What changed in this filing

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Item 1. Financial Statements

2020-12-03 compared with 2020-09-04 · 174 added, 135 removed, 506 unchanged (38% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

July 31, 2020 January 31, 2020

October 31, 2020 January 31, 2020

Current Assets

31 unchanged sentences

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

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

22,555 shares issued and outstanding at October 31, 2020;

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

8 unchanged sentences

(in thousands, except per share data)

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

Three Months Ended October 31, Nine Months Ended October 31,

2020 2019 2020 2019

12 unchanged sentences

Operating Expenses 54,115 58,184 160,252 165,594

Impairment of Long-Lived Assets — — 216 135

Impairment of Goodwill 1,453 — 1,453 —

Impairment of Intangible and Long-Lived Assets 1,102 51 1,318 186

Income from Operations 15,881 13,539 30,627 23,920

Other Income (Expense)

Interest and other income 562 620 692 1,414

Interest and other income (expense) ( 360 ) 1,273 333 2,687

Floorplan interest expense ( 757 ) ( 1,448 ) ( 2,811 ) ( 3,724 )

13 unchanged sentences

(in thousands)

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

Three Months Ended October 31, Nine Months Ended October 31,

2020 2019 2020 2019

Net Income $ 9,912 $ 8,214 $ 18,574 $ 13,280

Other Comprehensive Income

Other Comprehensive Income (Loss)

Foreign currency translation adjustments 2,181 ( 2,650 ) 2,431 ( 2,409 )

13 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 — — — — —

3 unchanged sentences

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

Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax ( 2 ) — ( 17 ) — — ( 17 )

Stock-based compensation expense — — 773 — — 773

Net Income — — — 8,214 — 8,214

Other comprehensive loss — — — — ( 2,650 ) ( 2,650 )

BALANCE, October 31, 2019 22,352 $ — $ 249,984 $ 97,044 $ ( 4,749 ) $ 342,279

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

1 unchanged sentence

BALANCE, January 31, 2020 22,335 $ — $ 250,607 $ 97,717 $ ( 3,220 ) $ 345,104

Cumulative-effect adjustment of adopting ASC 326, Credit Loss — — — ( 204 ) — ( 204 )

Cumulative-effect adjustment of adopting ASC 326, Financial Instruments - Credit Losses — — — ( 204 ) — ( 204 )

Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax ( 21 ) — ( 201 ) — — ( 201 )

3 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 — — — — —

3 unchanged sentences

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

Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax 2 — ( 8 ) — — ( 8 )

Stock-based compensation expense — — 691 — — 691

Net income — — — 9,912 — 9,912

Other comprehensive income — — — — 2,181 2,181

BALANCE, October 31, 2020 22,555 $ — 252,270 $ 116,087 $ ( 789 ) $ 367,568

See Notes to Consolidated Financial Statements

2 unchanged sentences

(in thousands)

Six Months Ended July 31,

Nine Months Ended October 31,

Operating Activities

29 unchanged sentences

Other, net ( 209 ) ( 509 )

Net Cash Provided by Financing Activities 4,519 13,647

Net Cash Provided by (Used for) Financing Activities ( 40,779 ) 34,902

Effect of Exchange Rate Changes on Cash 268 ( 183 )

3 unchanged sentences

Supplemental Disclosures of Cash Flow Information

Cash paid (received) during the period

Cash paid during the period

Income taxes, net of refunds $ 31 $ 4,934

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 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.

Therefore, operating results for the nine-month period ended October 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 of the Company for the fiscal year then ended.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2020 as filed with the SEC.

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The pandemic is a highly fluid and rapidly evolving situation, and we cannot anticipate with any certainty the length, scope, or severity of such restrictions in each of the markets that we operate.

Risk Factors for more information on possible impacts.

Since the beginning of the COVID-19 pandemic, the safety of our employees and customers has been and continues to be our top concern.

At the onset of the pandemic we organized a COVID Task Force to implement safety protocols and to quickly respond to matters, in the event of a positive case at one of our locations.

At the onset of the pandemic, we organized a COVID Task Force to implement safety protocols and to quickly respond to matters, in the event of positive cases at any of our locations.

Even though we are considered an essential business, in response to the COVID-19 pandemic, the Company closed its U.S.

stores to the public on March 23, 2020 but continued operations through social distancing means in all areas:

stores to the public in March 2020 but continued operations through social distancing means in all areas:

equipment, parts, service and rental.

Beginning May 4, 2020, we began fully reopening our stores to the public, following pandemic safety protocols applicable to the locations.

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

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

Beginning in May 2020, we began fully reopening our stores to the public, following pandemic safety protocols, and by June 2020 all of our locations were once again open to the public.

Additionally, our International stores have also been following pandemic safety protocols set forth by each country and local government authority, which at times have included border shutdowns and curfew regulations.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Actual results could differ from those estimates, particularly related to realization of inventory, impairment of long-lived assets, collectability of receivables, and income taxes.

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

2 unchanged sentences

Recently Adopted Accounting Guidance

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.

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

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

5 unchanged sentences

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.

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

This guidance aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software.

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

The Company adopted this standard on February 1, 2020, using the prospective transition approach.

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

Accounting Guidance Not Yet Adopted

In March 2020, the FASB issued ASU No.

In March 2020, the FASB issued Accounting Standard Update ("ASU") No.

2020-04 , Reference Rate Reform (Topic 848):

5 unchanged sentences

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

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

Three Months Ended October 31, Nine Months Ended October 31,

2020 2019 2020 2019

10 unchanged sentences

Diluted $ 0.44 $ 0.37 $ 0.83 $ 0.60

Anti-dilutive shares excluded from diluted weighted-average common shares outstanding:

Restricted stock units — — 18 —

NOTE 3 - REVENUE

2 unchanged sentences

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

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

Three Months Ended October 31, 2020 Three Months Ended October 31, 2019

Agriculture Construction International Total Agriculture Construction International Total

8 unchanged sentences

Total revenues $ 220,625 $ 79,030 $ 61,217 $ 360,872 $ 214,073 $ 78,031 $ 68,832 $ 360,936

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

Nine Months Ended October 31, 2020 Nine Months Ended October 31, 2019

Agriculture Construction International Total Agriculture Construction International Total

9 unchanged sentences

Unbilled Receivables and Deferred Revenue

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

Unbilled receivables amounted to $ 16.8 million and $ 13.9 million as of October 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 $ 21.7 million and $ 39.5 million as of July 31, 2020 and January 31, 2020.

Deferred revenue from contracts with customers amounted to $ 13.7 million and $ 39.5 million as of October 31, 2020 and January 31, 2020.

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

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

During the three months ended October 31, 2020 and 2019, the Company recognized $ 3.9 million and $ 2.5 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, 2020 and January 31, 2019, respectively.

During the nine months ended October 31, 2020 and 2019, the Company recognized $ 40.9 million and $ 43.7 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, 2020 and January 31, 2019, respectively.

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

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

October 31, 2020 January 31, 2020

(in thousands)

Deferred revenue from contracts with customers $ 13,687 $ 39,512

Deferred revenue from rental and other contracts 1,021 1,456

$ 14,708 $ 40,968

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

1 unchanged sentence

NOTE 4 - RECEIVABLES

The Company provides an allowance for expected credit losses on its nonrental receivables in accordance with the guidance in ASU 2016-13.

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.

6 unchanged sentences

Management continually monitors these receivables and should information be obtained that identifies potential credit risk, an adjustment to the allowance would be made if deemed appropriate.

Trade and unbilled receivables from rental contracts are primarily in the US and are specifically excluded from the guidance in ASU 2016-13 in determining an allowance for expected losses.

Trade and unbilled receivables from rental contracts are primarily in the United States and are specifically excluded from the accounting guidance in determining an allowance for expected losses.

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

July 31, 2020 January 31, 2020

October 31, 2020 January 31, 2020

(in thousands)

2 unchanged sentences

Unbilled receivables 16,796 13,944

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

Less allowance for expected credit losses 3,053 2,943

45,349 47,401

3 unchanged sentences

Unbilled receivables 1,130 861

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

Less allowance for expected credit losses 1,957 2,180

Other receivables

2 unchanged sentences

Receivables, net of allowance for expected credit losses $ 73,531 $ 72,776

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

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

Agriculture Construction International Total

3 unchanged sentences

Credit loss recoveries collected 40 4 6 50

F/X Impact — — ( 29 ) ( 29 )

Foreign exchange impact — — ( 29 ) ( 29 )

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

2 unchanged sentences

Credit loss recoveries collected 9 — — 9

F/X Impact — — 23 23

Foreign exchange 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 July 31, Six Months Ended July 31,

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

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,

2020 2019 2020 2019

(in thousands)

Impairment losses on:

Impairment losses (recoveries) on:

Receivables from sales contracts $ ( 213 ) $ 75 $ 307 $ 1,061

2 unchanged sentences

NOTE 5 - INVENTORIES

July 31, 2020 January 31, 2020

October 31, 2020 January 31, 2020

(in thousands)

5 unchanged sentences

NOTE 6 - PROPERTY AND EQUIPMENT

July 31, 2020 January 31, 2020

October 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 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.

During the three months ended October 31, 2020, the Company determined, based on changing expectations regarding the future use of certain long-lived assets, that the $0.8 million carrying value of these assets, 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 Agriculture segment for the three months ended October 31, 2020.

For the nine months ended October 31, 2020, the Company recognized a total impairment charge of $ 0.2 million within its Construction segment and a $ 0.2 million impairment charge within its Agriculture segment.

For the three and nine months ended October 31, 2019, the Company recognized an impairment charge of $ 0.1 million and $ 0.2 million, respectively, within its Construction segment.

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

The Company integrated one pilot store on 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.

The Company integrated one pilot store on the new ERP system in the second quarter of the fiscal 2021 and expects all domestic stores to be on the new ERP application during the second or third quarter of fiscal 2022.

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

The net book value of the current ERP asset of $1.3 million as of July 31, 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 $0.8 million as of October 31, 2020 will be amortized on a straight-line basis over the estimated remaining period of use.

NOTE 7 - INTANGIBLE ASSETS AND GOODWILL

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

Agriculture Construction International Total

(in thousands)

January 31, 2020 $ 949 $ — $ 1,378 $ 2,327

Arising from business combinations 484 — — 484

Foreign currency translation — — 75 75

Impairment — — ( 1,453 ) ( 1,453 )

October 31, 2020 $ 1,433 $ — $ — $ 1,433

The Company performs at least an annual impairment testing of goodwill and, due to ongoing losses and the impact of COVID-19, an interim impairment test was performed in the third quarter of fiscal 2021 for our Germany reporting unit.

Under the impairment test, the fair value of the reporting unit is estimated using an income approach in which a discounted cash flow analysis is utilized, which includes a five-year forecast of future operating performance for the reporting unit and a terminal value that estimates sustained long-term growth.

The discount rate applied to the estimated future cash flows reflects an estimate of the weighted-average cost of capital of comparable companies.

The quantitative goodwill impairment analysis for the Germany reporting unit indicated that the estimated fair value of the reporting unit was less than the carrying value.

T he implied fair value of the goodwill associated with the reporting unit approximated zero, thus requiring a full impairment charge of the goodwill carrying value of the reporting unit.

A s such, a goodwill impairment charge of $ 1.5 million was recognized for the three and nine months ended October 31, 2020, which is included in the impairment of goodwill amount in the consolidated statements of operations.

The impairment charges arose as the result of lowered expectations of the future financial performance of this reporting unit.

The Company's assumptions about future financial performance were impacted by the current year operating performance of this reporting unit and by the anticipated impact that challenging industry conditions, including COVID-19, may have on the future financial performance of this reporting unit.

There were no goodwill impairment charges for the three and nine months ended October 31, 2019 .

Indefinite-Lived Intangible Assets

The Company's indefinite-lived intangible assets consist of distribution rights assets.

The following is a summary of the changes in indefinite-lived intangible assets, by segment, for the period ended October 31, 2020:

Agriculture Construction International Total

(in thousands)

January 31, 2020 $ 6,070 $ 72 $ 1,870 $ 8,012

Arising from business combinations 195 — — 195

Foreign currency translation — — 97 97

Impairment — — ( 858 ) ( 858 )

October 31, 2020 $ 6,265 $ 72 $ 1,109 $ 7,446

The Company performs at least an annual impairment testing of its indefinite-lived distribution rights intangible assets and, due to ongoing losses and the impact of COVID-19, an interim test was completed in the third quarter of fiscal 2021 for our Germany assets.

Under the impairment test, the fair value of distribution rights intangible assets is estimated based on a multi-period excess earnings model, an income approach.

This model allocates future estimated earnings of the store/complex amongst working capital, fixed assets and other intangible assets of the store/complex and any remaining earnings (the "excess earnings") are allocated to the distribution rights intangible assets.

The earnings allocated to the distribution rights are then discounted to arrive at the present value of the future estimated excess earnings, which represents the estimated fair value of the distribution rights intangible asset.

The discount rate applied reflects the Company's estimate of the weighted-average cost of capital of comparable companies plus an additional risk premium to reflect the additional risk inherent in the distribution right asset.

The results of the Company's impairment testing for the Germany distribution rights intangible assets for the quarter ended October 31, 2020, indicated that the estimated fair value of the tested distribution rights was below the carrying value of such assets, thus requiring an impairment to be recognized.

Impairment charges of $ 0.9 million were recognized for the three and nine months ended October 31, 2020 and included in the Impairment of Intangibles and Long-lived assets amount in the consolidated statements of operations.

The impairment charges arose as the result of lowered expectations of the future financial performance of this reporting unit.

There were no indefinite-lived intangible impairment charges for the three and nine months ended October 31, 2019 .

NOTE 8 - FLOORPLAN PAYABLE/ LINES OF CREDIT

2 unchanged sentences

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 Bank Syndicate Agreement includes a variable interest rate on outstanding balances, charges a 0.25% non-usage fee on the average monthly unused amount, and requires monthly payments of accrued interest.

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

2 unchanged sentences

(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 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 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.

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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.

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

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

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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 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:

As of October 31, 2020, the Company had floorplan lines of credit totaling $ 765.0 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

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

October 31, 2020 January 31, 2020

(in thousands)

5 unchanged sentences

$ 287,837 $ 371,772

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

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

floorplan payables carried various interest rates ranging primarily from 2.25 % to 3.07 %, compared to a range of 4.05 % to 4.81 % as of January 31, 2020.

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

July 31, 2020 January 31, 2020

(in thousands)

Deferred revenue from contracts with customers $ 21,686 $ 39,512

Deferred revenue from rental and other contracts 1,030 1,456

$ 22,716 $ 40,968

As of October 31, 2020, foreign floorplan payables carried various interest rates primarily ranging from 1.20 % to 4.84 %, compared to a range of 0.86 % to 7.66 % as of January 31, 2020.

As of October 31, 2020 and January 31, 2020, $ 164.6 million and $ 205.2 million, respectively, of outstanding floorplan payables were non-interest bearing.

As of October 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 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, 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:

Six Months Ended July 31,

(in thousands)

Cash Interest Expense

Coupon interest expense $ — $ 421

Noncash Interest Expense

Amortization of debt discount — 350

Amortization of transaction costs — 45

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

For the nine months ended October 31, 2019, the Company recognized $ 0.8 million in interest expense associated with its senior convertible notes.

NOTE 10 - LONG TERM DEBT

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

July 31, 2020 January 31, 2020

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

Description Maturity Dates Interest Rates October 31, 2020 January 31, 2020

(in thousands)

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

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

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

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

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

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

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

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

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

Other long-term debt primarily bearing interest at three-month EURIBOR plus 2.6%, payable in quarterly installments, maturing on January 31, 2021 401 1,067

52,586 51,568

Less current maturities ( 3,921 ) ( 13,779 )

$ 48,665 $ 37,789

Mortgage loans, secured Various through May 2039 2.09% to 5.1% $ 23,015 $ 15,252

Sale-leaseback financing obligations Various through December 2030 3.4% to 10.3% 16,832 17,781

Bank Syndicate Agreement - Revolver Loan April 2025 2.25% 10,000 10,000

Vehicle loans, secured Various through June 2026 1.7% to 3.94% 9,538 7,468

Other January 2021 2.6% 147 1,067

Total debt 59,532 51,568

current maturities 4,423 13,779

Long-term debt, net $ 55,109 $ 37,789

NOTE 11 - DERIVATIVE INSTRUMENTS

3 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.

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

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

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

As of July 31, 2020, the fair value of the Company's outstanding derivative instruments was not material.

The notional value of outstanding foreign currency contracts as of October 31, 2020 was $ 7.0 million.

As of October 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 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 July 31, Six Months Ended July 31,

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

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

Three Months Ended October 31, Nine Months Ended October 31,

2020 2019 2020 2019

(in thousands)

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

Foreign currency contract gain (loss) $ 471 $ ( 3 ) $ 660 $ 365

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 July 31, 2020 and July 31, 2019:

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

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

5 unchanged sentences

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

Other comprehensive income 2,181 — 2,181

Balance, October 31, 2020 $ ( 3,500 ) $ 2,711 $ ( 789 )

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

5 unchanged sentences

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

Other comprehensive loss ( 2,650 ) — ( 2,650 )

Balance, October 31, 2019 $ ( 7,460 ) $ 2,711 $ ( 4,749 )

NOTE 13 - LEASES

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The components of lease expense were as follows:

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

Three Months Ended October 31, Nine Months Ended October 31,

Classification 2020 2019 2020 2019

3 unchanged sentences

Interest on lease liabilities Other interest expense 108 143 351 421

Operating lease cost Operating expenses & rental and other cost of revenue 4,325 4,725 8,788 9,541

Operating lease cost Operating expenses and rental and other cost of revenue 4,541 4,613 13,329 14,154

Short-term lease cost Operating expenses 81 41 270 201

Variable lease cost Operating expenses 739 689 2,109 2,024

Sublease income Interest income and other income (expense) ( 131 ) ( 154 ) ( 283 ) ( 321 )

Sublease income Interest and other income (expense) ( 136 ) ( 146 ) ( 419 ) ( 468 )

$ 5,728 $ 5,713 $ 16,816 $ 17,412

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

Classification July 31, 2020 January 31, 2020

Classification October 31, 2020 January 31, 2020

(in thousands)

8 unchanged sentences

Total lease liabilities $ 97,988 $ 106,457

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

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

(a) Finance lease assets are recorded net of accumulated amortization of $2.6 million as of October 31, 2020 and $1.5 million as of January 31, 2020.

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

Operating Finance

11 unchanged sentences

Present value of lease liabilities $ 93,155 $ 4,833 $ 97,988

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

July 31, 2020

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

October 31, 2020

Weighted-average remaining lease term (years):

13 unchanged sentences

In most cases, our rental arrangements include non-lease components, including delivery and pick-up services.

Company accounts for these non-lease components separate from the rental arrangement and recognizes the revenue associated with these components when the service is performed.

The Company has elected to exclude from rental revenue all sales, value added and other taxes collected from our customers concurrent with our rental activities.

The Company accounts for these non-lease components separate from the rental arrangement and recognizes the revenue associated with these components when the service is performed.

The Company has elected to exclude from rental revenue all sales, value

added and other taxes collected from our customers concurrent with our rental activities.

Rental billings most often occur on a monthly basis and may be billed in advance or in arrears, thus creating unbilled rental receivables or deferred rental revenue amounts.

2 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 July 31, 2020 and January 31, 2020:

July 31, 2020 January 31, 2020

The following is the balance of our dedicated rental fleet assets, included in Property and equipment, net of accumulated depreciation in the consolidated balance sheet, of our Construction segment as of October 31, 2020 and January 31, 2020:

October 31, 2020 January 31, 2020

(in thousands)

3 unchanged sentences

NOTE 14 - FAIR VALUE MEASUREMENTS

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.

As of October 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.

The estimated fair value of such assets as of April 30, 2020 and January 31, 2020 was $ 0.4 million and $ 2.8 million, respectively.

The Company also valued certain long-lived assets at fair value on a non-recurring basis as of October 31, 2020, A pril 30, 2020, and January 31, 2020 as part of its long-lived asset impairment testing.

The estimated fair value of such assets as of October 31, 2020, April 30, 2020, and January 31, 2020 was $ 0.5 million, $ 0.4 million, and $ 2.8 million, respectively.

Fair value was estimated through an income approach incorporating both observable and unobservable inputs, and are deemed to be Level 3 fair value inputs.

2 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 July 31, 2020 and January 31, 2020.

The carrying amounts of these financial instruments approximated their fair values as of October 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 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

Our effective tax rate was 28.3 % and 33.8 % for the three months ended October 31, 2020 and October 31, 2019 and was 26.5 % and 31.3 % for the nine months ended October 31, 2020 and October 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 certain of 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.

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

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

9 unchanged sentences

On October 1, 2019, the Company acquired certain assets of Uglem-Ness Co.

The acquired business consists of one Case IH agriculture equipment store in Northwood, North Dakota.

The acquired business consisted of one Case IH agriculture equipment store in Northwood, North Dakota.

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

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

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

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

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

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 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

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

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

October 31, 2020 January 31, 2020

(in thousands)

17 unchanged sentences

The recognition of goodwill in the above business combinations arose from the acquisition of an assembled workforce and anticipated synergies expected to be realized.

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

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

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 nine months ended October 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.

1 unchanged sentence

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.

Acquisition related costs were not material for the nine months ended October 31, 2020 or 2019, and have been expensed as incurred and recognized as operating expenses in the consolidated statements of operations.

NOTE 17 - CONTINGENCIES

13 unchanged sentences

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

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

Three Months Ended October 31, Nine Months Ended October 31,

2020 2019 2020 2019

11 unchanged sentences

Total $ 13,824 $ 12,409 $ 25,265 $ 19,321

July 31, 2020 January 31, 2020

October 31, 2020 January 31, 2020

(in thousands)

6 unchanged sentences

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