second quarter of fiscal ~~2021, the Company~~2022, we recognized $1.5 million inof impairment ~~expense related to~~charges on certain ~~goodwill~~intangible and long-lived assets in our International segment. An additional $1.1 million in impairment expense was also recognized related to other intangible assets and long-lived assets primarily in our International segment in the third quarter of fiscal 2021.

Other Income (Expense)


		Three Months Ended October 31,				Increase/		Percent			Three Months Ended July 31,				Increase/		Percent
		2021		2020		(Decrease)		Change			2022		2021		(Decrease)		Change
		(dollars in thousands)									(dollars in thousands)
Interest and other income (expense)		$	616	$	(361)	$	977	n/m
Interest and other income										Interest and other income	$	873	$	654	$	219	33.5	%
Floorplan interest expense	Floorplan interest expense	(259)		(757)		(498)		(65.8)	%	Floorplan interest expense	(245)		(350)		(105)		(30.0)	%
Other interest expense	Other interest expense	(1,071)		(940)		131		13.9	%	Other interest expense	(1,349)		(1,118)		231		20.7	%

Interest and other income ~~(expense)~~ increased by ~~$1.0~~$0.2 million in the ~~third~~second quarter of fiscal 2023, as compared to the second quarter of fiscal 2022, ~~as compared to the third quarter of fiscal 2021,~~ due to ~~fluctuations~~increased sublease rental income of facilities that were divested in ~~foreign currency exchange rates, primarily the Ukrainian currency.~~January 2022. The decrease in floorplan interest expense of ~~65.8%~~30.0% was due to ~~lower borrowings.~~decreased levels of interest bearing inventory in the International segment. The increase in other interest expense was primarily due to increased fixed rate, long term debt from real estate purchases throughout fiscal 2022.

Provision for Income Taxes
Three Months Ended October 31, Increase/ Percent
2021 2020 (Decrease) Change
(dollars in thousands)
Provision for Income Taxes $ 7,007 $ 3,912 $ 3,095 79.1 %


	Three Months Ended July 31,				Increase/		Percent
	2022		2021		(Decrease)		Change
	(dollars in thousands)
Provision for Income Taxes	$	8,191	$	4,383	$	3,808	86.9	%

Our effective tax rate was ~~24.3%~~24.7% and ~~28.3%~~28.0% for the three months ended ~~October~~July 31, 2022 and July 31, 2021, respectively, and ~~October~~was 25.1% and 25.6% for the six months ended July 31, ~~2020.~~2022 and 2021, respectively. The effective tax rate for each of the ~~three~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020~~2021 is subject to variation due to factors such as the impact of certain discrete items, mainly the vesting of share-based compensation, the mix of domestic and foreign income and recognition of a valuation allowance on certain of our foreign deferred tax ~~assets and foreign currency gains and losses.~~assets.

Table of C ~~ontents~~Contents

Segment Results


		Three Months Ended October 31,				Increase/		Percent			Three Months Ended July 31,				Increase/		Percent
		2021		2020		(Decrease)		Change			2022		2021		(Decrease)		Change
		(dollars in thousands)									(dollars in thousands)
Revenue	Revenue									Revenue
Agriculture	Agriculture	$	281,506	$	220,625	$	60,881	27.6	%	Agriculture	$	348,956	$	219,364	$	129,592	59.1	%
Construction	Construction	79,735		79,030		705		0.9	%	Construction	70,022		80,943		(10,921)		(13.5)	%
International	International	92,734		61,217		31,517		51.5	%	International	77,565		77,323		242		0.3	%
Total	Total	$	453,975	$	360,872	$	93,103	25.8	%	Total	$	496,543	$	377,630	$	118,913	31.5	%

Income (Loss) Before Income Taxes
Income Before Income Taxes										Income Before Income Taxes
Agriculture	Agriculture	$	19,618	$	13,575	$	6,043	44.5	%	Agriculture	$	24,895	$	12,067	$	12,828	106.3	%
Construction	Construction	3,564		1,448		2,116		146.1	%	Construction	3,923		2,815		1,108		39.4	%
International	International	6,260		(2,424)		8,684		n/m		International	5,870		430		5,440		n/m
Segment Income Before Income Taxes	Segment Income Before Income Taxes	29,442		12,599		16,843		133.7	%	Segment Income Before Income Taxes	34,688		15,312		19,376		126.5	%
Shared Resources	Shared Resources	(619)		1,225		(1,844)		n/m		Shared Resources	(1,538)		320		(1,858)		n/m
Total	Total	$	28,823	$	13,824	$	14,999	108.5	%	Total	$	33,150	$	15,632	$	17,518	112.1	%

Agriculture

Agriculture segment revenue for the ~~third~~second quarter of fiscal ~~2022~~2023 increased ~~27.6%~~59.1% compared to the ~~third~~second quarter of fiscal ~~2021.~~2022. The higher revenue was driven primarily by ~~increased equipment demand due to higher~~an increase in same-store sales of 45.7% and our acquistions of Jaycox Implement and Mark's Machinery, completed in December 2021 and April 2022, respectively. The same-store sales increase was primarily driven by favorable commodity prices and higher net farm income.

Agriculture segment income before income taxes for the second quarter of fiscal 2023 was ~~$19.6~~$24.9 million compared to $12.1 million for the ~~third~~second quarter of fiscal 2022 compared to $13.6 million for the third quarter of fiscal 2021. Higher equipment revenue along with increased gross profit margin on equipment drove the largest increase in gross profit. Decreased inventory levels resulted in lower floorplan and other interest expense for the third quarter of fiscal 2022, as compared to the third quarter of fiscal 2021, which also contributed to the2022. The improvement in segment ~~results.~~results was primarily the result of increased revenues and stronger equipment margins which were positively impacted by favorable end market conditions, healthy inventory, and a $2.6 million benefit recognized on the expected achievement of annual manufacturer incentive programs.

Construction

Construction segment revenue for the ~~third~~second quarter of fiscal ~~2022 was flat~~2023 decreased 13.5% compared to the ~~third~~second quarter of fiscal ~~2021.~~2022. However, after taking into account the divestiture of the ~~Phoenix~~Billings, Great Falls, and ~~Tucson, Arizona~~Missoula, Montana, and Gillette, Wyoming stores in the fourth quarter of fiscal ~~2021,~~2022 and the first quarter of fiscal 2023 divestiture of our consumer products store in North Dakota, same-store sales in our Construction segment increased ~~11.1%~~14.9% for the ~~third~~second quarter of fiscal ~~2022,~~2023, as compared to the ~~third~~second quarter of fiscal ~~2021. Higher same store~~2022. The driving factor of the same-store sales ~~were driven by increased construction activity throughout~~increase was parts, service, and rental and other which increased 18.1%, 11.7%, and 20.0%, respectively, from the ~~footprint.~~second quarter of fiscal 2023, as compared to the second quarter of fiscal 2022.

Our Construction segment income before taxes was ~~$3.6~~$3.9 million for the ~~third~~second quarter of fiscal ~~2022~~2023 compared to ~~$1.4~~$2.8 million in the ~~third~~second quarter of fiscal ~~2021.~~2022. The improvement in segment results was primarily due to ~~increased equipment gross profit margin~~an increase in same store sales, as described above and ~~decreased inventory levels which resulted in lower floorplan interest expense for the third quarter of fiscal 2022, as compared to the third quarter of fiscal 2021. An~~an increase in rental fleet utilization, which led to an increase in rental gross profit ~~margin, which also contributed to the improvement in segment results.~~margin. The dollar utilization — which is calculated by dividing the rental revenue earned on our rental fleet by the average gross carrying value of our rental fleet (comprised of original equipment costs plus additional capitalized costs) for that period — of our rental fleet increased from ~~25.7%~~26.6% in the ~~third~~second quarter of fiscal ~~2021~~2022 to ~~31.4%~~31.9% in the ~~third~~second quarter of fiscal ~~2022.~~2023.

International

International segment revenue was $77.6 million for the ~~third~~second quarter of fiscal ~~2022 increased 51.5%~~2023 compared to $77.3 million in the ~~third~~second quarter of fiscal ~~2021. Higher~~2022. While segment revenue was ~~driven~~essentially flat, a 25% decrease in total revenue from our Ukrainian subsidiary due to the Russia-Ukraine conflict, and the significant devaluation of the Euro, the functional currency in much of our international footprint, were more than offset by a same-store sales increase of 5.9% due to many of the same macroeconomic factors as the Agriculture segment, as well as favorable growing conditions throughout most of the farming footprint we serve, which has improved customer sentiment and has had a positive impact on equipment sales. The increase was partially offset by the divestiture of our Novi Sad, Serbia location in the third quarter of fiscal 2022. Same-store sales in our International segment increased 62.5% for the third quarter of fiscal 2022 as compared to the third quarter of fiscal 2021, primarily driven bydriving an increase in equipment sales.

Table of C ~~ontents~~Contents

Our International segment income before income taxes was ~~$6.3~~$5.9 million for the ~~third~~second quarter of fiscal ~~2022~~2023 compared to segment ~~loss~~income before income taxes of ~~$2.4~~$0.4 million for the same period last year. The increase in segment pre-tax income was primarily the result of improved equipment gross profit margin and an impairment of certain intangible and fixed assets in our German subsidiary in the second quarter of fiscal 2022.

Shared Resources/Eliminations

We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments. Since these allocations are set early in the year, unallocated balances may occur. Shared Resources loss before income taxes was $1.5 million for the second quarter of fiscal 2023 compared to income before income taxes of $0.3 million for the same period last year. The lower shared resources results were driven by $0.5 million of acquisition related expenses incurred for the Heartland Companies acquisition.

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Six Months Ended July 31, 2022 Compared to Six Months Ended July 31, 2021

Consolidated Results

Revenue


	Six Months Ended July 31,				Increase/		Percent
	2022		2021		(Decrease)		Change
	(dollars in thousands)
Equipment	$	731,582	$	548,713	$	182,869	33.3	%
Parts	146,255		127,942		18,313		14.3	%
Service	62,887		57,379		5,508		9.6	%
Rental and other	16,825		16,300		525		3.2	%
Total Revenue	$	957,549	$	750,334	$	207,215	27.6	%

Total revenue for the first six months of fiscal 2023 was up 27.6% or $207.2 million compared to the first six months of fiscal 2022, driven primarily by an increase in Company-wide same-store sales of 27.1% and our acquistions of Jaycox Implement and Mark's Machinery, completed in December 2021 and April 2022, respectively. The same-store sales increase was primarily driven by favorable commodity prices, higher net farm income and increased construction activity in our footprint.

Gross Profit


	Six Months Ended July 31,						Increase/			Percent
	2022			2021			(Decrease)			Change
	(dollars in thousands)
Gross Profit
Equipment	$	97,360		$	64,705		$	32,655		50.5	%
Parts	46,240			37,413			8,827			23.6	%
Service	41,055			38,314			2,741			7.2	%
Rental and other	6,738			5,563			1,175			21.1	%
Total Gross Profit	$	191,393		$	145,995		$	45,398		31.1	%
Gross Profit Margin
Equipment	13.3		%	11.8		%	1.5		%	12.7	%
Parts	31.6		%	29.2		%	2.4		%	8.2	%
Service	65.3		%	66.8		%	(1.5)		%	(2.2)	%
Rental and other	40.0		%	34.1		%	5.9		%	17.3	%
Total Gross Profit Margin	20.0		%	19.5		%	0.5		%	2.6	%
Gross Profit Mix
Equipment	50.8		%	44.3		%	6.5		%	14.7	%
Parts	24.2		%	25.6		%	(1.4)		%	(5.5)	%
Service	21.5		%	26.2		%	(4.7)		%	(17.9)	%
Rental and other	3.5		%	3.9		%	(0.4)		%	(10.3)	%
Total Gross Profit Mix	100.0		%	100.0		%

Gross profit increased 31.1% or $45.4 million for the first six months of fiscal 2023, as compared to the same period last year. The increase in gross profit was primarily the result of increased equipment sales and stronger equipment margins for the first six months of fiscal 2023. These higher equipment sales and margins were driven by a healthy inventory and favorable end market conditions. Higher equipment margins were also benefited from a $2.6 million benefit recognized on the expected achievement of annual manufacturer incentive programs. The overall gross profit margin increase from 19.5% to 20.0% was primarily due to stronger equipment margins and rental margins, but was partially offset due to a shift in gross profit mix to lower margin equipment sales relative to parts, service, and rental sales.

Our Company-wide absorption rate for the first six months of fiscal 2023 increased to 85.6%, as compared to 81.0% during the same period last year, as the increase in gross profit from parts, rental, and service combined with lower floorplan

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interest expense more than offset the increase in operating expenses during the six month period compared to that of the prior year six month period.

Operating Expenses


	Six Months Ended July 31,						Increase/			Percent
	2022			2021			(Decrease)			Change
	(dollars in thousands)
Operating Expenses	$	132,980		$	113,516		$	19,464		17.2	%
Operating Expenses as a Percentage of Revenue	13.9		%	15.1		%	(1.2)		%	(7.9)	%

Our operating expenses for the first six months of fiscal 2023 increased $19.5 million as compared to the first six months of fiscal 2022. The increase in operating expenses was a result of an increase in variable expenses associated with increased sales. Operating expenses as a percentage of revenue decreased to 13.9% in the first six months of fiscal 2023 from 15.1% in the first six months of fiscal 2022. The decrease in operating expenses as a percentage of total revenue was due to the increase in total revenue in the first six months of fiscal 2023, as compared to the first six months of fiscal 2022, which positively affected our ability to leverage our fixed operating costs.

Impairment Charges


	Six Months Ended July 31,		Increase/	Percent
	2022	2021	(Decrease)	Change
	(dollars in thousands)

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

We did not recognize any impairment charges in the first six months of fiscal 2023. In the first six months of fiscal 2022, we recognized $1.5 million of impairment charges on certain intangible and long-lived assets in our International segment.

Other Income (Expense)


	Six Months Ended July 31,				Increase/		Percent
	2022		2021		(Decrease)		Change
	(dollars in thousands)
Interest and other income	$	1,365	$	1,320	$	45	3.4	%
Floorplan interest expense	(499)		(768)		(269)		(35.0)	%
Other interest expense	(2,545)		(2,222)		323		14.5	%

Floorplan interest expense decreased 35.0% for the first six months of fiscal 2023, as compared to the same period last year, primarily due to lower interest bearing inventory, primarily in our international segment. The increase in other interest expense in the first six months of fiscal 2023, as compared to the first six months of fiscal 2022, is the result of increased long term debt on real estate purchased during fiscal 2022 and 2023.

Provision for Income Taxes


	Six Months Ended July 31,				Increase/		Percent
	2022		2021		Decrease		Change
	(dollars in thousands)
Provision for Income Taxes	$	14,235	$	7,515	$	6,720	89.4	%

Our effective tax rate was 25.1% for the first six months of fiscal 2023 and 25.6% for the same period last year. The effective tax rate for the six months ended July 31, 2022 and 2021 is subject to variation due to factors such as the impact of certain discrete items, mainly the vesting of share-based compensation, the mix of domestic and foreign income, recognition of a valuation allowance on certain of our foreign deferred tax assets and foreign currency gains and losses.

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Segment Results


	Six Months Ended July 31,				Increase/		Percent
	2022		2021		(Decrease)		Change
	(dollars in thousands)
Revenue
Agriculture	$	667,503	$	448,915	$	218,588	48.7	%
Construction	136,986		149,550		(12,564)		(8.4)	%
International	153,060		151,869		1,191		0.8	%
Total	$	957,549	$	750,334	$	207,215	27.6	%

Income Before Income Taxes
Agriculture	$	41,344	$	23,292	$	18,052	77.5	%
Construction	7,132		2,953		4,179		141.5	%
International	10,195		3,238		6,957		n/m
Segment Income Before Income Taxes	58,671		29,483		29,188		99.0	%
Shared Resources	(1,937)		(172)		(1,765)		n/m
Total	$	56,734	$	29,311	$	27,423	93.6	%

Agriculture

Agriculture segment revenue for the first six months of fiscal 2023 increased 48.7% compared to the same period last year. The higher revenue was driven primarily by an increase in same-store sales of 35.8% for the first six months of fiscal 2023, as compared to the same period last year as well as the acquisitions of Jaycox Implement and Mark's Machinery in December 2021 and April 2022, respectively. The same-store sales increase was driven by increased equipment demand due to higher commodity prices and higher net farm income.

Agriculture segment income before income taxes was $41.3 million for the first six months of fiscal 2023 compared to $23.3 million over the first six months of fiscal 2022. The improvement in segment results was the result of higher equipment revenue along with higher gross profit margin on equipment driven by increased demand, healthy inventory, and a $2.6 million benefit recognized on the expected achievement of annual manufacturer incentive programs.

Construction

Construction segment revenue for the first six months of fiscal 2023 decreased 8.4% compared to the same period last year. However, when accounting for the divestitures of the Billings, Great Falls, and Missoula, Montana and Gillette, Wyoming stores in January 2022, and the North Dakota consumer products store in March 2022, same-store sales increased 19.5%. Higher same-store sales were driven by increased construction activity throughout the footprint.

Our Construction segment income before income taxes was $7.1 million for the first six months of fiscal 2023 compared to income before income taxes of $3.0 million for the first six months of fiscal 2022. The increase in segment results was primarily due to increased construction activity within our footprint and an increase in rental fleet utilization. The dollar utilization of our rental fleet increased from 22.9% in the first six months of fiscal 2022 to 28.6% in the first six months of fiscal 2023.

International

International segment revenue for the first six months of fiscal 2023 increased 0.8% compared to the same period last year. Higher commodity prices are primarily driving demand for equipment sales. The increase in revenue was partially offset by a 9.0% devaluation of the Euro, the functional currency in much of our international footprint, in the first six months of fiscal 2023. The segment was also negatively impacted by a 38% decrease in revenues from our Ukrainian subsidiary due to the Russia-Ukraine conflict compared to the first six months of fiscal 2022.

Our International segment income before income taxes was $10.2 million for the first six months of fiscal 2023 compared to income before income taxes of $3.2 million for the same period last year. The higher segment results were

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primarily the result and equipment gross profit margin. ~~The segment did not recognize any~~There were no fixed or intangible asset impairment charges recognized in the ~~third quarter~~first six months of fiscal 2023 while $1.5 million was recognized in the first six months of fiscal 2022, ~~compared~~related to ~~$2.3 million~~the impairment of ~~goodwill~~certain intangible and ~~other intangible asset impairment related charges in the third quarter~~long-lived assets of ~~fiscal 2021.~~our German subsidiary.

Shared Resources/Eliminations

We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments. Since these allocations are set early in the year, and a portion is planned to be unallocated, unallocated balances may occur. Shared Resources loss before income taxes was ~~$0.6 million for the third quarter of fiscal 2022 compared to income before income taxes of $1.2 million for the same period last year.~~

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~~Nine Months Ended October 31, 2021 Compared to Nine Months Ended October 31, 2020~~

~~Consolidated Results~~

~~Revenue~~
Nine Months Ended October 31, Increase/ Percent
2021 2020 (Decrease) Change
(dollars in thousands)
Equipment $ 878,528 $ 662,060 $ 216,468 32.7 %
Parts 208,464 194,846 13,618 7.0 %
Service 89,405 84,282 5,123 6.1 %
Rental and other 27,914 33,357 (5,443) (16.3) %
Total Revenue $ 1,204,311 $ 974,545 $ 229,766 23.6 %

Total revenue for the first nine months of fiscal 2022 was up 23.6% or $229.8 million compared to the first nine months of fiscal 2021, with increases in revenue from our equipment, parts and service businesses. The 32.7% increase in equipment sales was the primary factor in the total sales increase from the prior year period with all three segments recognizing increases, compared to the prior year period. Company-wide same-store sales increased 25.8% over the comparable prior year period.

~~Gross Profit~~
Nine Months Ended October 31, Increase/ Percent
2021 2020 (Decrease) Change
(dollars in thousands)
Gross Profit
Equipment $ 105,944 $ 69,012 $ 36,932 53.5 %
Parts 62,280 58,641 3,639 6.2 %
Service 60,091 56,019 4,072 7.3 %
Rental and other 10,160 9,978 182 1.8 %
Total Gross Profit $ 238,475 $ 193,650 $ 44,825 23.1 %
Gross Profit Margin
Equipment 12.1 % 10.4 % 1.7 % 16.3 %
Parts 29.9 % 30.1 % (0.2) % (0.7) %
Service 67.2 % 66.5 % 0.7 % 1.1 %
Rental and other 36.4 % 29.9 % 6.5 % 21.7 %
Total Gross Profit Margin 19.8 % 19.9 % (0.1) % (0.5) %
Gross Profit Mix
Equipment 44.4 % 35.6 % 8.8 % 24.7 %
Parts 26.1 % 30.3 % (4.2) % (13.9) %
Service 25.2 % 28.9 % (3.7) % (12.8) %
Rental and other 4.3 % 5.2 % (0.9) % (17.3) %
Total Gross Profit Mix 100.0 % 100.0 %

~~Gross profit increased 23.1% or $44.8~~$1.9 million for the first ~~nine~~six months of fiscal 2022, as compared to the same period last year. The increase in gross profit was primarily the result of increased equipment sales and stronger equipment margins for the first nine months of fiscal 2022. These higher equipment sales and margins were driven by a healthy inventory and favorable end market conditions. The overall gross profit margin decreased slightly from 19.9% to 19.8% due to a shift in gross profit mix to lower margin equipment sales relative to parts, service, and rental sales.

Our Company-wide absorption rate for the first nine months of fiscal 2022 increased to 86.7%, as compared to 82.7% during the same period last year, as the increase in gross profit from parts and service combined with lower floorplan interest expense more than offset the increase in operating expenses during the nine month period compared to that of the prior year nine month period.

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~~Operating Expenses~~
Nine Months Ended October 31, Increase/ Percent
2021 2020 (Decrease) Change
(dollars in thousands)
Operating Expenses $ 176,460 $ 160,252 $ 16,208 10.1 %
Operating Expenses as a Percentage of Revenue 14.7 % 16.4 % (1.7) % (10.4) %

Our operating expenses for the first nine months of fiscal 2022 increased $16.2 million as compared to the first nine months of fiscal 2021. The increase in operating expenses was primarily due to variable expenses associated with increased sales. Operating expenses as a percentage of revenue decreased to 14.7% in the first nine months of fiscal 2022 from 16.4% in the first nine months of fiscal 2021. The decrease in operating expenses as a percentage of total revenue was due to the increase in total revenue in the first nine months of fiscal 2022, as compared to the first nine months of fiscal 2021, which positively affected our ability to leverage our fixed operating costs.

~~Impairment Charges~~
Nine Months Ended October 31, Increase/ Percent
2021 2020 (Decrease) Change
(dollars in thousands)
Impairment of Goodwill $ — $ 1,453 $ (1,453) (100.0) %
Impairment of Intangible and Long-Lived Assets 1,498 1,318 180 13.7 %

We recognized $1.5 million in impairment charges in our International segment related to certain intangible and long-lived assets and $1.3 million of impairment charges on certain long-lived assets primarily in our International segment during the first nine months of fiscal 2022 and 2021, respectively. In addition, in the first nine months of fiscal 2021, we recognized $1.5 million in impairment charges related to certain goodwill assets in the International segment, but had no such impairment charges in the first nine months of fiscal 2022.

~~Other Income (Expense)~~
Nine Months Ended October 31, Increase/ Percent
2021 2020 (Decrease) Change
(dollars in thousands)
Interest and other income (expense) $ 1,936 $ 332 $ 1,604 n/m
Floorplan interest expense (1,027) (2,811) (1,784) (63.5) %
Other interest expense (3,292) (2,884) 408 14.1 %

Floorplan interest expense decreased 63.5% for the first nine months of fiscal 2022, as compared to the same period last year, primarily due to lower borrowings and a lower interest rate environment. The increase in other interest expense in the first nine months of fiscal 2022, as compared to the first nine months of fiscal 2021, is the result of increased long term debt on real estate purchased during fiscal 2022. The increase in interest and other income in the first nine months of fiscal 2022 as compared to the same period of fiscal 2021 is primarily due to foreign currency gains in fiscal 2022 due to the strengthening of the Ukrainian currency compared to losses in fiscal 2021 due to the devaluation of the Ukranian currency.

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~~Provision for Income Taxes~~
Nine Months Ended October 31, Increase/ Percent
2021 2020 Decrease Change
(dollars in thousands)
Provision for Income Taxes $ 14,521 $ 6,691 $ 7,830 117.0 %

Our effective tax rate was 25.0% for the first nine months of fiscal 2022 and 26.5% for the same period last year. The effective tax rate for the nine months ended October 31, 2021 and 2020 is subject to variation due to factors such as the impact of certain discrete items, mainly the vesting of share-based compensation, the mix of domestic and foreign income, recognition of a valuation allowance on certain of our foreign deferred tax assets and foreign currency gains and losses.

~~Segment Results~~

Certain financial information for our Agriculture, Construction and International business segments is presented below. “Shared Resources” in the table below refers to the various unallocated income/(expense) items that we have retained at the general corporate level. Revenue between segments is immaterial.
Nine Months Ended October 31, Increase/ Percent
2021 2020 (Decrease) Change
(dollars in thousands)
Revenue
Agriculture $ 730,422 $ 583,326 $ 147,096 25.2 %
Construction 229,286 216,862 12,424 5.7 %
International 244,603 174,357 70,246 40.3 %
Total $ 1,204,311 $ 974,545 $ 229,766 23.6 %
Income (Loss) Before Income Taxes
Agriculture $ 42,910 $ 26,490 $ 16,420 62.0 %
Construction 6,518 (50) 6,568 n/m
International 9,498 (3,136) 12,634 n/m
Segment Income Before Income Taxes 58,926 23,304 35,622 n/m
Shared Resources (793) 1,961 (2,754) n/m
Total $ 58,133 $ 25,265 $ 32,868 130.1 %

~~Agriculture~~

Agriculture segment revenue for the first nine months of fiscal 2022 increased 25.2% compared to the same period last year. We experienced increases across our equipment, parts and service businesses. Equipment sales were driven by increased equipment demand due to higher commodity prices and higher net farm income. All sources of revenue in this segment benefited from the addition of the three HorizonWest locations (acquired in May 2020) that were not in the full prior year nine-month period. Same-store sales increased 23.8% for the first nine months of fiscal 2022, as compared to the same period last year.

Agriculture segment income before income taxes was $42.9 million for the first nine months of fiscal 2022 compared to $26.5 million over the first nine months of fiscal 2021. The improvement in segment results was the result of higher equipment revenue along with higher gross profit margin on equipment driven by increased demand and healthy inventory. Decreased inventory levels resulted in lower floorplan and other interest expense for the nine months ended October 31, 2021, which also contributed to the improvement in segment results.

~~Construction~~

Construction segment revenue for the first nine months of fiscal 2022 increased 5.7% compared to the same period last year, due to a same-store sales increase of 16.3%, which more than offset our divestiture of the Phoenix and Tucson, Arizona stores in the fourth quarter of fiscal year 2021. Higher equipment sales were driven by increased construction activity throughout the footprint.

~~Our Construction segment income before income taxes was $6.5 million for the first nine months of fiscal 2022~~2023 compared to a loss before income taxes of ~~$0.1 million for the first nine months of fiscal 2021. The increase in segment results~~

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was primarily due to increased construction activity as well as operational improvements within the segment. The segment also benefited from decreased inventory levels which resulted in lower floorplan and other interest expense for the nine months ended October 31, 2021. The dollar utilization of our rental fleet increased from 22.2% in the first nine months of fiscal 2021 to 25.8% in the first nine months of fiscal 2022.

~~International~~

International segment revenue for the first nine months of fiscal 2022 increased 40.3% compared to the same period last year. Higher segment revenue is being driven by many of the same macroeconomic factors as the Agriculture segment as well as favorable growing conditions for much of our farming footprint which has had a positive impact on all sources of sales, but primarily equipment sales.

~~Our International segment income before income taxes was $9.5 million for the first nine months of fiscal 2022 compared to a loss before income taxes of $3.1~~$0.2 million for the same period last year. The ~~higher segment~~lower shared resources results were ~~the result~~driven by $0.5 million of increased equipment sales and equipment gross profit margin. Impairment charges of $1.5 million were recognized in the first nine months of fiscal 2022 compared to $2.3 million in the first nine months of fiscal 2021,acquisition related ~~to the impairment of certain goodwill, other intangible and long-lived assets of our German reporting unit.~~

~~Shared Resources/Eliminations~~

~~We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net~~ expenses to our segments. Since these allocations are set early in the year, and a portion is planned to be unallocated, unallocated balances may occur. Shared Resources loss before income taxes was $0.8 millionincurred for the ~~first nine months of fiscal 2022 compared to income before income taxes of $2.0 million for the same period last year.~~Heartland Companies acquisition.

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Non-GAAP Financial Measures

To supplement net income and diluted earnings per share ("Diluted EPS"), both GAAP measures, we present adjusted net income and adjusted Diluted EPS, both non-GAAP measures, which include adjustments for items such as ~~ERP transition costs for fiscal year 2021, impairment charges and~~ foreign currency remeasurement gains/losses in ~~Ukraine.~~Ukraine and impairment charges. We believe that the presentation of adjusted net income and adjusted Diluted EPS is relevant and useful to our management and investors because it provides a measurement of earnings on activities that we consider to occur in the ordinary course of our business. Adjusted net income and adjusted Diluted EPS should be evaluated in addition to, and not considered a substitute for, or superior to, the most comparable GAAP measure. In addition, other companies may calculate these non-GAAP measures in a different manner, which may hinder comparability of our adjusted results with those of other companies.

~~Change in Non-GAAP Financial Measures~~

Beginning in the third quarter of fiscal 2022, the Company discontinued the use of the adjusted cash-flow measure and revised its presentation of two non-GAAP measures, Adjusted Net Income and Adjusted Diluted EPS, to better align with SEC guidance. The adjustment for income tax valuation allowance, a non-cash tax expense related to the use of deferred tax assets in certain jurisdictions, will no longer be included in these two non-GAAP measures. For comparability, references to prior periods' non-GAAP measures have also been updated to show the effect of omitting the valuation allowance from Adjusted Net Income and Adjusted Diluted EPS - see table below.

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


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2021		2020		2021		2020			2022		2021		2022		2021
		(dollars in thousands, except per share data)									(dollars in thousands, except per share data)
Adjusted Net Income	Adjusted Net Income									Adjusted Net Income
Net Income	Net Income	$	21,816	$	9,912	$	43,612	$	18,574	Net Income	$	24,959	$	11,249	$	42,499	$	21,796
Adjustments	Adjustments									Adjustments
ERP transition costs		—		766		—		2,250

Impairment charges	Impairment charges	—		2,555		1,498		2,771		Impairment charges	—		1,498		—		1,498
Ukraine remeasurement (gain) / loss		(113)		338		(296)		973
Ukraine remeasurement (gain) / loss (1)										Ukraine remeasurement (gain) / loss (1)	21		(53)		315		(183)
Total Pre-Tax Adjustments	Total Pre-Tax Adjustments	(113)		3,659		1,202		5,994		Total Pre-Tax Adjustments	21		1,445		315		1,315
Less: Tax Effect of Adjustments (1)		—		1,566		—		2,613

Total Adjustments		(113)		2,093		1,202		3,381

Adjusted Net Income	Adjusted Net Income	$	21,703	$	12,005	$	44,814	$	21,955	Adjusted Net Income	$	24,980	$	12,694	$	42,814	$	23,111

Adjusted Diluted EPS	Adjusted Diluted EPS									Adjusted Diluted EPS
Diluted EPS	Diluted EPS	$	0.97	$	0.44	$	1.93	$	0.83	Diluted EPS	$	1.10	$	0.50	$	1.88	$	0.97
Adjustments (2)	Adjustments (2)									Adjustments (2)
ERP transition costs		—		0.03		—		0.10

Impairment charges	Impairment charges	—		0.11		0.07		0.12		Impairment charges	—		0.07		—		0.07
Ukraine remeasurement (gain) / loss		(0.01)		0.02		(0.02)		0.04
Ukraine remeasurement (gain) / loss (1)										Ukraine remeasurement (gain) / loss (1)	—		(0.01)		0.01		(0.01)
Total Pre-Tax Adjustments	Total Pre-Tax Adjustments	(0.01)		0.16		0.05		0.26		Total Pre-Tax Adjustments	—		0.06		0.01		0.06
Less: Tax Effect of Adjustments (1)		—		0.07		—		0.12

Total Adjustments		(0.01)		0.09		0.05		0.14

Adjusted Diluted EPS	Adjusted Diluted EPS	$	0.96	$	0.53	$	1.98	$	0.97	Adjusted Diluted EPS	$	1.10	$	0.56	$	1.89	$	1.03

(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 $0.7 million for the three months ended October 31, 2020 and $1.3 million for the nine months ended October 31, 2020.
(1) Due to the income tax valuation allowance on the Ukrainian and German subsidiaries, there are no tax adjustments of the Ukraine remeasurement (gain)/loss for the periods ended July 31, 2022 and 2021 or the impairment charge for the period ended July 31, 2021.										(1) Due to the income tax valuation allowance on the Ukrainian and German subsidiaries, there are no tax adjustments of the Ukraine remeasurement (gain)/loss for the periods ended July 31, 2022 and 2021 or the impairment charge for the period ended July 31, 2021.
(2) Adjustments are net of amounts allocated to participating securities where applicable.	(2) Adjustments are net of amounts allocated to participating securities where applicable.									(2) Adjustments are net of amounts allocated to participating securities where applicable.

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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 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 that our borrowing capacity under our credit agreements is dependent on compliance with various covenants as further described in the "Risk Factors" section of our Annual Report on Form 10-K.

Equipment Inventory and Floorplan Payable Credit Facilities

As of ~~October~~July 31, ~~2021,~~2022, the Company had floorplan payable lines of credit for equipment purchases totaling ~~$753.0~~$743.0 million, which is primarily comprised of a $450.0 million credit facility with CNH Industrial, a $185.0 million floorplan payable line under the Bank Syndicate Agreement, and a $50.0 million credit facility with DLL Finance.

Our equipment inventory turnover increased from ~~1.6~~2.7 times for the rolling 12 month period ended ~~October~~July 31, ~~2020~~2021 to ~~3.1~~3.6 times for the rolling 12 month period ended ~~October~~July 31, ~~2021.~~2022. The increase in equipment turnover was attributable to an increase in equipment sales ~~and a~~ ~~decrease~~ ~~in average equipment inventory~~ over the rolling 12 month period ended ~~October~~July 31, ~~2021~~2022 as compared to the same period ended ~~October~~July 31, ~~2020.~~2021. Our

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equity in equipment inventory, which reflects the portion of our equipment inventory balance that is not financed by floorplan payables, decreased to ~~46.0%~~38.3% as of ~~October~~July 31, ~~2021~~2022 from ~~52.1%~~58.2% as of January 31, ~~2021.~~2022. The decrease was primarily due to ~~more inventory being financed~~drawing on our floorplan loan with ~~non-interest bearing floorplan lines~~the Bank Syndicate, in anticipation of ~~credit.~~the Heartland acquisition.

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.~~assets, and funding acquisitions. Based on our current operational performance and taking into account the use of cash to pay the purchase price on the Heartland acquisition, we believe our cash flow from operations, available cash and available borrowing capacity under our existing credit facilities will adequately provide for our liquidity needs for, at a minimum, the next 12 months.

As of ~~October~~July 31, ~~2021,~~2022, we were in compliance with the financial covenants under our CNH Industrial and DLL Finance credit agreements and we were not subject to the fixed charge coverage ratio covenant under the Bank Syndicate Agreement as our adjusted excess availability plus eligible cash collateral (as defined therein) was not less than 15% of the lesser of (i) aggregate borrowing base and (ii) maximum credit amount as of ~~October~~July 31, ~~2021.~~2022. While not expected to occur, if anticipated operating results were to create the likelihood of a future covenant violation, we would expect to work with our lenders on an appropriate modification or amendment to our financing arrangements.

Cash Flow

Cash Flow Provided by (Used for) Operating Activities

Net cash ~~provided by~~used for operating activities was ~~$72.3~~$21.0 million for the first ~~nine~~six months of fiscal ~~2022,~~2023, compared to net cash provided by operating activities of ~~$60.8~~$28.6 million for the first ~~nine~~six months of fiscal ~~2021.~~2022. The change in net cash provided by (used for) operating activities is primarily the result of an increase in ~~net income and~~inventories partially offset by an increase in ~~the amount of inventory financed with~~ non-interest bearing floorplan lines of credit from manufacturers ~~which was partially offset by an increase in receivables~~ and ~~prepaid expenses~~higher net income for the first ~~nine~~six months of fiscal ~~2022.~~2023.

Cash Flow Used for Investing Activities

Net cash used for investing activities was ~~$29.0~~$20.7 million for the first ~~nine~~six months of fiscal ~~2022,~~2023, compared to ~~$22.2~~$19.4 million for the first ~~nine~~six months of fiscal ~~2021.~~2022. The increase in cash used for investing activities was primarily the result of ~~an increase in property and equipment purchases as~~ the ~~Company purchased formerly leased buildings and bought out vehicle leases~~business acquisition of Mark's Machinery in the first ~~nine~~six months of fiscal ~~2022~~. 2023.

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

Net cash ~~used for~~provided by financing activities was ~~$31.3~~$39.6 million for the first ~~nine~~six months of fiscal ~~2022~~2023 compared to cash used for financing activities of ~~$40.8~~$22.4 million for the first ~~nine~~six months of fiscal ~~2021~~2022. The ~~decrease~~increase in cash ~~used for~~provided by financing activities was primarily the result of ~~a decrease in repayments of non-manufacturer~~increased non-manufactured floorplan ~~lines of credit partially offset by~~

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~~an increase of principal payments on long term debt~~payables in the first ~~nine~~six months of fiscal 2023, as the Company drew on its Bank Syndicate floorplan loan in anticipation of the August 2022 acquisition of the Heartland Companies, compared to ~~the same period~~ last year.

Information Concerning Off-Balance Sheet Arrangements

As of ~~October~~July 31, ~~2021,~~2022, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Therefore, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Forward-looking statements are contained in this Quarterly Report on Form 10-Q, including in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as in our Annual Report on Form 10-K for the year ended January 31, ~~2021,~~2022, and in other materials ~~filed or to be~~ filed by the Company with the Securities and Exchange Commission (and included in oral statements or other written statements ~~made or to be~~ made by the Company).

Forward-looking statements are statements based on future expectations and specifically may include, among other things, statements relating to our expectations regarding ~~exchange rate and interest rate impact on~~the performance of our ~~business,~~Ukrainian subsidiary within our International segment, the impact of farm income levels on customer demand for agricultural equipment and services, the impact of the COVID-19 pandemic on our business, ~~including~~ the ~~impact~~effectiveness of ~~OSHA's emergency regulations regarding vaccination or weekly testing~~our new ERP system and the timing of ~~employees,~~the phased roll-out of the ERP system to the Company's domestic locations, the general market conditions of the agricultural and construction industries,

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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. These statements are based upon the current beliefs and expectations of our management. These forward-looking statements involve important risks and uncertainties that could significantly affect anticipated results or outcomes in the future and, accordingly, actual results or outcomes may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, the impact of the Russia -Ukraine conflict on our Ukrainian subsidiary, our ability to successfully integrate and realize growth opportunities and synergies in connection with the Heartland acquisition, the risk that we assume unforeseen or other liabilities in connection with the Heartland acquisition and the impact of those conditions and obligations imposed on us under the new CaseIH dealer agreements for the commercial application equipment business, our substantial dependence on CNH Industrial, including CNH Industrial's ability to design, manufacture and allocate inventory to our stores in quantities necessary to satisfy our customer's demands, the duration, scope and impact of the COVID-19 pandemic on the Company's operations and business, including the disruption of supply chains and associated impacts on the Company's supply vendors, adverse market conditions in the agricultural and construction equipment industries, and those matters identified and discussed under the section titled “Risk Factors” in our Annual Report on Form 10-K. In addition to those matters, there may exist additional risks and uncertainties not currently known to us or that we currently deem to be immaterial that may materially adversely affect our business, financial condition or results of operations.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Interest Rate Risk

Exposure to changes in interest rates results from borrowing activities used to fund operations. For fixed rate debt, interest rate changes affect the fair value of financial instruments but do not impact earnings or cash flows. Conversely, for floating rate debt, interest rate changes generally do not affect the fair market value but do impact future earnings and cash flows, assuming other factors are held constant. We have both fixed and floating rate financing. Some of our floating rate credit facilities contain minimum rates of interest to be charged. Based upon our interest-bearing balances and interest rates as of ~~October~~July 31, ~~2021,~~2022, holding other variables constant, a one percentage point increase in interest rates for the next 12-month period would decrease pre-tax earnings and cash flow by approximately ~~$0.3~~$0.6 million. Conversely, a one percentage point decrease in interest rates for the next 12-month period would result in an increase to pre-tax earnings and cash flow of approximately ~~$0.3~~$0.6 million. At ~~October~~July 31, ~~2021,~~2022, we had floorplan payables of ~~$174.7~~$274.2 million, of which approximately ~~$27.4~~$63.5 million was variable-rate floorplan payable and ~~$147.2~~$210.7 million was non-interest bearing. In addition, at ~~October~~July 31, ~~2021,~~2022, we had total long-term debt, including finance lease obligations, of ~~$81.9~~$94.8 million, all of which ~~all~~ was fixed rate debt.

Foreign Currency Exchange Rate Risk

Our foreign currency exposures arise as the result of our foreign operations. We are exposed to transactional foreign currency exchange rate risk through our foreign entities’ holding assets and liabilities denominated in currencies other than their functional currency. In addition, the Company is exposed to foreign currency transaction risk as a result of certain intercompany financing transactions. The Company attempts to manage its transactional foreign currency exchange rate risk through the use of derivative financial instruments, primarily foreign exchange forward contracts, or through natural hedging instruments. Based upon balances and exchange rates as of ~~October~~July 31, ~~2021,~~2022, holding other variables constant, we believe that a hypothetical 10% increase or decrease in all applicable foreign exchange rates would not have a material impact on our results of operations or cash flows. As of ~~October~~July 31, ~~2021,~~2022, our Ukrainian subsidiary had ~~$1.2~~$0.3 million of net monetary assets denominated in Ukrainian hryvnia ("UAH"). We have attempted to minimize our net monetary asset position in Ukraine through reducing overall asset levels in Ukraine and at times through borrowing in UAH which serves as a natural hedging instrument offsetting our net UAH denominated assets. ~~At certain times,~~Many of the currency and payment controls ~~imposed by~~ the National Bank of Ukraine imposed in February 2022, have ~~limited~~been relaxed, making it more practicable to manage our ~~ability~~UAH exposure. However, the continuation of the Russia/Ukraine conflict could lead to more significant UAH devaluations, similar to the 24% devaluation that occurred in July 2022, or more stringent payment controls in the future. The inability to fully manage our net monetary asset ~~position.~~position and continued UAH devaluations for an extended period of time, could have a significant adverse 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, ~~2021,~~2022, as filed with the Securities and Exchange Commission. Among other things, those factors, if they were to occur, could cause our actual results to differ materially from those expressed in our forward-looking statements in this report, and may materially adversely affect our business, financial condition, or results of operations. In addition to those factors, additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially adversely affect our business, financial condition or results of operations.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

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

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EXHIBIT INDEX

TITAN MACHINERY INC.

FORM 10-Q


No.						Description

2.1						Amendment No. 1 to Securities Purchase Agreement, dated as of July 28, 2022, by and among Titan Machinery Inc.; Heartland Agriculture, LLC; Gordon Glade, Jeff Keller, Robert Caldwell and Michael Stopkotte; Michael Anderson, Barb Anderson, David Clare, Scott Reins, Shawn Sterling, The Constance Kent Revocable Trust and Lenco Enterprises, LLC; and Robert Caldwell, solely in his capacity as Seller Representative.

2.2						Amendment No. 1 to Securities Purchase Agreement, dated as of July 29, 2022, by and among Titan Machinery Inc.; Heartland Leverage Lender, LLC; Gordon Glade, Jeff Keller and Robert Caldwell; and Robert Caldwell, solely in his capacity as Seller Representative.

10.1						Amendment, dated August 1, 2022, to the Amended and Restated Wholesale Floor Plan Credit Facility and Security Agreement, dated November 13, 2007, by and between Titan Machinery Inc. and CNH Industrial Capital America LLC

10.2						Agreement to Grant Commercial Application Equipment Distribution Rights, dated as of August 1, 2022, by and between CNH Industrial America LLC and Titan Machinery Inc.

10.3						Form of CaseIH Agriculture Equipment Sales and Service Agreement between CNH Industrial America LLC and Titan Machinery Inc.

10.4						Revision 1 to the Case IH Agricultural Equipment Sales and Service Agreement between CNH Industrial America LLC and Titan Machinery Inc.

10.5						Joinder to Third Amended and Restated Credit Agreement, dated as of August 31, 2022, by and among Titan Machinery Inc., Heartland Agriculture, LLC, Heartland Ag Kansas, LLC and Bank of America, N.A.

10.6						Joinder to Third Amended and Restated Guaranty and Security Agreement, dated as of August 31, 2022, by and among Titan Machinery Inc., Heartland Agriculture, LLC, Heartland Ag Kansas, LLC and Bank of America, N.A.

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, ~~2021,~~2022, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to the Condensed Consolidated Financial Statements.

101.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 2, 2021~~September 8, 2022
		TITAN MACHINERY INC.


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