What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-09-04 compared with 2020-06-04 · 163 added, 120 removed, 478 unchanged (37% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

April 30, 2020 January 31, 2020

July 31, 2020 January 31, 2020

Current Assets

31 unchanged sentences

Common stock, par value $ .00001 per share, $ 45,000 shares authorized;

22,314 shares issued and outstanding at April 30, 2020;

$ 22,553 shares issued and outstanding at July 31, 2020;

$ 22,335 shares issued and outstanding at January 31, 2020

8 unchanged sentences

(in thousands, except per share data)

Three Months Ended April 30,

Three Months Ended July 31, Six Months Ended July 31,

2020 2019 2020 2019

Equipment $ 202,654 $ 214,435 $ 421,159 $ 408,390

17 unchanged sentences

Other interest expense ( 978 ) ( 966 ) ( 1,944 ) ( 2,607 )

Income (Loss) Before Income Taxes 3,148 ( 515 )

Provision for (Benefit from) Income Taxes 886 ( 70 )

Net Income (Loss) $ 2,262 $ ( 445 )

Income Before Income Taxes 8,292 7,427 11,441 6,912

Provision for Income Taxes 1,892 1,916 2,779 1,846

Net Income $ 6,400 $ 5,511 $ 8,662 $ 5,066

Earnings per Share:

8 unchanged sentences

(in thousands)

Three Months Ended April 30,

Net Income (Loss) $ 2,262 $ ( 445 )

Other Comprehensive Income (Loss)

Three Months Ended July 31, Six Months Ended July 31,

2020 2019 2020 2019

Net Income $ 6,400 $ 5,511 $ 8,662 $ 5,066

Other Comprehensive Income

Foreign currency translation adjustments 778 1,012 250 241

Comprehensive Income (Loss) $ 1,734 $ ( 1,216 )

Comprehensive Income $ 7,178 $ 6,523 $ 8,912 $ 5,307

See Notes to Consolidated Financial Statements

11 unchanged sentences

BALANCE, April 30, 2019 22,184 $ — $ 248,534 $ 83,319 $ ( 3,111 ) $ 328,742

Cumulative-effect adjustment of adopting ASC 842, Leases — — — — — —

Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax 170 — — — — —

Stock-based compensation expense — — 694 — — 694

Net Income — — — 5,511 — 5,511

Other comprehensive Income — — — — 1,012 1,012

BALANCE, July 31, 2019 22,354 — 249,228 88,830 ( 2,099 ) 335,959

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity

7 unchanged sentences

BALANCE, April 30, 2020 22,314 $ — $ 251,051 $ 99,775 $ ( 3,748 ) $ 347,078

Cumulative-effect adjustment of adopting ASC 326, Credit Loss — — — — — —

Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax 239 — — — — —

Stock-based compensation expense — — 536 — — 536

Net income — — — 6,400 — 6,400

Other comprehensive income — — — — 778 778

BALANCE, July 31, 2020 22,553 — 251,587 106,175 ( 2,970 ) 354,792

See Notes to Consolidated Financial Statements

2 unchanged sentences

(in thousands)

Three Months Ended April 30,

Six Months Ended July 31,

Operating Activities

Net income (loss) $ 2,262 $ ( 445 )

Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities

Net income $ 8,662 $ 5,066

Adjustments to reconcile net income to net cash provided by (used for) operating activities

Depreciation and amortization 11,286 13,264

21 unchanged sentences

Net change in non-manufacturer floorplan payable 7,229 49,937

Principal payments on senior convertible notes — ( 45,644 )

Proceeds from long-term debt borrowings 1,112 11,786

8 unchanged sentences

Supplemental Disclosures of Cash Flow Information

Cash paid during the period

Cash paid (received) during the period

Income taxes, net of refunds $ ( 228 ) $ 3,064

13 unchanged sentences

(the “Company”) are subject to fluctuation due to varying weather patterns, which may impact the timing and amount of equipment purchases, rentals, and after-sales parts and service purchases by the Company’s Agriculture, Construction and International customers.

Therefore, operating results for the three-month period ended April 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2021.

Therefore, operating results for the six-month period ended July 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2021.

The information contained in the consolidated balance sheet as of January 31, 2020 was derived from the audited consolidated financial statements for the Company for the fiscal year then ended.

15 unchanged sentences

Additionally, our International stores have also been following pandemic safety protocols applicable to each location.

By June 2020, all of our stores were open to the public but still maintain pandemic safety protocols.

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.

4 unchanged sentences

Recently Adopted Accounting Guidance

In June 2016, the FASB issued a new standard, codified in ASC 326, that modifies how entities measure credit losses on most financial instruments.

In June 2016, the Financial Accounting Standards Board ("FASB") issued a new standard, codified in ASC 326, that modifies how entities measure credit losses on most financial instruments.

The new standard replaced the "incurred loss" model with an "expected credit loss" model that requires consideration of a broader range of information to estimate expected credit losses over the lifetime of the asset.

3 unchanged sentences

The Company identified and updated existing internal controls and procedures to ensure compliance with the new guidance, but such modifications were not deemed to be material to the Company's overall system of internal control.

While the adoption of this ASU did not have a material impact on the Company's consolidated financial statements, it required changes to the Company's process of estimating expected credit losses on trade receivables.

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

Balance at February 1, 2020 Current Expected Credit Loss Provision Write-offs Charged Against the Allowance Credit Loss Recoveries Collected F/X Impact Balance at April 30, 2020

(in thousands)

Agriculture $ 181 $ 14 $ 5 $ 40 $ — $ 230

Construction 1,016 113 71 4 — 1,062

International 1,746 226 133 6 ( 29 ) 1,816

$ 2,943 $ 353 $ 209 $ 50 $ ( 29 ) $ 3,108

While the adoption of this standard did not have a material impact on the Company's consolidated financial statements, it required changes to the Company's process of estimating expected credit losses on trade receivables.

See footnote 4 for further discussion of our accounts receivables.

In February 2018, the FASB issued guidance on the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract, codified in ASC 350-40.

1 unchanged sentence

This standard was adopted on February 1, 2020 and was applied using the prospective transition approach.

The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.

Unadopted Accounting Guidance

The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Accounting Guidance Not Yet Adopted

In March 2020, the FASB issued ASU No.

6 unchanged sentences

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

Three Months Ended April 30,

Three Months Ended July 31, Six Months Ended July 31,

2020 2019 2020 2019

(in thousands, except per share data)

Net income (loss) $ 2,262 $ ( 445 )

Net income $ 6,400 $ 5,511 $ 8,662 $ 5,066

Allocation to participating securities ( 101 ) ( 82 ) ( 129 ) ( 76 )

Net income (loss) attributable to Titan Machinery Inc.

Net income attributable to Titan Machinery Inc.

common stockholders $ 6,299 $ 5,429 $ 8,533 $ 4,990

7 unchanged sentences

Restricted stock units — — 18 —

Shares underlying senior convertible notes — 1,057

NOTE 3 - REVENUE

2 unchanged sentences

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

Three Months Ended April 30, 2020

Agriculture Construction International Total

(in thousands)

Three Months Ended July 31, 2020 Three Months Ended July 31, 2019

Agriculture Construction International Total Agriculture Construction International Total

(in thousands) (in thousands)

Equipment $ 110,601 $ 48,478 $ 43,575 $ 202,654 $ 111,212 $ 51,396 $ 51,827 $ 214,435

6 unchanged sentences

Total revenues $ 169,072 $ 77,719 $ 56,674 $ 303,465 $ 165,692 $ 84,039 $ 65,250 $ 314,981

Three Months Ended April 30, 2019

Agriculture Construction International Total

(in thousands)

Six Months Ended July 31, 2020 Six Months Ended July 31, 2019

Agriculture Construction International Total Agriculture Construction International Total

(in thousands) (in thousands)

Equipment $ 250,349 $ 82,732 $ 88,078 $ 421,159 $ 219,075 $ 94,442 $ 94,873 $ 408,390

7 unchanged sentences

Unbilled Receivables and Deferred Revenue

Unbilled receivables amounted to $ 17.1 million and $ 13.9 million as of April 30, 2020 and January 31, 2020.

Unbilled receivables amounted to $ 17.3 million and $ 13.9 million as of July 31, 2020 and January 31, 2020.

The increase in unbilled receivables is primarily the 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 $ 27.9 million and $ 39.5 million as of April 30, 2020 and January 31, 2020.

Deferred revenue from contracts with customers amounted to $ 21.7 million and $ 39.5 million as of July 31, 2020 and January 31, 2020.

Our deferred revenue most often increases in the fourth quarter of each fiscal year due to a higher level of customer down payments or prepayments and longer time periods between customer payment and delivery of the equipment asset, and the related recognition of equipment revenue, prior to its seasonal use.

During the three months ended April 30, 2020 and 2019, the Company recognized $ 29.7 million and $ 30.5 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, 2020 and January 31, 2019, respectively.

No material amount of revenue was recognized during the three months ended April 30, 2020 and 2019 from performance obligations satisfied in previous periods.

During the six months ended July 31, 2020 and 2019, the Company recognized $ 37.0 million and $ 41.2 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, 2020 and January 31, 2019, respectively.

No material amount of revenue was recognized during the three months ended July 31, 2020 and 2019 from performance obligations satisfied in previous periods.

The Company has elected as a practical expedient to not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of service of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

12 unchanged sentences

The Company does provide an allowance for these receivables based on historical experience and using credit information obtained from continued monitoring of customer accounts.

April 30, 2020 January 31, 2020

July 31, 2020 January 31, 2020

(in thousands)

1 unchanged sentence

Trade receivables due from customers $ 35,691 $ 36,400

Trade receivables due from finance companies 17,388 12,352

Unbilled receivables 17,280 13,944

Less allowance for expected credit loss 3,293 2,943

49,678 47,401

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

Trade and unbilled receivables from rental contracts

1 unchanged sentence

Unbilled receivables 875 861

Less allowance for expected credit loss 1,979 2,180

Other receivables

1 unchanged sentence

Other 998 1,198

Total receivables 81,659 77,899

Less allowance for expected credit losses ( 5,229 ) ( 5,123 )

Receivables, net of allowance for expected credit losses $ 75,782 $ 72,776

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

Agriculture Construction International Total

Balance at February 1, 2020 $ 181 $ 1,016 $ 1,746 $ 2,943

Current Expected Credit Loss Provision 14 113 226 353

Write-offs Charged Against Allowance 5 71 133 209

Credit Loss Recoveries Collected 40 4 6 50

F/X Impact — — ( 29 ) ( 29 )

Balance at April 30, 2020 230 1,062 1,816 3,108

Current Expected Credit Loss Provision 16 95 265 376

Write-offs Charged Against Allowance 47 78 98 223

Credit Loss Recoveries Collected 9 — — 9

F/X Impact — — 23 23

Balance at July 31, 2020 $ 208 $ 1,079 $ 2,006 $ 3,293

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

Three Months Ended April 30,

Three Months Ended July 31, Six Months Ended July 31,

2020 2019 2020 2019

(in thousands)

2 unchanged sentences

Receivables from rental contracts 13 414 151 497

$ 390 $ 1,072 $ 671 $ 1,483

NOTE 5 - INVENTORIES

April 30, 2020 January 31, 2020

July 31, 2020 January 31, 2020

(in thousands)

5 unchanged sentences

NOTE 6 - PROPERTY AND EQUIPMENT

April 30, 2020 January 31, 2020

July 31, 2020 January 31, 2020

(in thousands)

8 unchanged sentences

The Company reviews its long-lived assets for potential impairment whenever events or circumstances indicate that the carrying value of the long-lived asset (or asset group) may not be recoverable.

During the three months ended April 30, 2020, the Company determined that a current period operating loss combined with historical losses of certain store locations indicated that the long-lived asset group of the store locations may not be recoverable.

The Company performed an impairment assessment of this asset group and as a result recognized an impairment charge of $ 0.2 million within its Construction segment.

During the three months ended July 31, 2020, the Company determined that a current period operating loss combined with historical losses of a certain store location indicated that the long-lived asset group of a store location may not be recoverable.

The Company performed an impairment assessment of this asset group and as a result determined an impairment charge was not needed for the three months ended July 31, 2020.

For the six months ended July 31, 2020, the Company recognized total impairment charges of $ 0.2 million within its Construction segment.

For the three and six months ended July 31, 2019, the Company recognized an impairment charge of $ 0.1 million within its Construction segment.

In March 2019, the Company completed an assessment of its Enterprise Resource Planning ("ERP") application and concluded that the Company would begin the process to prepare for conversion to a new ERP application.

The Company currently anticipates a pilot store to be on the new ERP system in the second quarter of the current fiscal year and all stores to be on the new ERP application in the first half of the fiscal year ending January 31, 2022.

The Company integrated one pilot store on the new ERP system in the second quarter of the current fiscal year and expects all domestic stores to be on the new ERP application in the first half of the fiscal year ending January 31, 2022.

We have prospectively adjusted the useful life of our current ERP application such that it will be fully amortized upon its estimated replacement date.

The net book value of the ERP asset of $ 1.8 million as of April 30, 2020 will be amortized on a straight-line basis over the estimated remaining period of use.

The net book value of the current ERP asset of $1.3 million as of July 31, 2020 will be amortized on a straight-line basis over the estimated remaining period of use.

NOTE 7 - FLOORPLAN PAYABLE/ LINES OF CREDIT

On April 3, 2020, the Company entered into a Third Amended and Restated Credit Agreement with a group of banks (the "Bank Syndicate"), that amended and restated the Company's prior $ 200.0 million credit facility, dated October 28, 2015.

The Bank Syndicate provides for a secured credit facility in an amount up to $ 250.0 million, consisting of a $ 185.0 million floorplan facility (the "Floorplan Loan") and a $ 65.0 million operating line (the "Revolver Loan"), and changed the interest rates as compared to the prior credit facility, amongst other things.

The amounts available under the Bank Syndicate are subject to base calculations and reduced by outstanding standby letters of credit and certain reserves.

The Bank Syndicate has a variable interest rate on outstanding balances, has a 0.25% non-usage fee on the average monthly unused amount (replacing the previous non-usage fee of 0.25% to 0.375%), and requires monthly payments of accrued interest.

On April 3, 2020, the Company entered into a Third Amended and Restated Credit Agreement (the "Bank Syndicate Agreement") with a group of banks, that amended and restated the Company's prior $ 200.0 million credit facility, dated October 28, 2015.

The Bank Syndicate Agreement provides for a secured credit facility in an amount up to $ 250.0 million, consisting of a $ 185.0 million floorplan facility (the "Floorplan Loan") and a $ 65.0 million operating line (the "Revolver Loan"), and changed the interest rates as compared to the prior credit facility, amongst other things.

The amounts available under the Bank Syndicate Agreement are subject to base calculations and reduced by outstanding standby letters of credit and certain reserves.

The Bank Syndicate Agreement has a variable interest rate on outstanding balances, has a 0.25% non-usage fee on the average monthly unused amount (replacing the previous non-usage fee of 0.25% to 0.375%), and requires monthly payments of accrued interest.

The Company elects at the time of any advance to choose a Base Rate Loan or a LIBOR Rate Loan.

1 unchanged sentence

The Base Rate is the greater of (a) the prime rate of interest announced, from time to time, by Bank of America;

(b) the Federal Funds Rate plus 0.5%, (c) one month LIBOR plus 1%, but in no event shall the Base Rate be less than zero.

The applicable margin rate is determined based on excess availability under the Bank Syndicate and ranges from 0.5% to 1.0% for Base Rate Loans and 1.5% to 2.0% for LIBOR Rate Loans.

The new applicable margins under the Bank Syndicate are up to 0.5% less than the existing margins under the prior credit facility.

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

The Bank Syndicate includes various restrictions on the Company and its subsidiaries’ activities, including, under certain conditions, limitations on the Company’s ability to make certain cash payments including cash dividends and stock repurchases, issuance of equity instruments, acquisitions and divestitures, and entering into new indebtedness transactions.

The Bank Syndicate matures on April 3, 2025.

The Floorplan Loan under the Bank Syndicate is used to finance equipment inventory purchases.

(b) the Federal Funds Rate plus 0.5%, or (c) one month LIBOR plus 1%, but in no event shall the Base Rate be less than zero.

The applicable margin rate is determined based on excess availability under the Bank Syndicate Agreement and

ranges from 0.5% to 1.0% for Base Rate Loans and 1.5% to 2.0% for LIBOR Rate Loans.

The new applicable margins under the Bank Syndicate Agreement are up to 0.5% less than the existing margins under the prior credit facility.

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

The Bank Syndicate Agreement includes various restrictions on the Company and its subsidiaries’ activities, including, under certain conditions, limitations on the Company’s ability to make certain cash payments including cash dividends and stock repurchases, issuance of equity instruments, acquisitions and divestitures, and entering into new indebtedness transactions.

The Bank Syndicate Agreement matures on April 3, 2025.

The Floorplan Loan under the Bank Syndicate Agreement e is used to finance equipment inventory purchases.

Amounts outstanding are recorded as floorplan payable, within current liabilities on the consolidated balance sheets, as the Company intends to repay amounts borrowed within one year.

The Revolver Loan under the Bank Syndicate is used to finance rental fleet equipment and for general working capital requirements of the Company.

The Revolver Loan under the Bank Syndicate Agreement is used to finance rental fleet equipment and for general working capital requirements of the Company.

Amounts outstanding are recorded as long-term debt, within long-term liabilities on the consolidated balance sheets, as the Company does not have the intention or obligation to repay amounts borrowed within one year.

As of April 30, 2020, the Company had floorplan lines of credit totaling $ 762.0 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 with the Bank Syndicate, and (iii) a $ 60.0 million credit facility with DLL Finance LLC.

As of April 30, 2020 and January 31, 2020, the Company's outstanding balances of floorplan payables and lines of credit consisted of the following:

April 30, 2020 January 31, 2020

As of July 31, 2020, the Company had floorplan lines of credit totaling $ 763.0 million, which is primarily comprised of three significant floorplan lines of credit:

(i) a $ 450.0 million credit facility with CNH Industrial, (ii) a $ 185.0 million line of credit under the Bank Syndicate Agreement, and (iii) a $ 60.0 million credit facility with DLL Finance LLC.

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

July 31, 2020 January 31, 2020

(in thousands)

CNH Industrial $ 151,790 $ 187,690

Bank Syndicate Floorplan Loan 102,900 —

Bank Syndicate Agreement Floorplan Loan 98,400 —

Wells Fargo Floorplan Payable Line — 82,700

2 unchanged sentences

$ 352,215 $ 371,772

As of April 30, 2020, the interest-bearing U.S.

As of July 31, 2020, the interest-bearing U.S.

floorplan payables carried various interest rates ranging primarily from 2.00 % to 3.31 %, compared to a range of 4.05 % to 4.81 % as of January 31, 2020.

As of April 30, 2020, foreign floorplan payables carried various interest rates primarily ranging from 0.98 % to 6.33 %, compared to a range of 0.86 % to 7.66 % as of January 31, 2020.

As of April 30, 2020 and January 31, 2020, $ 201.9 million and $ 205.2 million, respectively, of outstanding floorplan payable were non-interest bearing.

As of April 30, 2020, the Company had a compensating balance arrangement under one of its foreign floorplan credit facilities, which requires a minimum cash deposit to be maintained with the lender in the amount of $ 5.0 million for the term of the credit facility.

As of July 31, 2020, foreign floorplan payables carried various interest rates primarily ranging from 1.34 % to 6.15 %, compared to a range of 0.86 % to 7.66 % as of January 31, 2020.

As of July 31, 2020 and January 31, 2020, $ 185.0 million and $ 205.2 million, respectively, of outstanding floorplan payables were non-interest bearing.

As of July 31, 2020, the Company had a compensating balance arrangement under one of its foreign floorplan credit facilities, which requires a minimum cash deposit to be maintained with the lender in the amount of $ 5.0 million for the term of the credit facility.

NOTE 8 - DEFERRED REVENUE

April 30, 2020 January 31, 2020

July 31, 2020 January 31, 2020

(in thousands)

3 unchanged sentences

NOTE 9 - SENIOR CONVERTIBLE NOTES

The Company's senior convertible notes matured, and the outstanding principal balance of $ 45.6 million was repaid in full, on May 1, 2019.

The Company's senior convertible notes matured, and the outstanding principal balance of $ 45.6 million was repaid in full, on May 1, 2019, as such there was no interest expense for the three months ended July 31, 2019.

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

Three Months Ended April 30,

Six Months Ended July 31,

(in thousands)

4 unchanged sentences

Amortization of transaction costs — 45

The effective interest rate of the liability component was equal to 0.0 % for the three months ended April 30, 2019.

NOTE 10 - LONG TERM DEBT

The following is a summary of long-term debt as of April 30, 2020 and January 31, 2020:

April 30, 2020 January 31, 2020

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

July 31, 2020 January 31, 2020

(in thousands)

Sale-leaseback financing obligations, interest rates ranging from 3.4% to 10.3% with various maturity dates through December 2030 $ 17,153 $ 17,781

Bank Syndicate - Working Capital Line, interest accrues at a variable rate on outstanding balances, requires monthly payments of accrued interest, matures April 2025 10,000 10,000

Bank Syndicate Agreement - Working Capital Line, interest accrues at a variable rate on outstanding balances, requires monthly payments of accrued interest, matures April 2025 10,000 10,000

Real estate mortgage bearing interest at 5.11%, payable in annual installments of $0.3 million, maturing on May 15, 2039, secured by real estate assets 6,485 6,827

Equipment financing loan, payable in monthly installments over a 72-month term for each funded tranche, bearing interest at 3.89%, secured by vehicle assets 7,350 7,468

Equipment financing loan, payable in monthly installments over a 72-month term for each funded tranche, interest rates ranging from 1.7% to 3.89%, secured by vehicle assets 7,446 7,468

Real estate mortgage bearing interest at 4.62%, payable in monthly installments of $0.04 million with a final payment at maturity of $3.4 million, maturing on June 10, 2024, secured by real estate assets 4,315 4,416

Real estate mortgage interest accrues at a variable rate of 2.5% plus 1-month LIBOR, requires monthly payments of accrued interest, final payment at maturity of $2.0 million, maturing on February 28, 2027, secured by real estate assets 1,964 —

Real estate mortgage bearing interest at 4.4%, payable in monthly installments of $0.01 million with a final payment at maturity of $1.0 million, maturing on January 1, 2027, secured by real estate assets 1,458 1,489

Equipment financing loan, payable in monthly installments over a 72-month term, bearing interest at 3.94%, secured by vehicle assets 1,025 —

Real estate mortgage bearing interest at 2.09%, payable in monthly installments, maturing on June 30, 2026, secured by real estate assets 2,339 2,520

8 unchanged sentences

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.

on net income.

The Company's foreign currency forward contracts generally have three-month maturities, maturing on the last day of each fiscal quarter.

No foreign currency contracts were outstanding as of January 31, 2020.

The notional value of outstanding foreign currency contracts as of April 30, 2020 was $ 13.0 million.

As of April 30, 2020, the fair value of the Company's outstanding derivative instruments was not material.

The notional value of outstanding foreign currency contracts as of July 31, 2020 was $ 11.0 million.

As of July 31, 2020, 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 consolidated balance sheets, and derivative instruments recognized as liabilities are recorded in accrued expenses and other in the consolidated balance sheets.

The following table sets forth the gains and losses recognized in income from the Company’s derivative instruments for the three months ended April 30, 2020 and 2019.

The following table sets forth the gains and losses recognized in income from the Company’s derivative instruments for the three and six months ended July 31, 2020 and 2019.

Gains and losses are recognized in interest income and other income (expense) in the consolidated statements of operations:

Three Months Ended April 30,

Three Months Ended July 31, Six Months Ended July 31,

2020 2019 2020 2019

(in thousands)

Foreign currency contract gain (loss) $ ( 13 ) $ 202

Foreign currency contract gain $ 202 $ 166 $ 189 $ 368

NOTE 12 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following is a summary of the changes in accumulated other comprehensive income (loss), by component, for the periods ended April 30, 2020 and April 30, 2019:

The following is a summary of the changes in accumulated other comprehensive income (loss), by component, for the periods ended July 31, 2020 and July 31, 2019:

Foreign Currency Translation Adjustment Net Investment Hedging Gain Total Accumulated Other Comprehensive Income (Loss)

3 unchanged sentences

Balance, April 30, 2020 ( 6,459 ) 2,711 ( 3,748 )

Other comprehensive income 778 — 778

Balance, July 31, 2020 $ ( 5,681 ) $ 2,711 $ ( 2,970 )

Foreign Currency Translation Adjustment Net Investment Hedging Gain Total Accumulated Other Comprehensive Income (Loss)

3 unchanged sentences

Balance, April 30, 2019 ( 5,822 ) 2,711 ( 3,111 )

Other comprehensive income 1,012 — 1,012

Balance, July 31, 2019 $ ( 4,810 ) $ 2,711 $ ( 2,099 )

NOTE 13 - LEASES

13 unchanged sentences

The components of lease expense were as follows:

Classification Three Months Ended April 30, 2020 Three Months Ended April 30, 2019

(in thousands)

Three Months Ended July 31, Six Months Ended July 31,

Classification 2020 2019 2020 2019

(in thousands) (in thousands)

Finance lease cost:

7 unchanged sentences

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

Classification April 30, 2020 January 31, 2020

Classification July 31, 2020 January 31, 2020

(in thousands)

8 unchanged sentences

Total lease liabilities $ 102,935 $ 106,457

(a) Finance lease assets are recorded net of accumulated amortization of $1.8 million as of April 30, 2020.

Maturities of lease liabilities as of April 30, 2020 are as follows:

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

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

Operating Finance

11 unchanged sentences

Present value of lease liabilities $ 95,499 $ 7,436 $ 102,935

The weighted-average lease term and discount rate as of April 30, 2020 are as follows:

April 30, 2020

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

July 31, 2020

Weighted-average remaining lease term (years):

19 unchanged sentences

Revenue generated from leasing activities is disclosed, by segment, in Note 3.

The following is the balance of our dedicated rental fleet assets of our Construction segment as of April 30, 2020 and January 31, 2020:

April 30, 2020 January 31, 2020

The following is the balance of our dedicated rental fleet assets of our Construction segment as of July 31, 2020 and January 31, 2020:

July 31, 2020 January 31, 2020

(in thousands)

3 unchanged sentences

NOTE 14 - FAIR VALUE MEASUREMENTS

As of April 30, 2020 and January 31, 2020, the fair value of the Company's foreign currency contracts, which are either assets or liabilities measured at fair value on a recurring basis, was not material.

These foreign currency contracts were valued using a discounted cash flow analysis, an income approach, utilizing readily observable market data as inputs, which is classified as a Level 2 fair value measurement.

As of July 31, 2020 and January 31, 2020, the fair value of the Company's foreign currency contracts, which are either assets or liabilities measured at fair value on a recurring basis, 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 April 30, 2020 and January 31, 2020 as part of its long-lived asset impairment testing.

4 unchanged sentences

The Company also has financial instruments that are not recorded at fair value in the consolidated balance sheets, including cash, receivables, payables and long-term debt.

The carrying amounts of these financial instruments approximated their fair values as of April 30, 2020 and January 31, 2020.

The carrying amounts of these financial instruments approximated their fair values as of July 31, 2020 and January 31, 2020.

Fair value of these financial instruments was estimated based on Level 2 fair value inputs.

NOTE 15 - INCOME TAXES

Our effective tax rate was 28.1 % for the three months ended April 30, 2020 compared to an effective tax rate of 13.6 % for the three months ended April 30, 2019.

Our effective tax rate differs from the domestic federal statutory tax rate due to the mix of domestic and foreign income or losses and the impact of the recognition of valuation allowances on our foreign deferred tax assets, including net operating losses.

Our effective tax rate was 22.8 % and 25.8 % for the three months ended July 31, 2020 and July 31, 2019 and was 24.3 % and 26.7 % for the six months ended July 31, 2020 and July 31, 2019.

Our effective tax rate differs from the domestic federal statutory tax rate due to the impact of state taxes, the mix of domestic and foreign income or losses, the impact of the recognition of valuation allowance on our foreign deferred tax assets, including net operating losses, the impact of foreign currency fluctuations on our Ukrainian business and discrete events that take place throughout the year, primarily the tax impact of share based payments

NOTE 16 - BUSINESS COMBINATIONS

On May 4, 2020, the Company acquired certain assets of HorizonWest Inc.

This acquired CaseIH agriculture dealership complex consisted of three agriculture equipment stores in Scottsbluff and Sidney, Nebraska and Torrington, Wyoming, which expands the Company's agriculture presence in Nebraska and into Wyoming.

The total consideration transferred for the acquired business was $ 6.8 million paid in cash.

In connection with the acquisition, the Company acquired from CNH Industrial and certain other manufacturers equipment and parts inventory previously owned by HorizonWest Inc.

Upon acquiring such inventories, the Company was offered floorplan financing by the manufacturer.

In total, the Company acquired inventory and recognized a corresponding financing liability of $ 2.7 million.

The recognition of these inventories and the associated financing liabilities are not included as part of the accounting for the business combination.

On January 1, 2019, the Company, through its German subsidiary, acquired certain assets of ESB Agrartechnik GmbH ("ESB").

6 unchanged sentences

The service area is contiguous to the Company's existing locations in Grand Forks and Casselton, North Dakota and Ada, Minnesota.

The total consideration transferred for the acquired business was $ 10.9 million paid in cash, including the acquired real estate, which was finalized in January 2020 for $ 2.1 million.

The total consideration transferred for the acquired business was $ 10.9 million paid in cash, including the real estate.

The real estate was acquired in January 2020 for $ 2.1 million.

In connection with the acquisition, the Company acquired from CNH Industrial and certain other manufacturers equipment and parts inventory previously owned by Uglem-Ness Co.

4 unchanged sentences

Each of the above acquisitions has been accounted for under the acquisition method of accounting, which requires the Company to estimate the acquisition date fair value of the assets acquired and liabilities assumed.

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

The following table presents the aggregate purchase price allocations for all acquisitions completed as of January 31, 2020:

January 31, 2020

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

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

July 31, 2020 January 31, 2020

(in thousands)

2 unchanged sentences

Inventories 4,260 6,466

Prepaid expenses and other 48 —

Property and equipment 1,752 3,810

Operating lease assets 2,006 —

Intangible assets 245 1,973

1 unchanged sentence

Liabilities assumed:

Current operating lease liabilities 159 —

Operating lease liabilities 1,847 —

Net assets acquired $ 6,790 $ 13,887

6 unchanged sentences

For the business combinations occurring during the twelve months ended January 31, 2020, the Company recognized a customer relationship intangible asset of $ 0.2 million, a non-competition intangible asset of $ 0.1 million, and a distribution rights intangible asset of $ 1.6 million.

For the business combinations occurring during the six months ended July 31, 2020, the Company recognized a non-competition intangible asset of $ 0.1 million, and a distribution rights intangible asset of $ 0.2 million.

The customer relationship and non-competition assets will be amortized over periods ranging from three to five years.

The distribution rights assets are indefinite-lived intangible assets not subject to amortization.

The Company estimated the fair value of the intangible assets using a multi-period excess earnings model, an income approach.

Acquisition related costs were not material for fiscal year ended January 31, 2020, and have been expensed as incurred and recognized as operating expenses in the consolidated statements of operations.

The Company estimated the fair value of the intangible assets using a multi-period excess earnings model, which is an income approach.

Acquisition related costs were not material for the six months ended July 31, 2020 and twelve months ended January 31, 2020, and have been expensed as incurred and recognized as operating expenses in the consolidated statements of operations.

NOTE 17 - CONTINGENCIES

3 unchanged sentences

The Company is also engaged in other legal proceedings incidental to the normal course of business.

Due to their nature, such legal proceedings involve inherent uncertainties, including but not limited to, court rulings, negotiations between

affected parties and governmental intervention.

Due to their nature, such legal proceedings involve inherent uncertainties, including but not limited to, court rulings, negotiations between affected parties and governmental intervention.

Based upon the information available to the Company and discussions with legal counsel, it is the Company's opinion that the outcome of these various legal actions and claims will not have a material impact on the financial position, results of operations or cash flows.

7 unchanged sentences

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

Three Months Ended April 30,

(in thousands)

Three Months Ended July 31, Six Months Ended July 31,

2020 2019 2020 2019

(in thousands) (in thousands)

Agriculture $ 169,072 $ 165,692 $ 362,700 $ 319,464

6 unchanged sentences

International ( 432 ) 505 ( 711 ) 722

Segment income (loss) before income taxes 3,009 ( 130 )

Segment income before income taxes 7,695 8,016 10,705 7,887

Shared Resources 597 ( 589 ) 736 ( 975 )

Total $ 8,292 $ 7,427 $ 11,441 $ 6,912

April 30, 2020 January 31, 2020

July 31, 2020 January 31, 2020

(in thousands)

5 unchanged sentences

Total $ 948,025 $ 975,343

NOTE 19 - SUBSEQUENT EVENTS

On January 31, 2020, the Company entered into a definitive purchase agreement to acquire HorizonWest Inc., which owns a three store CaseIH agriculture dealership complex in Scottsbluff and Sidney, Nebraska and Torrington, Wyoming.

In its most recent fiscal year, HorizonWest generated revenue of approximately $ 26 million.

The Company closed on the acquisition on May 4, 2020.

The total purchase price was $ 6.9 million, which does not include the $ 2.7 million of associated inventory that the Company concurrently purchased from CNH Industrial under standard terms.

Due to the limited time since the date of the acquisition, it is impracticable for the Company to make certain business combination disclosures at this time as the Company is still gathering information that is necessary for the required business combination disclosures.

The net assets acquired consist primarily of working capital and fixed assets.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements