What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-04-01 compared with 2021-03-31 · 226 added, 210 removed, 1121 unchanged (28% of the section changed)

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Audited Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm 48

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Report of Independent Registered Public Accounting Firm 46

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Notes to Consolidated Financial Statements 51

Table of Content

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Titan Machinery Inc.

To the stockholders and the Board of Directors of Titan Machinery Inc.

Opinion on the Financial Statements

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Given the significant judgments made by management to determine the initial fair value and subsequent net realizable value of used equipment inventories, performing audit procedures to evaluate these judgments to determine the valuation of used equipment inventories required a high degree of auditor judgment and an increased extent of effort.

Table of Content

How the Critical Audit Matter Was Addressed in the Audit

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We have served as the Company's auditor since 2013.

Table of Content

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Titan Machinery Inc.

To the stockholders and the Board of Directors of Titan Machinery Inc.

Opinion on Internal Control over Financial Reporting

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and financial statement schedule as of and for the year ended January 31, 2021, of the Company and our report dated March 30, 2021, expressed an unqualified opinion on those consolidated financial statements.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended January 31, 2022, of the Company and our report dated March 31, 2022, expressed an unqualified opinion on those financial statements.

Basis for Opinion

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March 31, 2022

Table of Content

TITAN MACHINERY INC.

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See Notes to Consolidated Financial Statements

Table of Content

TITAN MACHINERY INC.

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Impairment of Intangible and Long-Lived Assets 1,498 1,727 3,764

Restructuring Costs — — 414

Income from Operations 90,182 37,408 21,332

Other Income (Expense)

Interest and other income (expense) 527 3,126 2,547

Interest and other income 2,431 527 3,126

Floorplan interest expense ( 1,175 ) ( 3,339 ) ( 5,354 )

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See Notes to Consolidated Financial Statements

Table of Content

TITAN MACHINERY INC.

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See Notes to Consolidated Financial Statements

Table of Content

TITAN MACHINERY INC.

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BALANCE, JANUARY 31, 2019 22,218 $ — $ 248,423 $ 89,228 $ ( 2,340 ) $ 335,311

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 116 — ( 621 ) — — ( 621 )

Stock-based compensation expense — — 2,535 — — 2,535

Net income — — — 12,182 — 12,182

Other comprehensive loss — — — — ( 640 ) ( 640 )

BALANCE, JANUARY 31, 2019 22,218 — 248,423 89,228 ( 2,340 ) 335,311

Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax 117 — ( 509 ) — — ( 509 )

Stock-based compensation expense — — 2,693 — — 2,693

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Net income — — — 19,356 — 19,356

Other comprehensive loss — — — — 4,719 4,719

BALANCE, JANUARY 31, 2021 22,553 — 252,913 116,869 1,499 371,281

Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax 35 — ( 1,012 ) — — ( 1,012 )

Stock-based compensation expense — — 2,554 — — 2,554

Net income — — — 66,047 — 66,047

Other comprehensive income — — — — ( 3,671 ) ( 3,671 )

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See Notes to Consolidated Financial Statements

Table of Content

TITAN MACHINERY INC.

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Noncash lease expense 9,882 11,537 12,234

Loss on repurchase of senior convertible notes — — 615

Gain on sale of property & equipment ( 4,525 ) ( 863 ) ( 875 )

Other, net 711 ( 512 ) 487

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Manufacturer floorplan payable 14,233 ( 110,084 ) 49,601

Deferred revenue 74,244 18,157 ( 5,370 )

Accounts payable, deferred revenue, accrued expenses and other and other long-term liabilities 9,687 18,048 3,480

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Proceeds from long-term debt borrowings 10,348 5,326 23,354

Principal payments on long-term debt ( 15,942 ) ( 4,490 ) ( 16,116 )

Principal payments on long-term debt and finance leases ( 9,212 ) ( 15,942 ) ( 4,490 )

Other, net ( 1,028 ) ( 909 ) ( 509 )

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Net property and equipment financed with long-term debt, capital leases, accounts payable and accrued liabilities $ 14,626 $ 19,537 $ 11,039

Long-term debt to acquire finance leases $ 11,000 $ — $ —

Net transfer of assets from property and equipment to inventories $ 4,368 $ 6,702 $ 2,544

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and its subsidiaries (collectively, the "Company") are 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.

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

Russia/Ukraine Geopolitical Conflict

On February 24, 2022, the ongoing Russia/Ukraine conflict significantly intensified.

Titan Machinery Ukraine, LLC.

("Titan Machinery Ukraine"), the Company's wholly owned Ukrainian subsidiary, has ten locations in Ukraine, each of which were temporarily closed for a period of time, some locations have remained closed, as the well-being of the employees is the Company's primary concern.

The Company is actively monitoring the quickly evolving geopolitical situation but due to the unknown nature of this conflict, the duration of the closures are unknown and may vary across different areas of Ukraine.

For the fiscal year ended January 31, 2022, the Company had total assets of $32.7 million in Ukraine.

The physical assets (e.g.

inventory and fixed assets) are almost exclusively located in central and western areas of the country.

The Company has been monitoring Titan Machinery Ukraine's net monetary asset position, but the currency and payment controls imposed by the National Bank of Ukraine have limited our ability to fully manage our net monetary asset position.

The Russia/Ukraine conflict did not have a significant impact on our results of operations for the fiscal year ended January 31, 2022, but depending on the extent and duration of the conflict may have a material adverse effect on Titan Machinery Ukraine's operations going forward.

Impact of the COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, and the President of the United States declared the COVID-19 outbreak as a national emergency.

The nature of COVID-19 led to worldwide shutdowns and halting of commercial and interpersonal activity as governments imposed regulations in efforts to control the spread of the pandemic, such as shelter-in-place orders and quarantines.

The pandemic has been highly fluid and we cannot anticipate with any certainty the length, scope, or severity of such restrictions in each of the markets that we operate.

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 related to the pandemic at 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 in March 2020 but continued operations through social distancing means in all areas:

equipment, parts, service and rental.

Beginning in May 2020, we began to fully reopen 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 outbreak and global spread of COVID-19, which was declared a pandemic by the World Health Organization and a national emergency by the President of the United States in March 2020, continues to have an impact on society, economies, financial markets, and businesses.

While the Company's products and services were determined to be an essential business, the pandemic has had an impact on the Company's business operations, existing employees and ability to find new employees, customers, and suppliers.

Uncertainty remains regarding the magnitude and duration of the pandemic and the resulting financial effects and will depend on future developments including the efficacy of vaccines, the spread of COVID-19 variants, and the extent of governmental responses, including potential vaccine or testing mandates.

On November 5, 2021, the Department of Labor's Occupational Safety and Health Administration ("OSHA") announced an Emergency Temporary Standard ("ETS") requiring all employers with at least 100 employees to ensure their employees are fully vaccinated or require weekly testing of unvaccinated employees.

On January 13, 2022, the US Supreme Court granted emergency relief to stay the implementation of the ETS and on January 26, 2022, OSHA withdrew the standard.

Although OSHA withdrew the vaccination and testing ETS as an enforceable emergency temporary standard, the agency is not withdrawing the ETS as a proposed rule.

The agency is prioritizing resources and is focusing on finalizing a permanent COVID-19 Healthcare Standard.

The ultimate impact of a permanent standard on the Company, if one were to be adopted, is currently unknown and difficult to predict.

The Company has assessed the impacts of the COVID-19 pandemic on its results of operations for the fiscal year ended January 31, 2022, and although there have been challenges, no material adverse impacts were identified.

We continue to monitor developments involving our workforce, customers, and suppliers and continue to take steps to mitigate against additional impacts.

The agricultural and construction equipment businesses are highly seasonal, which causes the Company's quarterly results and cash flows to fluctuate during the year.

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However, weather conditions impact the timing of our customers' busy times, which may cause the Company's quarterly financial results to differ between fiscal years.

In addition, the fourth quarter typically is a significant period for equipment sales in the United States because of our customers’ year-end tax planning considerations, the timing of dealer incentives and the increase in availability of funds from completed harvests and construction projects.

In addition, the fourth quarter

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

typically is a significant period for equipment sales in the United States because of our customers’ year-end tax planning considerations, the timing of dealer incentives and the increase in availability of funds from completed harvests and construction projects.

Principles of Consolidation

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Concentrations of Credit Risk

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Sales, value added and other taxes collected from the Company's customers concurrent with the Company's revenue activities are excluded from revenue.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Equipment Revenue.

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Historically, parts returns have not been material.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Parts revenue also includes the retail value of parts inventories consumed during the course of customer repair and maintenance services and services provided under manufacturer warranties.

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Trade accounts receivable due from finance companies primarily consist of contracts in transit with finance companies and balances due from credit card companies.

These receivables do not generally have established payment terms but are collected in relatively short time periods.

Unbilled receivables primarily represent unbilled labor hours incurred and parts inventories consumed during the performance of service arrangements for our customers at their retail rates.

These receivables

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

do not generally have established payment terms but are collected in relatively short time periods.

Unbilled receivables primarily represent unbilled labor hours incurred and parts inventories consumed during the performance of service arrangements for our customers at the Company's retail rates.

The carrying amount of trade receivables is reduced by a valuation allowance that reflects management's best estimate of the amounts that will not be collected.

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Parts inventories are valued at the lower of average cost or net realizable value.

The Company estimates its lower of cost or net realizable value adjustments on its parts inventories based on various factors including aging and sales of each type of parts inventory.

The Company estimates its lower of average cost or net realizable value adjustments on its parts inventories based on various factors including aging and sales of each type of parts inventory.

Work in process represents costs incurred in the reconditioning and preparation for sale of our equipment inventories.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Property and Equipment

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The goodwill impairment analysis is a single-step quantitative assessment that identifies both the existence of impairment and the amount of impairment loss by comparing the estimated fair value of a reporting unit to its carrying value, with any excess carrying value over the fair value being recognized as an impairment loss, limited to the total amount of goodwill allocated to that reporting unit.

The Company performs its annual goodwill impairment test as of December 31st of each year and has identified one reporting unit that carries a goodwill balance.

The Company performs its annual goodwill impairment test as of December 31st of each year.

See Note 7 for details and results of the Company's impairment testing.

Intangible Assets

Intangible assets with a finite life consist of customer relationships and covenants not to compete, and are carried at cost less accumulated amortization.

The Company amortizes the cost of identified intangible assets on a straight-line basis over the expected period of benefit, which is generally five years for customer relationships and the contractual term for covenants not to compete, which range from 3 to 5 years.

Intangible assets with an indefinite life consist of distribution rights with manufacturers.

Distribution rights are classified as an indefinite-lived intangible asset because the Company's distribution agreements continue indefinitely by their terms, or are routinely awarded or renewed without substantial cost or material modifications to the underlying agreements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accordingly, the Company believes that its distribution rights intangible assets will contribute to its cash flows for an indefinite period, therefore the carrying amount of distribution rights is not amortized, but is tested for impairment annually, or more frequently upon the occurrence of certain events or when circumstances indicate that impairment may be present.

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Long-lived assets deployed and used by individual store locations are reviewed for impairment at the individual store level.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

long-lived assets shared across stores within a segment or shared across segments are reviewed for impairment on a segment or consolidated level as appropriate.

Other long-lived assets shared across stores within a segment or shared across segments are reviewed for impairment on a segment or consolidated level as appropriate.

During the year ended January 31, 2022, the Company determined that certain events or circumstances, including a current period operating loss combined with historical losses and anticipated future operating losses, within certain of its stores was an indication that the long-lived assets of these stores may not be recoverable.

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Accordingly, the Company estimated the fair value of the assets using an income approach.

The Company recognized total impairment charges of $ 0.9 million, of which $ 0.3 million related to the Agriculture segment and $ 0.6 million related to the Construction segment.

All impairment charges recognized are included in the Impairment of Intangible and Long-Lived Assets line item in the consolidated statements of operations.

The Company recognized total impairment charges of $ 0.4 million, which relates to the International segment.

We performed similar impairment analyses at the end of fiscal 2021 and 2020.

The Company recognized impairment charges totaling $ 0.9 million on long-lived assets during the year ended January 31, 2021, of which $ 0.3 million related to the Agriculture segment and $ 0.6 million related to the Construction segment.

The Company recognized impairment charges totaling $ 2.2 million on long-lived assets during the year ended January 31, 2019, of which $ 0.9 million related to the Agriculture segment, $ 1.1 million related to the Construction segment, and $0.2 million related to the International segment.

The Company recognized impairment charges totaling $ 3.1 million on long-lived assets during the year ended January 31, 2020, of which $ 2.3 million related to the Agriculture segment and $ 0.8 million related to the Construction segment.

All impairment charges recognized are included in the Impairment of Intangible and Long-Lived Assets line item in the consolidated statements of operations.

Construction of Leased Assets and Sale-Leaseback Accounting

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In instances in which the Company has no continuing involvement in the sold asset, the criteria for sale recognition are met and the asset and any related financing obligation are derecognized from the consolidated balance sheet, and the lease is analyzed for proper accounting treatment as either an operating or finance lease.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Derivative Instruments

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Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases.

Deferred tax assets are reduced by a valuation allowance when it is more likely

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

than not that a portion or all of the deferred tax assets will not be realized.

Deferred tax assets are reduced by a valuation allowance when it is more likely than not that a portion or all of the deferred tax assets will not be realized.

Changes in valuation allowances are included in its provision for income taxes in the period of the change.

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For the Company, comprehensive income (loss) represents net income adjusted for foreign currency translation adjustments.

For its foreign subsidiaries in which their local currency is their functional currency, assets and liabilities are translated into U.S.

For the Company's foreign subsidiaries in which their local currency is their functional currency, assets and liabilities are translated into U.S.

dollars at the balance sheet date exchange rate.

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Foreign currency translation adjustments are recorded directly as other comprehensive income (loss), a component of stockholders' equity.

For its foreign subsidiaries in which the local currency is not the functional currency, prior to translation into U.S.

For the Company's foreign subsidiaries in which the local currency is not the functional currency, prior to translation into U.S.

dollars, amounts must first be remeasured from the local currency into the functional currency.

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Foreign currency remeasurement adjustments are included in the statement of operations.

The Company recognized, in interest and other income (expense) in its consolidated statements of operations, a net foreign currency transaction loss of $ 2.8 million and $ 0.9 million for the years ended January 31, 2021 and 2019, respectively, and a net foreign currency transaction gain of $ 0.4 million for the year ended January 31, 2020.

The Company recognized, in interest and other income in its consolidated statements of operations, a net foreign currency transaction loss of $ 0.1 million and $ 2.8 million for the years ended January 31, 2022 and 2021, respectively, and a net foreign currency transaction gain of $ 0.4 million for the year ended January 31, 2020.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Business Combinations

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In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

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Segment Reporting

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Recent Accounting Guidance

Accounting guidance adopted

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.

The guidance impacts the Company on its accounts receivable portfolio but specifically excluded receivables from operating lease arrangements and, therefore, the Company’s receivables from rental contracts were not impacted.

The guidance also requires new disclosures to allow the users of the financial statements to understand the credit risk inherent in a portfolio and how management monitors the credit quality of the portfolio, management’s estimate of expected credit losses, and changes in the estimate of expected credit losses that have taken place during the reporting period.

The Company adopted the new guidance on February 1, 2020 using a modified retrospective approach and recognized an immaterial cumulative-effect adjustment to retained earnings as of the effective date.

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

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

See Note 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, 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.

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 Accounting Standard Update ("ASU") No.

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

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

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Under the two-class method, earnings of the Company are allocated between common stockholders and these participating securities based on the weighted-average number of shares of common stock and participating securities outstanding during the relevant period.

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Basic EPS is computed by dividing net income attributable to Titan Machinery Inc.

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All anti-dilutive securities were excluded from the computation of diluted EPS.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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Diluted $ 2.92 $ 0.86 $ 0.63

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

Shares underlying senior convertible notes (conversion price of $43.17) — — 1,057

NOTE 3 - REVENUE

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Total revenues $ 1,076,751 $ 317,164 $ 317,991 $ 1,711,906

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year Ended January 31, 2021

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Total revenues $ 886,485 $ 305,745 $ 218,992 $ 1,411,222

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year Ended January 31, 2020

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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.

In the fourth quarter of the fiscal year, longer time periods between customer payments and delivery of the equipment occur.

The increase in deferred revenue from January 31, 2020 to January 31, 2021 was primarily due to increased equipment sales activity, including prepayments and trade-in activity on pending equipment sale transactions in the fourth quarter of fiscal 2021.

The increase in deferred revenue from January 31, 2021 to January 31, 2022 was primarily due to increased equipment sales activity and longer lead times on delivery of new equipment from the manufacturer, which increased the amount of time between customer payments and the delivery of the equipment to the customer.

During the year ended January 31, 2022, the Company recognized substantially all of the revenue that was included in the deferred revenue balance as of January 31, 2021.

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The contracts for which the practical expedient has been applied include (i) equipment revenue transactions, which do not have a stated contractual term, but are short-term in nature, and (ii) service revenue transactions, which also do not have a stated contractual term but are generally completed within 30 days and for such contracts we recognize revenue over time at the amount to which we have the right to invoice for services completed to date.

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NOTE 4 - RECEIVABLES

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

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

The Company provides an allowance for these

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receivables based on historical experience and using credit information obtained from continued monitoring of customer accounts.

January 31, 2022 January 31, 2021

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Other 5,056 1,767

28,035 10,487

Receivables, net of allowance for expected credit losses $ 94,287 $ 69,109

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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Balance at January 31, 2021 229 1,074 1,691 2,994

Current expected credit loss provision 137 186 ( 8 ) 315

Write-offs charged against allowance 166 1,076 111 1,353

Credit loss recoveries collected 44 9 42 95

Foreign exchange impact — — ( 72 ) ( 72 )

Balance at January 31, 2022 $ 244 $ 193 $ 1,542 $ 1,979

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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(in thousands)

Impairment losses on:

Receivables from sales contracts $ 356 $ 1,373

Impairment losses (recoveries) on:

Receivables from sales contracts with customers $ 593 $ 356

Receivables from rental contracts ( 56 ) 142

$ 498 $ 2,497

NOTE 5 - INVENTORIES

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$ 178,243 $ 147,165

Depreciation expense totaled $ 21.9 million, $ 26.5 million and $ 23.6 million for the years ended January 31, 2021, 2020 and 2019, respectively.

The Company had assets related to sale-leaseback financing obligations and finance leases associated with real estate of store locations, which are included in the land, buildings and leasehold improvements balance

The Company includes depreciation expense related to its rental fleet and its trucking fleet, for hauling equipment, in cost of revenue, which was $ 8.6 million, $ 10.3 million, and $ 10.6 million for the years ended January 31, 2022, 2021 and 2020.

All other depreciation expense is included in Operating Expenses, which totaled $ 12.2 million, $ 11.6 million and $ 15.9 million for the years ended January 31, 2022, 2021 and 2020, respectively.

Such assets had gross carrying values totaling $ 26.3 million and $ 31.1 million, and accumulated amortization balances totaling $ 8.3 million and $ 8.7 million, as of January 31, 2022 and 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Such assets had gross carrying values totaling $ 31.1 million and $ 24.3 million, and accumulated amortization balances totaling $ 8.7 million and $ 6.9 million, as of January 31, 2021 and 2020.

NOTE 7 - INTANGIBLE ASSETS AND GOODWILL

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Balance, January 31, 2022 $ 10,136 $ 72 $ — $ 10,208

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

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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 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 in the second quarter of fiscal 2022 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.

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 July 31, 2021, 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 $ 1.1 million were recognized and are 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.

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.

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.

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The results of the Company's distribution rights impairment tests for the year ended January 31, 2021 indicated no additional impairment.

The results from the impairment test for the prior fiscal year ended January 31, 2020 indicated impairment of $ 0.7 million and no impairment was indicated for the fiscal year ended January 31, 2019.

During the years ended January 31, 2022 and 2021, the Company recognized $ 1.1 million and $ 0.9 million of impairment charges associated with its distribution rights in its Germany reporting unit.

No impairment charges were recognized for the fiscal year ended January 31, 2020.

The Company had gross indefinite-lived intangible assets of $12.2 million and accumulated impairments of $2.0 million as of January 31, 2022.

Changes in the carrying amount of goodwill during the years ended January 31, 2022 and 2021 are as follows:

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Foreign currency translation — 75 75

Impairment — 1,453 1,453

Balance, January 31, 2021 1,433 — 1,433

Arising from business combinations 7,519 — 7,519

Foreign currency translation — 75 75

Impairment — 1,453 1,453

Balance, January 31, 2022 $ 8,952 $ — $ 8,952

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.

The Company performs an annual impairment testing of goodwill as of December 31st of each year.

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.

During the years ended January 31, 2022 and 2020, the Company did not recognize any impairment charges.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the year ended January 31, 2021, 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.

2 unchanged sentences

The results of the Company's annual goodwill impairment tests for the fiscal years ended January 31, 2021, 2020 and 2019 indicated that no goodwill impairment existed as of the test date.

This removed all of the remaining goodwill in the International segment last year, the Agriculture segment is the only segment with goodwill on its balance sheet.

The Company had gross goodwill of $10.4 million and accumulated impairments of $ 1.5 million as of January 31, 2022.

NOTE 8 - FLOORPLAN PAYABLE/LINES OF CREDIT

1 unchanged sentence

In the consolidated statements of cash flows, the Company reports cash flows associated with manufacturer floorplan financing as operating cash flows and cash flows associated with non-manufacturer floorplan financing as financing cash flows.

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of January 31, 2022, the Company had floorplan lines of credit totaling $ 752.0 million, which is primarily comprised of three significant floorplan lines of credit:

4 unchanged sentences

Available borrowings under the credit facility are reduced by outstanding floorplan payable balances and other acquisition-related financing arrangements with CNH Industrial.

The credit facility charges 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.

The credit facility charges interest at a rate dependent on the Company's Retail Finance Market Share, as defined in the credit facility agreement, and ranges from 0.5% to 2.75 % plus the prime rate for the financing of new and used equipment inventories and rental fleet assets.

CNH Industrial offers periods of reduced interest rates and interest-free periods.

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As of January 31, 2022, the Company was in compliance with the adjusted debt to tangible net worth and fixed charge coverage ratio financial covenants under this credit facility.

During the year ended January 31, 2022, the CNH Industrial credit facility was amended to update the interest rate structure from a rate equal to the prime rate plus 3.25% to a rate dependent on the Company's Retail Finance Market Share which ranges from 0.5% to 2.75% plus the prime rate.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Bank Syndicate Credit Agreement - Floorplan Payable and Working Capital 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 million Wells Fargo Credit Agreement, 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").

As of January 31, 2022, the Company had a $250.0 million credit facility under a Third Amended and Restated Credit Agreement (the "Bank Syndicate Agreement"), consisting of a $ 185.0 million floorplan facility (the "Floorplan Loan") and a $ 65.0 million operating line (the "Revolver Loan").

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

5 unchanged sentences

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 has 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, or 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 2.0%.

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.

3 unchanged sentences

The Bank Syndicate Agreement matures on April 3, 2025.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Floorplan Loan is used to finance equipment inventory purchases.

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Amounts outstanding are typically 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.

Due to cash generation throughout fiscal 2021, the Company was able to repay the amount borrowed in fiscal 2021.

This balance can be drawn on in the future when the need arises.

The balances outstanding on the Revolver Loan as of January 31, 2022 and 2021 are disclosed in Note 10.

During the year ended January 31, 2022, the Bank Syndicate Agreement was amended to, among other things, add a benchmark replacement reference rate and reduce the current floor for the LIBOR Rate.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DLL Finance Floorplan Payable Line of Credit

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The DLL Finance credit facility may be used to purchase or refinance new and used equipment inventory.

Amounts outstanding for domestic financing bear interest on outstanding balances of three-month LIBOR plus an applicable margin of 2.85 %.

Amounts outstanding for domestic financing bear interest on outstanding balances of one-month SOFR plus an applicable margin of 3.00 %.

Amounts outstanding for European financing bear interest on outstanding balances of three-month EURIBOR plus an applicable margin of 2.10 % to 2.50 %.

The credit facility allows for increase, decrease or termination of the facility by DLL Finance upon 90 days notice.

The credit facility allows for increase, decrease or termination of the facility by DLL Finance in its sole discretion at any time.

The credit facility contains financial covenants that impose a maximum net leverage ratio of 3.50:1.00 and a minimum fixed charge coverage ratio of 1.10 :1.00.

3 unchanged sentences

As of January 31, 2022, the Company was in compliance with the net leverage ratio and fixed charge coverage ratio financial covenants under this credit facility.

During the year ended January 31, 2022, the DLL Finance credit facility was amended to, among other things, reduce the available borrowing capacity from $60.0 million to the current level of $50.0 million, increase 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, eliminate the 0.15% non-utilization fee and remove the 90-day notice of termination.

Other Lines of Credit

9 unchanged sentences

CNH Industrial $ 94,054 $ 86,792

Bank Syndicate Agreement Floorplan Loan — 82,700

DLL Finance 8,558 10,667

1 unchanged sentence

$ 135,415 $ 161,835

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

floorplan payables were generally all non-interest bearing, compared to an interest rate range of 4.05 % and 4.81 % as of January 31, 2020.

floorplan payables were generally all non-interest bearing, as of January 31, 2022 and 2021.

As of January 31, 2022, 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.

13 unchanged sentences

$ 59,339 $ 48,791

NOTE 10 - SENIOR CONVERTIBLE NOTES

On April 24, 2012, the Company issued through a private offering $ 150 million of 3.75% Senior Convertible Notes (the "Senior Convertible Notes").

The Senior Convertible Notes bore interest at a rate of 3.75 % per year, payable semi-annually in arrears on May 1 and November 1 of each year.

The Senior Convertible Notes matured on May 1, 2019, and the Company repaid the outstanding principal balance of $ 45.6 million on the maturity date, and as such there was no interest expense for the fiscal year ended January 31, 2021.

The Company recognized interest expense associated with its Senior Convertible Notes as follows:

Year Ended January 31,

(in thousands)

Cash Interest Expense

Coupon interest expense $ 421 $ 2,014

Noncash Interest Expense

Amortization of debt discount 350 1,626

Amortization of transaction costs 45 216

$ 816 $ 3,856

The effective interest rate of the liability component was equal to 7.3% for each of the periods presented.

NOTE 10 - LONG-TERM DEBT

4 unchanged sentences

Mortgage loans, secured Various through May 2039 2.1 % to 5.1 %

$ 57,801 $ 22,916

Sale-leaseback financing obligations Various through December 2030 3.4 % to 10.3 %

Bank Syndicate Agreement - Revolver Loan April 2025 2.3% — 10,000

12,382 16,505

Vehicle loans, secured Various through December 2027 1.7 % to 3.9 %

3 unchanged sentences

Long-term debt, net $ 74,772 $ 44,906

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company has purchased buildings and real estate assets of several of its U.S.

dealer locations in fiscal 2022 and financed many of these purchases with long term debt.

Long-term debt maturities are as follows:

8 unchanged sentences

however, the instruments are an effective economic hedge of the underlying foreign currency exposure.

Both the gain or loss on the derivative instrument and the offsetting gain or loss on the underlying intercompany loan are recognized in earnings immediately, thereby eliminating or reducing the impact of foreign currency exchange rate fluctuations on net income.

Both the gain or loss on the derivative instrument and the offsetting gain or loss on the underlying intercompany loan are

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

1 unchanged sentence

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

As of January 31, 2021, the fair value of the Company's outstanding derivative instruments was not material and as of January 31, 2020 the Company had no derivative instruments.

As of January 31, 2022, the Company had no derivative instruments and, 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 consolidated balance sheets, and derivative instruments recognized as liabilities are recorded in Accrued expenses and other in the consolidated balance sheets.

6 unchanged sentences

Total Derivatives $ ( 159 ) $ 934 $ 365

(a) Amounts are included in Interest and other income (expense) in the consolidated statements of operations

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 13 - CONTINGENCIES AND GUARANTEES

The Company has provided residual value guarantees to CNH Industrial Capital in connection with certain customer leasing arrangements with CNH Industrial Capital.

The Company, as guarantor, may be required to provide payment to CNH Industrial Capital at the termination of the lease agreement if the customer fails to exercise the purchase option under the leasing agreement and the proceeds CNH Industrial Capital receives upon disposition of the leased asset are less than the purchase option price as stipulated in the lease agreement.

As of January 31, 2021, the maximum amount of residual value guarantees was approximately $ 2.0 million and the lease agreements have termination dates ranging from 2021 to 2025.

As of January 31, 2021, the Company has recognized a liability of approximately $ 1.7 million based on its estimates of the likelihood and amount of residual value guarantees that will become payable at the termination dates of the underlying leasing agreements discounted at a rate of interest to reflect the risk inherent in the liability.

As of January 31, 2021, the Company has recorded a current liability, recognized in Accrued expenses and other in the consolidated balance sheets, of $ 0.9 million, and a long-term liability, recognized in other Long-term liabilities in the consolidated balance sheets, of $ 0.8 million.

As of January 31, 2021, the Company had $ 1.2 million of guarantees on customer financing with CNH Industrial Capital.

In the event that the customer defaulted on the payments owed to CNH Industrial Capital, the Company as the guarantor would be required to make those payments and any accelerated indebtedness to CNH Industrial Capital.

Upon such payment, the Company would be entitled to enforce normal creditor rights against the customer including collection action for monetary damages or re-possession of the collateral if CNH Industrial Capital has a perfected security interest.

No liabilities associated with these guarantees are included in the consolidated balance sheets as of January 31, 2021 as the Company deems the probability of being required to make such payments to be remote.

(a) Amounts are included in Interest and other income in the consolidated statements of operations .

NOTE 12 - CONTINGENCIES

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

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Variable lease cost Operating expenses 2,332 2,798 2,665

Sublease income Interest income and other income (expense) ( 547 ) ( 620 )

Sublease income Interest and other income ( 894 ) ( 547 ) ( 620 )

$ 17,473 $ 22,652 $ 25,523

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Classification January 31, 2022 January 31, 2021

3 unchanged sentences

Property and equipment, net of accumulated depreciation 9,045 12,426

Total leases assets $ 86,871 $ 94,578

Total leased assets $ 65,195 $ 86,871

Operating Current operating lease liabilities $ 9,601 $ 11,772

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Financing leases 4.6 % 5.3 %

Other lease information is as follows:

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other lease information is as follows:

Year Ended January 31,

27 unchanged sentences

$ 41,616 $ 48,614

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 14 - INCOME TAXES

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The provision for (benefit from) income taxes charged to income for the years ended January 31, 2022, 2021 and 2020 consists of the following:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2022 2021 2020

8 unchanged sentences

Total deferred taxes 4,315 ( 3,538 ) ( 1,663 )

$ 11,397 $ 699 $ 3,972

Total $ 20,854 $ 11,397 $ 699

The reconciliation of the statutory federal income tax rate to the Company's effective rate is as follows:

27 unchanged sentences

Total deferred tax liabilities $ ( 27,155 ) $ ( 28,425 )

Net deferred tax asset $ 3,637 $ 92

As of January 31, 2021, the Company has recorded $ 36.7 million of net operating loss carryforwards within certain of its U.S.

state and foreign jurisdictions;

$ 22.9 million of net operating loss carryforwards are within foreign jurisdictions with unlimited carryforward periods, $ 9.2 million are within foreign jurisdictions that expire at various dates between the Company's fiscal years 2021 and 2025, and $ 4.6 million are within U.S.

states that expire at various dates between the Company's fiscal years 2032 and 2038.

In reviewing our foreign deferred tax assets as of January 31, 2021, we concluded that a full valuation allowance continued to be warranted in certain jurisdictions.

It was also concluded that a full valuation allowance for the Company’s Ukraine business was warranted and a partial valuation allowance for the Company’s Germany business was warranted, based on the presence of historical losses and our expected future sources of taxable income, including the anticipated future reversal of our existing deferred tax assets and liabilities.

The Company recorded an additional $3.8 million valuation allowance related to the Ukraine and Germany businesses.

Net deferred tax asset (liability) $ ( 678 ) $ 3,637

As of January 31, 2022, the Company has recorded $ 28.8 million of net operating loss carryforwards within certain of its foreign jurisdictions;

$ 24.5 million of net operating loss carryforwards are within foreign jurisdictions with unlimited carryforward periods, and $ 4.3 million are within foreign jurisdictions that expire at various dates between the Company's fiscal years 2023 and 2026.

In reviewing the foreign deferred tax assets as of January 31, 2022, the Company concluded that a full valuation allowance continued to be warranted in the Company's Ukrainian subsidiary, due to geopolitical concerns in the area.

It was also concluded that a full valuation allowance for the Company’s German and Luxembourg subsidiaries was warranted, based on the presence of historical losses and our expected future sources of taxable income, including the anticipated future reversal of our existing deferred tax assets and liabilities.

In the second quarter of fiscal 2022, the Company recorded an additional $2.5 million valuation allowance related to the German and Luxembourg subsidiaries.

It was also concluded that a partial release of the valuation allowance of the Company’s Bulgaria subsidiary is warranted based on the presence of historical income, and our expected future sources of taxable income, including the anticipated future reversal of our existing deferred tax assets and liabilities.

In the fourth quarter of fiscal 2022, the Company recorded a benefit of $1.3 million from the partial release of the valuation allowance related to the Company’s Bulgaria subsidiary.

In total, valuation allowances of $6.0 million exist for our international entities as of January 31, 2022.

At the end of fiscal year ended January 31, 2021, the Company concluded that a full valuation allowance continued to be warranted in certain jurisdictions.

It was also concluded that a full valuation allowance for the Company's Ukrainian subsidiary was warranted and a partial valuation allowance for the Company's German subsidiary was warranted, based on the presence of historical losses and our expected future sources of taxable income, including the anticipated future reversal of our existing deferred tax assets and liabilities.

The Company recorded an additional $3.8 million valuation allowance related to the Ukrainian and German subsidiaries.

In total, valuation allowances of $6.1 million existed for our international entities as of January 31, 2021.

At the end of fiscal year ended January 31, 2020, the Company concluded, based upon all available evidence, it was more likely than not that it would have sufficient future taxable income to realize the Company’s U.S.

federal and state deferred tax assets.

As a result, the Company released the $4.6 million valuation allowance associated with these deferred tax assets and recognized a corresponding benefit from income taxes in the consolidated statement of operations for the year ended January 31, 2020.

The Company's conclusion regarding the realizability of such deferred tax assets was based on recent profitable domestic operations resulting in a cumulative profit over the three-year period ended January 31, 2020 and our projections of future profitability in the U.S.

In reviewing our foreign deferred tax assets as of January 31, 2020, we concluded that a full valuation allowance was warranted in certain jurisdictions.

In total, valuation allowances of $2.2 million existed for our international entities as of January 31, 2020.

At the end of fiscal year 2019, we concluded that a partial valuation allowance was warranted for U.S.

federal and state deferred tax assets, including state net operating losses, and a full valuation allowance for certain of our foreign deferred tax assets, including net operating losses.

In total, valuation allowances of $6.7 million existed as of January 31, 2019.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

recognition of the valuation allowances for our U.S.

and foreign deferred tax assets was based on the presence of historical losses and our expected future sources of taxable income, including the anticipated future reversal of our existing deferred tax assets and liabilities.

January 31, 2020.

In reviewing the foreign deferred tax assets as of January 31, 2020, the Company concluded that a full valuation allowance was warranted in certain jurisdictions.

In total, valuation allowances of $2.2 million existed for its international entities as of January 31, 2020.

The Company files income tax returns in the U.S.

15 unchanged sentences

The Company has one stock-based compensation plan, the Amended and Restated Titan Machinery Inc.

2014 Equity Incentive Plan (the"2014 Equity Incentive Plan") (the "Plan"), to provide incentive compensation to participants for services that have been or will be performed for continuing as employees or members of the Board of Directors of the Company.

Under the plan, which has been approved by the stockholders of the Company, the Company may grant incentive stock options, non-qualified stock options and restricted stock for up to a maximum number of shares of common stock set forth in the Plan under all forms of awards.

2014 Equity Incentive Plan (the "2014 Equity Incentive Plan"), to provide incentive compensation to participants for services that have been or will be performed for continuing as employees or members of the Board of Directors of the Company.

Under the 2014 Equity Incentive Plan, which has been approved by the stockholders of the Company, the Company may grant incentive stock options, non-qualified stock options and restricted stock for up to a maximum number of shares of common stock set forth in the 2014 Equity Incentive Plan under all forms of awards.

Shares issued for stock-based awards consist of authorized but unissued shares.

The 2014 Equity Incentive Plan authorizes and makes available 2,200,000 shares for equity awards.

As of January 31, 2021, the Company has 791,959 shares authorized and available for future equity awards under the 2014 Equity Incentive Plan.

During the year ended January 31, 2021, the 2014 Equity Incentive Plan was amended to increase the shares available for equity awards from 1,650,000 shares to 2,200,000 shares.

Compensation cost arising from stock-based compensation and charged to operations was $ 2.7 million for each of the years ended January 31, 2021, 2020 and 2019.

As of January 31, 2022, the Company has 718,945 shares authorized and available for future equity awards under the 2014 Equity Incentive Plan.

Compensation cost arising from stock-based compensation and charged to operations was $ 2.8 million, $ 2.7 million, $ 2.7 million for the years ended January 31, 2022, 2021 and 2020, respectively.

The related income tax benefit (net) was $ 1.3 million, $ 0.4 million and $ 0.6 million for the years ended January 31, 2022, 2021 and 2020, respectively.

2 unchanged sentences

The fair value of these awards is determined based on the closing market price of the Company's stock on the date of grant.

The RSAs primarily vest over a period of four to six years for employees and over one year for members of the Board of Directors.

The RSAs primarily vest over a period of four years for employees and over one year for members of the Board of Directors.

The Company recognizes compensation expense ratably over the vesting period of the award.

1 unchanged sentence

provided, however, any dividends paid shall be subject to a right of forfeiture until the underlying rule of forfeiture of the RSA has lapsed.

The following table summarizes RSA activity for the year ended January 31, 2021:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes RSA activity for the year ended January 31, 2022:

Shares Weighted Average Grant Date Fair Value

11 unchanged sentences

The fair value of these awards is determined based on the closing market price of the Company's stock on the date of grant.

The RSUs primarily vest over a period of three to six years.

The RSUs primarily vest over a period of four years.

The Company recognizes compensation expense ratably over the vesting period of the award.

7 unchanged sentences

Nonvested at January 31, 2022 15 $ 16.30

The weighted-average grant date fair value of RSUs granted was $ 10.33 and $ 17.79 for the fiscal years ended January 31, 2021 and 2020.

There were no RSUs granted during fiscal 2019.

The weighted-average grant date fair value of RSUs granted was $ 34.59 , $ 10.33 , and $ 17.79 for the fiscal years ended January 31, 2022, 2021, and 2020, respectively.

As of January 31, 2022, there was $ 0.2 million of unrecognized compensation cost related to nonvested RSUs that is expected to be recognized over a weighted-average period of 2.0 years.

During the year ended January 31, 2019, the Company modified certain of its RSU agreements to require the settlement of all future vested awards to be paid in cash in an amount equal to the number of vested awards multiplied by the stock price of the Company on the date of vesting.

Due to the cash settlement provision, these awards became liability-classified share-based payments on the modification date.

The accounting for this modification did not have a material impact on the Company's consolidated statement of operations or financial position.

Long-Term Cash Incentive Awards

5 unchanged sentences

The percentage of the fair value that is accrued as compensation cost at the end of each period is equal to the percentage of the requisite service that has been rendered at that date.

The following table summarizes activity for long-term cash incentive awards for the year ended January 31, 2021:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes activity for long-term cash incentive awards for the year ended January 31, 2021:

Shares Weighted Average Grant Date Fair Value

2 unchanged sentences

Granted 8 34.09

Forfeited ( 3 ) 17.11

Vested ( 16 ) 13.45

9 unchanged sentences

Balance, January 31, 2020 ( 5,931 ) 2,711 ( 3,220 )

Total other comprehensive loss ( 880 ) — ( 880 )

Total other comprehensive income 4,719 — 4,719

Balance, January 31, 2021 ( 1,212 ) 2,711 1,499

5 unchanged sentences

The Company has a 401(k) profit-sharing plan ("401(k) Plan") for full-time employees at least 19 years of age.

The Company matches 50 % of the first 6 % of participating employees' contributions.

Effective January 1, 2022, the Company amended the 401(k) Plan such that the Company matches 50 % of the first 8 % of the participating employee's contributions.

From February 1, 2021 to December 31, 2021, the Company matched 50% of the first 6 % of participating employees' contributions.

In addition, the Company may make a discretionary contribution to the 401(k) Plan as determined by the Board of Directors, with a maximum amount equal to the amount allowed under the IRS regulations.

1 unchanged sentence

All amounts contributed during these years reflected matching contributions, as no discretionary contributions were made by the Company to the 401(k) Plan.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 19 - BUSINESS COMBINATIONS

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

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

These locations are included in the Company's Agriculture segment.

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

The Company completed the real estate purchase on December 31, 2021 for a purchase price of $ 5.5 million, which was partially financed with long-term debt and the remainder was paid in cash.

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

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

In total, the Company acquired inventory and recognized a corresponding financing liability of $ 5.3 million.

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

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

2 unchanged sentences

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

9 unchanged sentences

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

This acquisition occurred with the Company's Agriculture segment.

This acquisition occurred within the Company's Agriculture segment.

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

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

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

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

2 unchanged sentences

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

On July 2, 2018, the Company acquired all interests of two commonly-controlled companies, AGRAM Landtechnikvertrieb GmbH and AGRAM Landtechnik Rollwitz GmbH (collectively "AGRAM"), for $ 19.2 million in cash consideration.

Founded in 1990, AGRAM is a CaseIH and Steyr dealership complex consisting of four agriculture dealership locations in the following cities of Germany:

Altranft, Burkau, Gutzkow, and Rollwitz.

This acquisition occurred within the Company's International segment.

Our acquisition of these entities provided the Company the opportunity to expand its international presence into the large, well-established German market.

TITAN MACHINERY INC.

2 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 is complete as of January 31, 2021.

As of January 31, 2022, all business combinations from fiscal year 2022 are preliminary and all business combinations from fiscal years 2021 and 2020 are complete.

The following table presents the aggregate purchase price allocations for all acquisitions completed during the fiscal years ended January 31, 2022, 2021, and 2020:

13 unchanged sentences

Liabilities Assumed:

Accounts payable — — 1,553

Floorplan payable — — 13,820

Current operating lease liabilities — 159 —

Deferred revenue 1,261 — —

Accrued expenses and other — — 1,279

Long-term debt — — 1,725

Operating lease liabilities — 1,847 —

Deferred income taxes — — 632

1,261 2,006 —

2 unchanged sentences

Agriculture $ 7,519 $ 484 $ 699

Construction — — —

International — — 499

7 unchanged sentences

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

Acquisition related costs were

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

not material for the fiscal years ended January 31, 2021, 2020, and 2019, 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 fiscal years ended January 31, 2022, 2021, and 2020, and have been expensed as incurred and recognized as operating expenses in the consolidated statements of operations.

NOTE 20 - FAIR VALUE OF FINANCIAL INSTRUMENTS

As of January 31, 2022 and 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, an income approach, utilizing readily observable market data as inputs, which is classified as a Level 2 fair value measurement.

The Company also valued certain long-lived assets at fair value on a non-recurring basis as of January 31, 2021, October 31, 2020, April 30, 2020, and January 31, 2020 as part of its long-lived asset impairment testing.

The estimated fair value of such assets were $ 0.8 million, $ 0.5 million, $ 0.4 million, and $ 2.8 million, respectively.

These foreign currency contracts were valued using a

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

discounted cash flow analysis, an income approach, utilizing readily observable market data as inputs, which is classified as a Level 2 fair value measurement.

The Company also valued certain long-lived assets at fair value on a non-recurring basis as of January 31, 2021, as part of its long-lived asset impairment testing.

The estimated fair value of such assets were $ 0.8 million.

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

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All such fair value measurements were based on unobservable inputs and thus are Level 3 fair value inputs.

The Company also has financial instruments that are not recorded at fair value in its consolidated financial statements.

The carrying amount of cash, receivables, payables, short-term debt and other current liabilities approximates fair value because of the short maturity and/or frequent repricing of those instruments, which are Level 2 fair value inputs.

Based upon current borrowing rates with similar maturities, which are Level 2 fair value inputs.

the carrying value of long-term debt approximates the fair value as of January 31, 2021 and 2020.

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 January 31, 2022 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:

January 31, 2022 January 31, 2021

(in thousands)

Carrying amount $ 68,267 $ 32,992

Fair value $ 63,237 $ 34,185

NOTE 21 - SEGMENT INFORMATION AND OPERATING RESULTS

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Total $ 946,667 $ 815,789

NOTE 22 - SUBSEQUENT EVENTS

The Company signed a definitive purchase agreement to sell its assets for one of its locations ("Fargo Tractor"), in Fargo, North Dakota, on December 28, 2021.

The sale closed in March 2022.

Fargo Tractor's revenues for the year ended January 31, 2022 were $10.8 million.

On January 25, 2022, the Company entered into a definitive purchase agreement to acquire Mark's Machinery, a two-store Cash IH agriculture dealership complex in Yankton and Wagner, South Dakota.

In its most recent fiscal year, Mark's Machinery generated revenue of approximately $34.0 million.

The Company expects to close the acquisition in April 2022.

As of the date of issuance of this Annual Report on Form 10-K, the Company is monitoring the conflict involving Russia and Ukraine.

The Company's operations in Ukraine, which accounted for 4.2% of the Company's total revenue for fiscal 2022 and and 3.5% of the total assets as of January 31, 2022, have been interrupted, as all ten of its locations closed for a period of time and certain locations continue to remain closed.

A continuation of the conflict may have a material adverse effect on Titan Machinery Ukraine and the Company's consolidated operations.

At January 31, 2022, Titan Machinery Ukraine had total assets of $32.7 million.

In reviewing the assets, the Company considers certain assets to be at a higher risk of being lost, stolen, or destroyed, such as inventory within the country (parts and equipment), receivables with customers, and fixed assets, primarily vehicles.

Titan Machinery Ukraine had $24.8 million of these higher risk assets as of January 31, 2022.

As of the date of issuance of this report, the Company is not aware of any material loss of assets due to destruction, theft, or other.

Due to the uncertainty of the duration or magnitude of the conflict, the Company cannot accurately estimate potential losses at this time.

Schedule II—Valuation and Qualifying Accounts and Reserves

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What changed 10-K

Item 8. Financial Statements and Supplementary Data