What changed in this filing

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Item 1. Financial Statements

2022-12-08 compared with 2022-09-09 · 145 added, 81 removed, 491 unchanged (32% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

July 31, 2022 January 31, 2022

October 31, 2022 January 31, 2022

Current Assets

32 unchanged sentences

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

22,695 shares issued and outstanding at July 31, 2022;

22,707 shares issued and outstanding at October 31, 2022;

22,588 shares issued and outstanding at January 31, 2022

8 unchanged sentences

(in thousands, except per share data)

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

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

2022 2021 2022 2021

31 unchanged sentences

(in thousands)

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

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

2022 2021 2022 2021

10 unchanged sentences

BALANCE, January 31, 2022 22,588 $ — $ 254,455 $ 182,916 $ ( 2,172 ) $ 435,199

Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax ( 33 ) — ( 975 ) — — ( 975 )

Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax ( 19 ) — ( 685 ) — — ( 685 )

Stock-based compensation expense — — 620 — — 620

2 unchanged sentences

BALANCE, April 30, 2022 22,569 $ — $ 254,390 $ 200,456 $ ( 3,363 ) $ 451,483

Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax 76 — ( 2 ) — — ( 2 )

Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax 126 — ( 5 ) — — ( 5 )

Stock-based compensation expense — — 803 — — 803

Net income — — — 24,959 — 24,959

Other comprehensive income — — — — 938 938

Other comprehensive loss — — — — ( 2,963 ) ( 2,963 )

BALANCE, July 31, 2022 22,695 — 255,188 225,415 ( 6,326 ) 474,277

Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax 12 — — — — —

Stock-based compensation expense — — 885 — — 885

Net income — — — 41,257 — 41,257

Other comprehensive loss — — — — ( 5,132 ) ( 5,132 )

BALANCE, October 31, 2022 22,707 $ — $ 256,073 $ 266,672 $ ( 11,458 ) $ 511,287

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

1 unchanged sentence

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 ( 19 ) — ( 685 ) — — ( 685 )

Stock-based compensation expense — — 609 — — 609

2 unchanged sentences

BALANCE, April 30, 2021 22,520 $ — $ 252,547 $ 127,416 $ ( 880 ) $ 379,083

Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax 126 — ( 5 ) — — ( 5 )

Stock-based compensation expense — — 584 — — 584

2 unchanged sentences

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

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

2 unchanged sentences

Depreciation and amortization 18,356 16,336

Impairment — 1,498

Impairment of intangible and long-lived assets — 1,498

Deferred income taxes ( 1,835 ) ( 3,116 )

2 unchanged sentences

Other, net 7,072 8,248

Changes in assets and liabilities

Changes in assets and liabilities, net of effects of acquisitions

Receivables, prepaid expenses and other assets 168 ( 18,463 )

40 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-months ended July 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2023.

Therefore, operating results for the nine-months ended October 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2023.

The information contained in the consolidated balance sheet as of January 31, 2022 was derived from the audited consolidated financial statements of the Company for the fiscal year then ended.

6 unchanged sentences

Titan Machinery Ukraine, LLC ("Titan Machinery Ukraine"), the Company's wholly owned Ukrainian subsidiary, has ten locations throughout Ukraine primarily in western and central Ukraine.

The conflict has caused disruptions in our Ukrainian operations, with our revenues for the six-months ended July 31, 2022 down 37.7% from the prior year period.

The conflict has caused disruptions in our Ukrainian operations, with our revenues for the three months and nine months ended October 31, 2022 down 40.7% and 38.8%, respectively, from the prior year periods.

These disruptions have not been material to the Company's consolidated financial statements.

7 unchanged sentences

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,

2022 2021 2022 2021

14 unchanged sentences

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

Three Months Ended July 31, 2022 Six Months Ended July 31, 2022

Three Months Ended October 31, 2022 Nine Months Ended October 31, 2022

Agriculture Construction International Total Agriculture Construction International Total

8 unchanged sentences

Total revenues $ 493,324 $ 86,403 $ 89,046 $ 668,773 $ 1,160,829 $ 223,389 $ 242,105 $ 1,626,323

Three Months Ended July 31, 2021 Six Months Ended July 31, 2021

Three Months Ended October 31, 2021 Nine Months Ended October 31, 2021

Agriculture Construction International Total Agriculture Construction International Total

9 unchanged sentences

Unbilled Receivables and Deferred Revenue

Unbilled receivables from contracts with customers amounted to $ 24.4 million and $ 17.1 million as of July 31, 2022 and January 31, 2022, respectively.

Unbilled receivables from contracts with customers amounted to $ 26.8 million and $ 17.1 million as of October 31, 2022 and January 31, 2022, respectively.

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

Deferred revenue from contracts with customers amounted to $ 90.7 million and $ 132.2 million as of July 31, 2022 and January 31, 2022, respectively.

Deferred revenue from contracts with customers amounted to $ 55.8 million and $ 132.2 million as of October 31, 2022 and January 31, 2022, respectively.

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

During the six months ended July 31, 2022 and 2021, the Company recognized $ 105.1 million and $ 50.8 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, 2022 and January 31, 2021, respectively.

No material amount of revenue was recognized during the six months ended July 31, 2022 or 2021 from performance obligations satisfied in previous periods.

During the nine months ended October 31, 2022 and 2021, the Company recognized $ 126.3 million and $ 55.8 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, 2022 and January 31, 2021, respectively.

No material amount of revenue was recognized during the nine months ended October 31, 2022 or 2021 from performance obligations satisfied in previous periods.

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

12 unchanged sentences

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

July 31, 2022 January 31, 2022

October 31, 2022 January 31, 2022

(in thousands)

21 unchanged sentences

Credit loss recoveries collected 24 9 — 33

Acquisition 94 — — 94

Foreign exchange impact — — ( 113 ) ( 113 )

Balance at July 31, 2022 $ 309 $ 135 $ 2,278 $ 2,722

Balance at October 31, 2022 $ 368 $ 129 $ 2,317 $ 2,814

Agriculture Construction International Total

1 unchanged sentence

Balance at January 31, 2021 $ 228 $ 1,074 $ 1,690 $ 2,992

Current expected credit loss provision 114 118 ( 227 ) 5

Current expected credit loss provision (benefit) 109 144 ( 235 ) 18

Write-offs charged against allowance 135 177 65 377

1 unchanged sentence

Foreign exchange impact — — ( 50 ) ( 50 )

Balance at July 31, 2021 $ 299 $ 1,050 $ 1,372 $ 2,721

The increase in the credit loss provision in the International segment, during the six months ended July 31, 2022, was driven by a $ 0.7 million bad debt provision placed on the accounts receivables due from customers of Titan Machinery Ukraine, primarily due to the ongoing Russia-Ukraine conflict.

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

The increase in the credit loss provision in the International segment, during the nine months ended October 31, 2022, was driven by a $ 0.8 million bad debt provision placed on the accounts receivables due from customers of Titan Machinery Ukraine, primarily due to the ongoing Russia-Ukraine conflict.

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

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

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

2022 2021 2022 2021

5 unchanged sentences

NOTE 5 - INVENTORIES

July 31, 2022 January 31, 2022

October 31, 2022 January 31, 2022

(in thousands)

5 unchanged sentences

NOTE 6 - PROPERTY AND EQUIPMENT

July 31, 2022 January 31, 2022

October 31, 2022 January 31, 2022

(in thousands)

7 unchanged sentences

$ 215,954 $ 178,243

The Company includes depreciation expense related to its rental fleet and its trucking fleet, for hauling equipment, in Cost of Revenue, which was $ 2.0 million and $ 2.1 million for the three months ended July 31, 2022 and 2021, and $ 3.5 million and $ 3.8 million for the six months ended July 31, 2022 and 2021, respectively.

All other depreciation expense is included in Operating Expenses, which was $ 3.6 million and $ 3.0 million for the three months ended July 31, 2022 and 2021 and $ 7.1 million and $ 6.0 million for the six months ended July 31, 2022 and 2021, respectively.

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 $ 2.6 million for the three months ended October 31, 2022 and 2021, and $ 6.0 million and $ 6.4 million for the nine months ended October 31, 2022 and 2021, respectively.

All other depreciation expense is included in Operating Expenses, which was $ 4.2 million and $ 2.9 million for the three months ended October 31, 2022 and 2021 and $ 11.3 million and $ 8.9 million for the nine months ended October 31, 2022 and 2021, respectively.

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

During the three months ended July 31, 2022, the Company identified two such asset groups in the Agriculture segment, and performed an impairment test, and concluded that no impairment was present, thus the Company did not recognize any impairment for the three and six months ended July 31, 2022.

The Company did recognize impairment of long-lived assets of $ 0.4 million in its International segment for the three and six months ended July 31, 2021 .

During the three months ended October 31, 2022, the Company identified one such asset group in the Construction segment, and performed an impairment test, and concluded that no impairment was present, thus the Company did not recognize any impairment for the three and nine months ended October 31, 2022.

The Company recognized impairment of long-lived assets of $ 0.4 million in its International segment for the nine months ended October 31, 2021 .

NOTE 7 - INTANGIBLE ASSETS AND GOODWILL

Finite-Lived Intangible Assets

The Company's finite-lived intangible assets consist of customer relationships and covenants not to compete.

The following is a summary of intangible assets with finite lives as of October 31, 2022 and January 31, 2022.

October 31, 2022 January 31, 2022

Cost Accumulated Amortization Net Cost Accumulated Amortization Net

(in thousands) (in thousands)

Customer relationships $ 5,338 $ (393) $ 4,945 $ 497 $ (252) $ 245

Covenants not to compete 1,025 (168) 857 250 (79) 171

$ 6,363 $ (561) $ 5,802 $ 747 $ (331) $ 416

The Company acquired intangible assets with finite lives, consisting of customer relationships totaling $5.0 million with a weighted-average amortization period of 5.0 years and covenants not to compete totaling $0.8 million with a weighted-average amortization period of 5.0 years, as part of the business combinations completed during the period ended October 31, 2022.

The Company acquired intangible assets with finite lives, consisting of customer relationships totaling $0.2 million and covenants not to compete totaling $0.1 million for the year ended January 31, 2022.

Future amortization expense, as of October 31, 2022, is expected to be as follows:

Fiscal Year Ended January 31, Amount

(in thousands)

2023 (remainder) $ 321

Thereafter 574

Indefinite-Lived Intangible Assets

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

The following is a summary of the changes in indefinite-lived intangible assets, by segment, for the six months ended July 31, 2022:

The following is a summary of the changes in indefinite-lived intangible assets, by segment, for the nine months ended October 31, 2022:

Agriculture Construction Total

2 unchanged sentences

Arising from business combinations 842 — 842

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

The following presents changes in the carrying amount of goodwill, by segment, for the six months ended July 31, 2022:

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

The following presents changes in the carrying amount of goodwill, by segment, for the nine months ended October 31, 2022:

Agriculture Total

2 unchanged sentences

Arising from business combinations 23,070 23,070

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

October 31, 2022 $ 32,022 $ 32,022

NOTE 8 - FLOORPLAN PAYABLE/LINES OF CREDIT

As of July 31, 2022, the Company had floorplan lines of credit totaling $ 743.0 million, which is primarily comprised of three 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.

Additionally, the Company amended its CNH Industrial floorplan line of credit as of August 1, 2022, increasing the total available domestic limit to $410 million and overall limit to $500 million.

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

July 31, 2022 January 31, 2022

On October 31, 2022, the Company entered into Amendment No.

2 to the Third Amended and Restated Credit Agreement ("the Bank Syndicate Agreement") to replace the reference rate from LIBOR to the secured overnight financing rate (SOFR) and to add the Heartland Companies as borrowers.

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

The SOFR Rate is based upon one-month, three-month, or six-month SOFR, as chosen by the Company, plus an applicable margin of 11.4 basis points for one-month, 26.2 basis points for three-month, and 42.8 basis points for six-month loans.

In no event shall the SOFR 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 plus applicable margin;

(b) the Federal Funds Rate plus 50.0 basis points plus applicable margin, or one-month SOFR plus 100.0 basis points plus applicable margin plus 11.4 basis points.

The applicable margin for Base Rate loans remains unchanged from prior versions of the agreement and is based on excess availability under the Bank Syndicate Agreement and ranges from .5% to 1.0%.

As of October 31, 2022, the Company had floorplan lines of credit totaling $ 777.0 million, which is primarily comprised of three floorplan lines of credit:

(i) a $ 500.0 million credit facility with CNH Industrial (amended as of August 1, 2022, to increase the total available domestic limit to $410 million and overall limit to $500 million), (ii) a $ 185.0 million line of credit under the Bank Syndicate Agreement, and (iii) a $ 50.0 million credit facility with DLL Finance LLC.

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

October 31, 2022 January 31, 2022

(in thousands)

4 unchanged sentences

$ 273,083 $ 135,415

In anticipation of closing the Heartland acquisition on August 1, 2022, the Company drew $ 41.0 million on its Bank Syndicate Floorplan Loan, which had a variable interest rate of 3.21% as of July 31, 2022.

Generally, all U.S.

CNH Industrial and DLL Finance amounts outstanding are non-interest bearing.

As of July 31, 2022, foreign floorplan payables carried various interest rates primarily ranging from 1.92 % to 8.36 %, compared to a range of 1.40 % to 6.11 % as of January 31, 2022.

The Company had non-interest bearing floorplan payables of $ 210.7 million and $ 106.8 million, on July 31, 2022 and January 31, 2022, respectively.

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

As of October 31, 2022, the interest bearing U.S.

floorplan payables were primarily on the Bank Syndicate Agreement Loan with a variable interest rate of 4.62%.

As of January 31, 2022, generally all U.S.

floorplan payables were non-interest bearing.

As of October 31, 2022, foreign floorplan payables carried various interest rates primarily ranging from 2.09 % to 4.15 %, compared to a range of 1.40 % to 6.11 % as of January 31, 2022.

The Company had non-interest bearing floorplan payables of $ 211.4 million and $ 106.8 million, on October 31, 2022 and January 31, 2022, respectively.

NOTE 9 - LONG TERM DEBT

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

Description Maturity Dates Interest Rates July 31, 2022 January 31, 2022

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

Description Maturity Dates Interest Rates October 31, 2022 January 31, 2022

(in thousands)

5 unchanged sentences

12,674 10,465

Other Various through July 2039 3.6%

Total debt 97,950 80,648

2 unchanged sentences

NOTE 10 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following is a summary of the changes in accumulated other comprehensive income (loss), by component, for the six month periods ended July 31, 2022 and July 31, 2021:

The following is a summary of the changes in accumulated other comprehensive income (loss), by component, for the nine month periods ended October 31, 2022 and October 31, 2021:

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

3 unchanged sentences

Balance, April 30, 2022 ( 6,074 ) 2,711 ( 3,363 )

Other comprehensive income ( 2,963 ) — ( 2,963 )

Other comprehensive loss ( 2,963 ) — ( 2,963 )

Balance, July 31, 2022 $ ( 9,037 ) $ 2,711 $ ( 6,326 )

Other comprehensive loss ( 5,132 ) ( 5,132 )

Balance, October 31, 2022 $ ( 14,169 ) $ 2,711 $ ( 11,458 )

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 )

NOTE 11 - LEASES

13 unchanged sentences

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 2022 2021 2022 2021

9 unchanged sentences

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

Classification July 31, 2022 January 31, 2022

Classification October 31, 2022 January 31, 2022

(in thousands)

8 unchanged sentences

Total lease liabilities $ 63,175 $ 74,180

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

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

(a) Finance lease assets are recorded net of accumulated amortization of $1.3 million as of October 31, 2022 and $1.7 million as of January 31, 2022.

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

Operating Finance

11 unchanged sentences

Present value of lease liabilities $ 60,408 $ 2,767 $ 63,175

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

July 31, 2022

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

October 31, 2022

Weighted-average remaining lease term (years):

14 unchanged sentences

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

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

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

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

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

2 unchanged sentences

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

The following is the balance of our dedicated rental fleet assets, included in Property and equipment, net of accumulated depreciation in the condensed consolidated balance sheet, of our Construction segment as of July 31, 2022 and January 31, 2022:

July 31, 2022 January 31, 2022

October 31, 2022 January 31, 2022

(in thousands)

3 unchanged sentences

NOTE 12 - FAIR VALUE MEASUREMENTS

As of October 31, 2022 the fair value of the Company's foreign currency contracts, which are either assets or liabilities measured at fair value on a recurring basis, was not material.

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

The Company also valued certain long-lived assets at fair value on a non-recurring basis as of January 31, 2022 as part of its long-lived asset impairment testing.

4 unchanged sentences

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

The carrying amounts of these financial instruments approximated their fair values as of July 31, 2022 and January 31, 2022.

The carrying amounts of these financial instruments approximated their fair values as of October 31, 2022 and January 31, 2022.

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

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

July 31, 2022 January 31, 2022

October 31, 2022 January 31, 2022

(in thousands)

2 unchanged sentences

NOTE 13 - INCOME TAXES

Our effective tax rate was 24.7 % and 28.0 % for the three months ended July 31, 2022 and 2021, respectively and was 25.1 % and 25.6 % for the six months ended July 31, 2022 and 2021, respectively.

The effective tax rate for the six months ended July 31, 2022 and 2021 were subject to various factors such as the impact of certain discrete items, mainly the vesting of share-based compensation, the mix of domestic and foreign income, and recognition of a valuation allowance on certain of our foreign deferred tax asset s.

Our effective tax rate was 24.5 % and 24.3 % for the three months ended October 31, 2022 and 2021, respectively and was 24.8 % and 25.0 % for the nine months ended October 31, 2022 and 2021, respectively.

In reviewing our foreign deferred tax assets as of October 31, 2022, it was concluded that based on recent income and sources of future income of our Bulgarian subsidiary, that the release of the remaining valuation allowance of our Bulgarian subsidiary was warranted.

In the third quarter of fiscal 2023, the Company recorded a benefit of $0.3 million from the release of the valuation allowance related to the Company's Bulgarian subsidiary.

The effective tax rate for the three and nine months ended October 31, 2022 and 2021 was also subject to various other factors such as the impact of certain discrete items, mainly the vesting of share-based compensation, and the mix of domestic and foreign income .

NOTE 14 - BUSINESS COMBINATIONS

On August 1, 2022, the Company acquired all interests of three entities, Heartland Agriculture, LLC, Heartland Solutions, LLC, and Heartland Leveraged Lender, LLC, (collectively referred to as "Heartland Companies") for $ 94.4 million in cash consideration.

The Heartland Companies consist of 12 CaseIH commercial application agriculture locations, in the states of Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota, Washington, and Wisconsin.

The Heartland Companies have been a successful CaseIH commercial application dealer group and our acquisition of these entities provides the Company the opportunity for synergies due to the overlap of our footprints, which will allow us to package deals that will include both commercial application equipment as well as other agricultural and construction equipment to commercial customers within our core footprint.

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

In the most recent completed fiscal year, the Heartland Companies generated revenue of approximately $214 million.

The results of operations from the acquisition from the August 1, 2022 closing date through October 31, 2022, represented approximately $51.2 million of revenue and $3.4 million of pre-tax income.

The Company incurred $1.1 million in acquisition related expenses in connection with this acquisition, which are included in operating expenses in the condensed consolidated statement of operations.

On April 1, 2022, the Company acquired certain assets of Mark's Machinery, Inc.

17 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.

As of July 31, 2022, all business combinations completed in fiscal years 2023 and 2022 are preliminary.

The following table presents the aggregate purchase price allocations for all acquisitions completed during the fiscal year ended January 31, 2022 and the period ended July 31, 2022:

July 31, 2022 January 31, 2022

As of October 31, 2022, the purchase price allocation for all business combinations completed in fiscal year 2023 are preliminary as we finalize the valuation of our intangible assets acquired.

The purchase price allocation for all business combinations completed in fiscal year 2022 are complete.

The following table presents the purchase price allocations for all acquisitions completed during the fiscal year ended January 31, 2022 and the period ended October 31, 2022:

August 1, 2022 April 1, 2022 December 1, 2021

(in thousands)

Heartland Companies Mark's Machinery Jaycox Implement

Assets acquired:

Cash $ 1,583 $ 1 $ 4

Receivables 9,007 478 1,197

2 unchanged sentences

Property and equipment 20,204 4,088 8,236

Operating lease assets 3,928 — —

Intangible assets 5,700 917 4,121

Goodwill 22,487 583 7,519

167,015 9,519 34,904

Liabilities assumed:

Accounts payable 18,547 — —

Floorplan payable 31,699 — —

Current operating lease liabilities 541 — —

Deferred revenue 5,195 1,844 1,261

Accrued expenses and other 3,523 — —

Long-term debt 4,591 — —

Operating lease liabilities 3,387 — —

Other long-term liabilities 5,152 — —

72,635 1,844 1,261

Net assets acquired $ 94,380 $ 7,675 $ 33,643

3 unchanged sentences

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

For the Heartland Companies acquisition, the Company recognized a non-competition intangible asset of $0.7 million and a customer relationship intangible asset of $5.0 million.

For the Mark's Machinery acquisition the Company recognized a non-competition intangible asset of $ 0.8 million and a distribution rights intangible asset of $0.8 million.

For the Jaycox acquisition the Company recognized a non-competition intangible asset of $ 0.1 million and a distribution rights intangible asset of $ 3.9 million.

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

The non-competition and customer relationship assets will be amortized over five year periods.

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

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

Acquisition related costs, amounted to $0.5 million for the period ended July 31, 2022, primarily related to the Heartland acquisition, and acquisition related costs for the period ended January 31, 2022, were not material.

Acquisition related costs, amounted to $1.1 million for the period ended October 31, 2022, and acquisition related costs for the period ended January 31, 2022, were not material.

All acquisition related costs have been expensed as incurred and recognized as operating expenses in the condensed consolidated statements of operations.

Pro Forma Information

The following summarized unaudited pro forma condensed statement of operations information for the three and nine months ended October 31, 2021 and 2022 assumes that the Heartland Companies acquisition occurred as of February 1, 2021.

The Company prepared the following summarized unaudited pro forma financial results for comparative purposes only.

The summarized unaudited pro forma information may not be indicative of the results that would have occurred had the Company completed the acquisition as of February 1, 2021 or that will be attained in the future.

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

2022 2021 2022 2021

(in thousands)

Total Revenues $ 668,773 $ 497,945 $ 1,786,396 $ 1,361,574

Net Income $ 41,707 $ 23,106 $ 92,590 $ 51,041

NOTE 15 - CONTINGENCIES

10 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,

2022 2021 2022 2021

11 unchanged sentences

Total $ 54,678 $ 28,823 $ 111,412 $ 58,133

July 31, 2022 January 31, 2022

October 31, 2022 January 31, 2022

(in thousands)

5 unchanged sentences

Total $ 1,124,770 $ 946,667

NOTE 17 - SUBSEQUENT EVENTS

On July 8, 2022, the Company entered into a definitive purchase agreement to acquire three entities, Heartland Agriculture, LLC, Heartland Solutions, LLC, and Heartland Leverage Lender, LLC, collectively, the "Heartland Companies", which operate a twelve store CaseIH commercial application agriculture dealership complex .

In its most recently completed fiscal year ended December 31, 2021, Heartland Companies generated revenue of approximately $214 million.

The Company closed on the acquisition, on August 1, 2022 with cash consideration transferred of $94.5 million.

The Company primarily used cash on hand for the funding of the purchase price and drew down on the floorplan loan with the Bank Syndicate for the remaining balance.

The acquisition will be accounted in accordance with Accounting Standards Codification ("ASC") Topic 805, "Business Combinations".

As the acquisition was completed subsequent to July 31, 2022, the consolidated financials statements do not include the results or the financial position of the Heartland Companies.

Because the Company has not completed the work of the purchase price allocation needed under ASC 805, the initial accounting for the business combination was incomplete at the time of the issuance of the financial statements, therefore, the Company did not include all of the information regarding the effect of the business combination as permitted by ASC 805-10-50-4 and ASC 805-30-50-3.

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