What changed in this filing

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Item 1. Financial Statements

2021-12-03 compared with 2021-09-03 · 157 added, 112 removed, 512 unchanged (34% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

July 31, 2021 January 31, 2021

October 31, 2021 January 31, 2021

Current Assets

31 unchanged sentences

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

22,596 shares issued and outstanding at July 31, 2021;

22,592 shares issued and outstanding at October 31, 2021;

22,553 shares issued and outstanding at January 31, 2021

1 unchanged sentence

Retained earnings 160,482 116,869

Accumulated other comprehensive income 58 1,499

Accumulated other comprehensive income (loss) ( 686 ) 1,499

Total stockholders' equity 413,578 371,281

1 unchanged sentence

See Notes to Condensed Consolidated Financial Statements

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TITAN MACHINERY INC.

1 unchanged sentence

(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,

2021 2020 2021 2020

12 unchanged sentences

Operating Expenses 62,943 54,115 176,460 160,252

Impairment of Goodwill — 1,453 — 1,453

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

1 unchanged sentence

Other Income (Expense)

Interest and other income 654 562 1,320 692

Interest and other income (expense) 616 ( 360 ) 1,935 333

Floorplan interest expense ( 259 ) ( 757 ) ( 1,027 ) ( 2,811 )

10 unchanged sentences

See Notes to Condensed Consolidated Financial Statements

Table of C ontents

TITAN MACHINERY INC.

1 unchanged sentence

(in thousands)

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

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

2021 2020 2021 2020

4 unchanged sentences

See Notes to Condensed Consolidated Financial Statements

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TITAN MACHINERY INC.

15 unchanged sentences

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

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

Stock-based compensation expense — — 691 — — 691

Net Income — — — 9,912 — 9,912

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

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

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

11 unchanged sentences

BALANCE, July 31, 2021 22,596 — 253,129 138,665 58 391,852

Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax ( 4 ) — ( 4 ) — — ( 4 )

Stock-based compensation expense — — 657 — — 657

Net income — — — 21,816 — 21,816

Other comprehensive income — — — — ( 744 ) ( 744 )

BALANCE, October 31, 2021 22,592 $ — $ 253,782 $ 160,482 $ ( 686 ) $ 413,578

See Notes to Condensed Consolidated Financial Statements

2 unchanged sentences

(in thousands)

Six Months Ended July 31,

Nine Months Ended October 31,

Operating Activities

14 unchanged sentences

Operating lease liabilities ( 8,303 ) ( 9,248 )

Net Cash Provided by (Used for) Operating Activities 28,561 13,035

Net Cash Provided by Operating Activities 72,275 60,814

Investing Activities

11 unchanged sentences

Other, net ( 998 ) ( 209 )

Net Cash Provided by (Used for) Financing Activities ( 22,373 ) 4,519

Net Cash Used for Financing Activities ( 31,315 ) ( 40,779 )

Effect of Exchange Rate Changes on Cash ( 404 ) 268

11 unchanged sentences

See Notes to Condensed Consolidated Financial Statements

Table of C ontents

TITAN MACHINERY INC.

7 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, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2022.

Therefore, operating results for the nine-month period ended October 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2022.

The information contained in the consolidated balance sheet as of January 31, 2021 was derived from the audited consolidated financial statements of the Company for the fiscal year then ended.

2 unchanged sentences

The Company is engaged in the retail sale, service and rental of agricultural and construction machinery through its stores in the United States and Europe.

The Company’s North American stores are located in Colorado, Iowa, Minnesota, Montana, Nebraska, North Dakota, South Dakota, Wisconsin and Wyoming, and its European stores are located in Bulgaria, Germany, Romania, Serbia and Ukraine.

Impact of the COVID-19 Pandemic

2 unchanged sentences

The Company's products and services were determined to be essential in the markets we serve and accordingly operations have been allowed to continue throughout the pandemic.

The extent and duration of the COVID-19 impact, on the operations and financial position of the Company and on the global economy, is uncertain.

Uncertainty remains regarding emerging variant strains of COVID-19, and regarding the length of time it will take for the COVID-19 pandemic to subside.We will continue to take action as necessary as the health and safety of our employees and customers remain our top priority.

Some of the Company's supply vendors are facing production, supply chain and staffing challenges as they work to achieve production capacity and lead times consistent with pre-pandemic levels.

The extent and duration of the impact of COVID-19 on the operations and financial position of the Company and on the global economy is uncertain.

Uncertainty remains regarding the magnitude and duration of the pandemic and resulting financial effects.

Increased infection rates and any future responses to mitigate the spread of the virus, including any potential vaccination mandates that would apply to our employees, could impact our business and our financial results in future periods.

Recently, the Department of Labor's Occupational Safety and Health Administration ("OSHA") announced an emergency temporary standard requiring all employers with at least 100 employees to ensure their employees are fully vaccinated or require weekly testing for unvaccinated employees.

This standard became effective in November 2021, giving companies 30 days to comply with most requirements and 60 days to comply with the testing requirements.

In response to a court ruling, in mid-November 2021, OSHA announced that it had suspended all activities related to implementation of this new regulation pending further litigation.

The exact impact that this new regulation could have on our Company is uncertain at this time.

However, it could result in employee attrition, difficulty in fulfilling future labor needs, additional costs related to compliance and may have an adverse effect on our future operating results.

Additionally, some of the Company's supply vendors are facing production, supply chain and staffing challenges as they work to achieve production capacity and lead times consistent with pre-pandemic levels.

As a result, the Company has experienced some disruptions and delays on delivery of certain inventory.

The Company has assessed the impacts of the COVID-19 pandemic on its results of operations for the three and six months ended July 31, 2021 and 2020, and although there have been logistical and other challenges, no material adverse impacts were identified.

The Company has assessed the impacts of the COVID-19 pandemic on its results of operations for the three and nine months ended October 31, 2021 and 2020, and although there have been logistical and other challenges, no material adverse impacts were identified.

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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.

9 unchanged sentences

ASU 2020-04 is effective upon issuance and can be applied through December 31, 2022.

The Company is updating its credit agreements to include language regarding the successor or alternate rate to LIBOR, and a review of other contracts and agreements is on-going.

The Company is amending its credit agreements to include language regarding the successor or alternate rate to LIBOR, and a review of other contracts and agreements is on-going.

The Company does not expect the guidance to have a material impact on its results of operations, financial position, cash flows, or disclosures.

1 unchanged sentence

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

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

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

2021 2020 2021 2020

13 unchanged sentences

Sales, value added and other taxes collected from our customers concurrent with our revenue activities are excluded from revenue.

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

Three Months Ended July 31, 2021 Three Months Ended July 31, 2020

Three Months Ended October 31, 2021 Three Months Ended October 31, 2020

Agriculture Construction International Total Agriculture Construction International Total

8 unchanged sentences

Total revenues $ 281,506 $ 79,735 $ 92,734 $ 453,975 $ 220,625 $ 79,030 $ 61,217 $ 360,872

Six Months Ended July 31, 2021 Six Months Ended July 31, 2020

Nine Months Ended October 31, 2021 Nine Months Ended October 31, 2020

Agriculture Construction International Total Agriculture Construction International Total

9 unchanged sentences

Unbilled Receivables and Deferred Revenue

Unbilled receivables from contracts with customers amounted to $ 20.1 million and $ 12.9 million as of July 31, 2021 and January 31, 2021.

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 $ 37.1 million and $ 57.7 million as of July 31, 2021 and January 31, 2021.

Unbilled receivables from contracts with customers amounted to $ 21.8 million and $ 12.9 million as of October 31, 2021 and January 31, 2021, respectively.

This increase in unbilled receivables is primarily the result of a seasonal increase in the volume of our service transactions in which we recognize revenue as our work is performed and prior to customer invoicing.

Deferred revenue from contracts with customers amounted to $ 34.1 million and $ 57.7 million as of October 31, 2021 and January 31, 2021, respectively.

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

During the six months ended July 31, 2021 and 2020, the Company recognized $ 50.8 million and $ 37.0 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, 2021 and January 31, 2020, respectively.

No material amount of revenue was recognized during the six months ended July 31, 2021 and 2020 from performance obligations satisfied in previous periods.

During the nine months ended October 31, 2021 and 2020, the Company recognized $ 55.8 million and $ 40.9 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, 2021 and January 31, 2020, respectively.

No material amount of revenue was recognized during the nine months ended October 31, 2021 or 2020 from performance obligations satisfied in previous periods.

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

The contracts for which the practical expedient has been applied include (i) equipment revenue transactions, which do not have a stated contractual term but are short-term in nature, and (ii) service revenue transactions, which also do not have a stated contractual term but are generally completed within 30 days.

For such service contracts we recognize revenue over time at the amount to which we have the right to invoice for services completed to date.

For such service contracts, we recognize revenue over time in the amount for which we have the right to invoice for services completed to date.

NOTE 4 - RECEIVABLES

5 unchanged sentences

Trade receivables from finance companies, other receivables due from manufacturers, and other receivables have not historically resulted in any credit losses to the Company.

These receivables are short-term in nature and deemed to be of good credit quality and have no need for any allowance for expected credit losses.

These receivables are short-term in nature and deemed to be of good

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credit quality and have no need for any allowance for expected credit losses.

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

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

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

July 31, 2021 January 31, 2021

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

October 31, 2021 January 31, 2021

(in thousands)

28 unchanged sentences

Balance at July 31, 2021 299 1,049 1,373 2,721

Current expected credit loss provision ( 3 ) 26 ( 8 ) 15

Write-offs charged against allowance 87 29 6 122

Credit loss recoveries collected 2 3 — 5

Foreign exchange impact — — ( 19 ) ( 19 )

Balance at October 31, 2021 $ 211 $ 1,049 $ 1,340 $ 2,600

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Agriculture Construction International Total

11 unchanged sentences

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

Current expected credit loss provision 30 12 ( 256 ) ( 215 )

Write-offs charged against allowance 44 21 48 114

Credit loss recoveries collected 2 18 — 20

Foreign exchange impact — — 67 67

Balance at October 31, 2020 $ 196 $ 1,088 $ 1,769 $ 3,053

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

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

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

2021 2020 2021 2020

5 unchanged sentences

NOTE 5 - INVENTORIES

July 31, 2021 January 31, 2021

October 31, 2021 January 31, 2021

(in thousands)

4 unchanged sentences

$ 412,674 $ 418,458

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NOTE 6 - PROPERTY AND EQUIPMENT

July 31, 2021 January 31, 2021

October 31, 2021 January 31, 2021

(in thousands)

7 unchanged sentences

$ 175,328 $ 147,165

The Company includes depreciation expense related to its rental fleet and its trucking fleet, for hauling equipment, in Cost of Revenue, which was $ 2.6 million and $ 3.1 million for the three months ended October 31, 2021 and 2020 and $ 6.4 million and $ 7.8 million for the nine months ended October 31, 2021 and 2020, respectively.

All other depreciation expense is included in Operating Expenses, which was $ 2.9 million for the three months ended October 31, 2021 and 2020 and $ 8.9 million and $ 8.5 million for the nine months ended October 31, 2021 and 2020, respectively.

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

During the three months ended July 31, 2021, the Company determined that a current period operating loss combined with historical losses of a certain business unit indicated that the long-lived asset group may not be recoverable.

The Company performed an impairment assessment of this asset group and as a result an impairment charge of $ 0.4 million was recognized within its International segment for the three months ended July 31, 2021.

The Company did not have any impairment charges for the three months ended July 31, 2020 .

For the six months ended July 31, 2021 and July 31, 2020, the Company recognized an impairment charge of $ 0.4 million and $ 0.2 million, respectively.

During the three months ended October 31, 2021, the Company identified no such asset group and no impairment was recorded.

The Company recognized $0.2 million million in impairment charges for the three months ended October 31, 2020 .

For the nine months ended October 31, 2021 and October 31, 2020, the Company recognized impairment charges of $ 0.4 million and $ 0.5 million, respectively.

NOTE 7 - INTANGIBLE ASSETS

1 unchanged sentence

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 six months ended July 31, 2021:

The following is a summary of the changes in indefinite-lived intangible assets, by segment, for the nine months ended October 31, 2021:

Agriculture Construction International Total

3 unchanged sentences

Impairment — — ( 1,139 ) ( 1,139 )

July 31, 2021 $ 6,265 $ 72 $ — $ 6,337

The Company performs at least an annual impairment testing of its indefinite-lived distribution rights intangible assets and, due to ongoing losses, an interim test was completed during the three months ended July 31, 2021 for our German distribution rights asset.

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 rights asset.

The results of the Company's impairment testing for the German distribution rights intangible asset for the three months ended July 31, 2021, indicated that the estimated fair value of the tested distribution rights was below the carrying value of the asset, thus requiring an impairment to be recognized.

Impairment charges of $1.1 million were recognized for the three and six months ended July 31, 2021 and included in Impairment of Intangible and Long-Lived Assets in the condensed consolidated statements of operations.

This impairment removed all remaining indefinite-lived intangible assets from the balance sheet of the German reporting unit.

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 six months ended July 31, 2020.

October 31, 2021 $ 6,265 $ 72 $ — $ 6,337

The Company performs impairment testing, at least annually, of its indefinite-lived distribution rights intangible assets.

There were no indicators of impairment in the three months ended October 31, 2021.

The Company did not recognize any impairment charges for the three months ended October 31, 2021 and recognized $1.1 million in impairment charges for the nine months ended October 31, 2021, as it fully impaired the remaining indefinite-lived intangible assets of the German reporting unit in the second quarter.

NOTE 8 - FLOORPLAN PAYABLE/LINES OF CREDIT

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

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

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

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.

The LIBOR Rate is based upon one month, two month, or three month LIBOR, as chosen by the Company, but in no event shall the LIBOR Rate be less than zero.

The Base Rate is the greater of (a) the prime rate of interest announced, from time to time, by Bank of America, (b) the Federal Funds Rate plus 0.5%, or (c) one month LIBOR plus 1%, but in no event shall the Base Rate be less than zero.

The effective interest rate on the Company's borrowings is then calculated by adding an applicable margin to the LIBOR Rate or Base Rate.

The applicable margin 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.

On June 4, 2021, the Bank Syndicate Agreement was amended to add a benchmark replacement reference rate when the LIBOR Rate is no longer published.

The identified replacement reference rate is the secured overnight financing rate (SOFR).The benchmark transition event will occur at the earliest of (i) the date all available Tenors of LIBOR have been permanently ceased to be reported, (ii) June 30, 2023, or (iii) any agreement by the banks party to the Bank Syndicate agreement and the Company to replace the LIBOR Rate.

The SOFR rate is based upon one month, two month, three month, six month, and 12 month SOFR plus between 11.4 basis points and 71.5 basis points depending on the available tenor used.

In no event shall the SOFR Rate be less than zero.

The applicable margin rate is the same as outlined above for the LIBOR Rate Loans.

The Company does not believe implementation of this new benchmark rate will have a material effect on its results of operations.

In addition, the amendment reduced the current floor of the LIBOR Rate from 0.5% to 0.0%

The Bank Syndicate Agreement does not obligate the Company to maintain financial covenants, except in the event that excess availability (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 is used to finance equipment inventory purchases.

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

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

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

As of July 31, 2021, the Company had floorplan lines of credit totaling $ 771.0 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.

In August 2021, the Company entered into an amendment to the credit facility with DLL Finance LLC.

The amendment reduced the available borrowings under this facility from $60.0 million to $50.0 million, increased the variable interest rate on outstanding balances from three-month LIBOR plus an applicable margin of 2.85% per annum to three-month

LIBOR plus an applicable margin of 3.0% per annum, and eliminated the 0.15% non-utilization fee.

DLL Finance LLC may terminate the facility in its sole discretion at any time.

As of July 31, 2021 and January 31, 2021, the Company's outstanding balances of floorplan lines of credit consisted of the following:

July 31, 2021 January 31, 2021

As of October 31, 2021, the Company had floorplan lines of credit totaling $ 753.0 million, which is primarily comprised of three significant floorplan lines of credit:

(i) a $ 450.0 million credit facility with CNH Industrial, (ii) a $ 185.0 million line of credit under the Third Amended and Restated Credit Agreement (the "Bank Syndicate Agreement"), and (iii) a $ 50.0 million credit facility with DLL Finance LLC.

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

October 31, 2021 January 31, 2021

(in thousands)

3 unchanged sentences

$ 174,659 $ 161,835

As of July 31, 2021 and January 31, 2021, the U.S.

As of October 31, 2021 and January 31, 2021, the U.S.

floorplan payables were generally all non-interest bearing.

As of July 31, 2021, foreign floorplan payables carried various interest rates primarily ranging from 1.40 % to 4.79 %, compared to a range of 1.40 % to 4.82 % as of January 31, 2021.

As of July 31, 2021 and January 31, 2021, $ 148.7 million and $ 98.8 million, respectively, of outstanding floorplan payables were non-interest bearing.

As of July 31, 2021, 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 October 31, 2021, foreign floorplan payables carried various interest rates primarily ranging from 1.40 % to 4.48 %, compared to a range of 1.40 % to 4.82 % as of January 31, 2021.

The Company had non-interest bearing floorplan payables of $ 147.2 million and $ 98.8 million, on October 31, 2021 and January 31, 2021, respectively.

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

Bank Syndicate Credit Agreement

On June 4, 2021, the Bank Syndicate Agreement was amended to add a benchmark replacement reference rate when the LIBOR Rate is no longer published.

The identified replacement reference rate is the secured overnight financing rate (SOFR).

The benchmark transition event will occur at the earliest to occur of (i) the date that all available tenors of LIBOR have permanently ceased to be reported, (ii) June 30, 2023, or (iii) the date of agreement by the banks party to the Bank Syndicate agreement and the Company to replace the LIBOR Rate.

The SOFR Rate is based upon one month, two month, three month, six month, and 12 month SOFR plus between 11.4 basis points and 71.5 basis points depending on the available tenor used.

In no event will the SOFR Rate be less than zero.

The applicable margin is determined based on excess availability under the Bank Syndicate Agreement and ranges from 1.5% to 2%.

The Company does not believe implementation of this new benchmark rate will have a material effect on its results of operations.

In addition, the amendment reduced the current floor of the LIBOR Rate from 0.5% to 0.0%

DLL Finance Floorplan Payable Line of Credit

In August 2021, the Company entered into an amendment to the credit facility with DLL Finance LLC.

DLL Finance LLC may terminate the facility in its sole discretion at any time.

CNH Industrial Floorplan Payable Line of Credit

Effective October 1, 2021, CNH updated their interest rate structure on the Company's credit facility to a tier-based rate program.

The new interest rate that will be payable by the Company on outstanding borrowings will be dependent on the Company's Retail Finance Market Share and will range from 0.5% to 2.75% plus the prime rate.

Previously, the credit facility charged interest at a rate equal to the prime rate plus 3.25% for the financing of new and used equipment inventories and rental fleet assets.

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NOTE 9 - LONG TERM DEBT

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

Description Maturity Dates Interest Rates July 31, 2021 January 31, 2021

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

Description Maturity Dates Interest Rates October 31, 2021 January 31, 2021

(in thousands)

3 unchanged sentences

13,246 16,505

Vehicle loans, secured Various through June 2026 1.7% to 3.9%

Vehicle loans, secured Various through September 2027 2.1% to 3.9%

Other January 2021 2.6%

4 unchanged sentences

dealer locations in the first quarter of fiscal 2022 and financed these purchases with long term debt of $17.7 million.

These dealer locations were previously leased from third party lessors.

In the third quarter of fiscal 2022, the Company purchased buildings and real estate assets of an additional eleven of its U.S.

dealer locations and financed these purchases with $10.2 million of long term debt.

All of these dealer locations were previously leased from third party lessors.

NOTE 10 - DERIVATIVE INSTRUMENTS

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

The Company uses foreign currency forward contracts to hedge the effects of fluctuations in exchange rates on outstanding intercompany loans.

From time to time, the Company uses foreign currency forward contracts to hedge the effects of fluctuations in exchange rates on outstanding intercompany loans.

The Company does not formally designate and document such derivative instruments as hedging instruments;

3 unchanged sentences

The notional value of outstanding foreign currency contracts as of January 31, 2021 was $ 8.0 million.

There were no outstanding foreign currency contracts as of July 31, 2021.

There were no outstanding foreign currency contracts as of October 31, 2021.

As of January 31, 2021, the fair value of the Company's outstanding derivative instruments was not material.

Derivative instruments recognized as assets are recorded in prepaid expenses and other in the condensed consolidated balance sheets, and derivative instruments recognized as liabilities are recorded in accrued expenses and other in the condensed consolidated balance sheets.

The following table sets forth the gains and losses recognized in income from the Company’s derivative instruments for the six months ended July 31, 2021 and 2020.

The following table sets forth the gains and losses recognized in income from the Company’s derivative instruments for the nine months ended October 31, 2021 and 2020.

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

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

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

2021 2020 2021 2020

1 unchanged sentence

Foreign currency contract gain (loss) $ — $ 471 $ ( 159 ) $ 660

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NOTE 11 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following is a summary of the changes in accumulated other comprehensive income (loss), by component, for the periods ended July 31, 2021 and July 31, 2020:

The following is a summary of the changes in accumulated other comprehensive income (loss), by component, for the nine month periods ended October 31, 2021 and October 31, 2020:

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

5 unchanged sentences

Balance, July 31, 2021 ( 2,653 ) 2,711 58

Other comprehensive loss ( 744 ) — ( 744 )

Balance, October 31, 2021 $ ( 3,397 ) $ 2,711 $ ( 686 )

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

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 )

NOTE 12 - LEASES

12 unchanged sentences

All sublease arrangements are classified as operating 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 2021 2020 2021 2020

9 unchanged sentences

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

Classification July 31, 2021 January 31, 2021

Classification October 31, 2021 January 31, 2021

(in thousands)

8 unchanged sentences

Total lease liabilities $ 74,956 $ 98,073

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

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

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

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

Operating Finance

11 unchanged sentences

Present value of lease liabilities $ 69,186 $ 5,770 $ 74,956

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

July 31, 2021

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

October 31, 2021

Weighted-average remaining lease term (years):

4 unchanged sentences

Financing leases 5.7 %

Table of C ontents

The Company rents equipment to customers, primarily in the Construction segment, on a short-term basis.

13 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, included in Property and equipment, net of accumulated depreciation in the consolidated balance sheet, of our Construction segment as of July 31, 2021 and January 31, 2021:

July 31, 2021 January 31, 2021

The following is the balance of our dedicated rental fleet assets, included in Property and equipment, net of accumulated depreciation in the condensed consolidated balance sheet, of our Construction segment as of October 31, 2021 and January 31, 2021:

October 31, 2021 January 31, 2021

(in thousands)

3 unchanged sentences

NOTE 13 - FAIR VALUE MEASUREMENTS

As of July 31, 2021 and January 31, 2021, the fair value of the Company's foreign currency contracts, which are either assets or liabilities measured at fair value on a recurring basis, was not material.

As of October 31, 2021 and January 31, 2021, the fair value of the Company's foreign currency contracts, which are either assets or liabilities measured at fair value on a recurring basis, was not material.

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

5 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, 2021 and January 31, 2021.

The carrying amounts of these financial instruments approximated their fair values as of October 31, 2021 and January 31, 2021.

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

The estimated fair value of the Company's Level 2 long-term debt, which is provided for disclosure purposes only, is as follows:

July 31, 2021 January 31, 2021

October 31, 2021 January 31, 2021

(in thousands)

1 unchanged sentence

Fair value 64,300 34,185

Table of C ontents

NOTE 14 - INCOME TAXES

Our effective tax rate was 28.0 % and 22.8 % for the three months ended July 31, 2021 and 2020, respectively and was 25.6 % and 24.3 % for the six months ended July 31, 2021 and 2020, respectively.

The effective tax rate for the six months ended July 31, 2021 was benefited by the vesting of share-based compensation but was offset by the recognition of a valuation allowance on certain of our foreign deferred tax assets including recording a valuation allowance on the remaining deferred tax assets of our Germany entity.

For the six months ended July 31, 2020, the effective tax rate benefited from a weakening Ukrainian currency but was offset by increased tax expense on the vesting of share-based compensation.

Our effective tax rate was 24.3 % and 28.3 % for the three months ended October 31, 2021 and 2020, respectively and was 25.0 % and 26.5 % for the nine months ended October 31, 2021 and 2020, respectively.

The effective tax rate for the three and nine months ended October 31, 2021 and 2020 were subject to variation due to various factors such as the impact of certain discrete items, mainly the vesting of share-based compensation, the mix of domestic and foreign income, recognition of a valuation allowance on certain of our foreign deferred tax assets and foreign currency gains and losses.

NOTE 15 - BUSINESS COMBINATIONS

9 unchanged sentences

The accounting for the purchase price allocation was complete as of January 31, 2021.

The following table presents the aggregate purchase price allocations for all acquisitions completed as of January 31, 2021:

The following table presents the aggregate purchase price allocations for the HorizonWest acquisition completed as of January 31, 2021:

January 31, 2021

14 unchanged sentences

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

For the business combination occurring during the twelve months ended January 31, 2021, 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 combination occurring during the fiscal year ended January 31, 2021, the Company recognized a non-competition intangible asset of $ 0.1 million and a distribution rights intangible asset of $ 0.2 million.

The non-competition asset will be amortized over periods ranging from three to five years.

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

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

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

The Company estimated the fair value of the

Table of C ontents

intangible assets using a multi-period excess earnings model, which is an income approach.

Acquisition related costs were not material for the fiscal year ended January 31, 2021, and have been expensed as incurred and recognized as operating expenses in the consolidated statements of operations.

2 unchanged sentences

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 it's financial position, results of operations or cash flows.

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

These matters, however, are subject to many uncertainties, and the outcome of any matter is not predictable.

6 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,

2021 2020 2021 2020

11 unchanged sentences

Total $ 28,823 $ 13,824 $ 58,133 $ 25,265

July 31, 2021 January 31, 2021

October 31, 2021 January 31, 2021

(in thousands)

5 unchanged sentences

Total $ 855,219 $ 815,789

Table of C ontents

NOTE 18 - SUBSEQUENT EVENTS

On December 1, 2021, the Company acquired certain assets of Jaycox Implement, Inc.

The acquired business consisted of three agricultural equipment stores in Worthington and Luverne, Minnesota and Lake Park, Iowa.

In its most recent fiscal year, Jaycox Implement, Inc.

generated revenue of approximately $ 91 million.

These locations will be included in the Company's Agriculture segment.

The total cash consideration paid for the acquired business was $ 28.2 million.

The Company has committed to acquire the real estate of Jaycox Implement, Inc., subject to customary closing conditions, for a purchase price of $ 5.5 million and anticipates completing the real estate acquisition by January 31, 2022.

The Company has considered the disclosure requirements of ASC 805-10-50-2 and ASC 805-10-50-4 but has not included certain required disclosures in this report due to the timing of the transaction.

Table of C ontents

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