What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-30 compared with 2022-04-01 · 189 added, 211 removed, 1136 unchanged (26% of the section changed)

12 unchanged sentences

Notes to Consolidated Financial Statements 52

Table of Content

Table of Conten ts

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 31, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated Marc h 30, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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The majority of the Company’s used equipment inventories are acquired through trade-ins from customers.

Equipment that is traded-in is recorded at fair value less a normal gross profit margin.

Used equipment acquired through a trade-in or during business combinations is recorded at fair value less a normal gross profit margin.

The Company determines fair value for the traded-in equipment through internal and third-party data that considers various factors including the age and condition of the equipment, hours of use, and market conditions.

5 unchanged sentences

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

Table of Conten ts

How the Critical Audit Matter Was Addressed in the Audit

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• We tested the effectiveness of controls over the internal and external data used to determine the valuation of used equipment inventories.

• We evaluated the reasonableness of management’s judgments utilized to determine the net realizable value of the used equipment inventories by:

◦ Evaluating the reasonableness and consistency of the methodology and assumptions used by management to determine net realizable value.

◦ Testing the underlying determination of the net realizable value by obtaining sales documentation containing the age of the equipment and hours of use and comparing it to comparable internal and external data.

◦ Performing a retrospective lookback analysis of management’s process by comparing the actual selling prices of used equipment inventories units sold in the current year to the selling prices estimated by management for those units in the prior year.

• We evaluated the reasonableness of management’s judgments utilized to determine the fair value or net realizable value of the used equipment inventories by:

• Evaluating the reasonableness and consistency of the methodology and assumptions used by management to determine fair value or net realizable value, as applicable.

• Testing the underlying determination of the fair value or net realizable value by obtaining sales documentation containing the age of the equipment and hours of use and comparing it to comparable internal and external data.

• Performing a retrospective lookback analysis of management’s process by comparing the actual selling prices of used equipment inventories units sold in the current year to the selling prices estimated by management for those units in the prior year, as applicable.

/s/ DELOITTE & TOUCHE LLP

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

Table of Content

Table of Conten ts

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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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, 2023, of the Company and our report dated March 30, 2023, expressed an unqualified opinion on those financial statements.

As detailed in Management's Report on Internal Control Over Financial Reporting , management excluded from its assessment the internal control over financial reporting at Heartland Agriculture, LLC, Heartland Solutions, LLC, Heartland Leveraged Lender, LLC (“collectively the Heartland Companies”), which were acquired on August 1, 2022, and whose financial statements constitute 5.7% of total assets and 4.7% of total revenue of the consolidated financial statement amounts as of and for the year ended January 31, 2023.

Accordingly, our audit did not include the internal control over financial reporting at the Heartland Companies.

Basis for Opinion

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Minneapolis, Minnesota

March 31, 2022

Table of Content

Ma rch 30, 2023

Table of Conten ts

TITAN MACHINERY INC.

45 unchanged sentences

See Notes to Consolidated Financial Statements

Table of Content

Table of Conten ts

TITAN MACHINERY INC.

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See Notes to Consolidated Financial Statements

Table of Content

Table of Conten ts

TITAN MACHINERY INC.

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See Notes to Consolidated Financial Statements

Table of Content

Table of Conten ts

TITAN MACHINERY INC.

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Stock-based compensation expense — — 2,515 — — 2,515

Cumulative-effect adjustment of adopting ASC 842, Leases

Cumulative-effect adjustment of adopting ASC 326, Financial Instruments - Credit Losses

— — — ( 204 ) — ( 204 )

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

Cumulative-effect adjustment of adopting ASC 326, Financial Instruments - Credit Losses

— — — ( 204 ) — ( 204 )

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

9 unchanged sentences

See Notes to Consolidated Financial Statements

Table of Content

Table of Conten ts

TITAN MACHINERY INC.

11 unchanged sentences

Noncash interest expense 245 218 174

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

Gain on sale of property & equipment ( 502 ) ( 4,525 ) ( 863 )

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Deferred revenue ( 20,901 ) 74,244 18,157

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

Operating lease liability ( 10,849 ) ( 12,389 ) ( 12,572 )

Accounts payable, accrued expenses and other and other long-term liabilities ( 13,933 ) ( 1,162 ) 5,659

Net Cash Provided by Operating Activities 10,816 158,916 172,996

8 unchanged sentences

Net change in non-manufacturer floorplan payable 22,334 ( 35,443 ) ( 106,414 )

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

Proceeds from long-term debt borrowings 8,415 10,348 5,326

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Long-term debt to acquire finance leases $ 7,119 $ 11,000 $ —

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

Net transfer of assets from (to) property and equipment to (from) inventories $ ( 3,767 ) $ 4,368 $ 6,702

See Notes to Consolidated Financial Statements

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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, Nebraska, North Dakota, South Dakota, Wisconsin and Wyoming, and its European stores are located in Bulgaria, Germany, Romania, and Ukraine.

The Company's North American stores are located in Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota, Washington, 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.

On February 24, 2022, the ongoing Russia/Ukraine conflict significantly intensified, and the sustained conflict and disruption in the region is ongoing.

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

The conflict has caused disruptions in our Ukrainian operations, with our revenues for fiscal 2023 down 40.5% from the prior fiscal year.

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

However, if the conflict intensifies in western and central Ukraine, it could significantly increase the adverse effect on Titan Machinery Ukraine in future periods.

For the fiscal year ended January 31, 2023, the Company had total assets of $27.4 million in Ukraine compared to $32.7 million as of January 31, 2022.

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

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 Company continues to monitor Titan Machinery Ukraine's net monetary asset position, and while the currency and payment controls imposed by the National Bank of Ukraine have been relaxed, the controls have limited our ability to manage our net monetary asset position in the past and could limit our ability in the future.

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

2 unchanged sentences

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

TITAN MACHINERY INC.

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.

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.

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.

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Concentrations of Credit Risk

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however, the Company does not generally require collateral on trade receivables.

The Company's cash balances are maintained in bank deposit accounts, which, generally, are in excess of federally insured limits.

The Company's cash balances are maintained in bank deposit accounts, which, at times, are in excess of federally insured limits.

Concentrations in Operations

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• CNH Industrial's product prices and incentive and discount programs;

• Supply of inventory from CNH Industrial

• Supply of inventory from CNH Industrial and ability to meet delivery timelines;

• CNH Industrial's implementation of an equipment allocation methodology for use in determining production slots in calendar year 2023;

• CNH Industrial provides floorplan payable financing for the purchase of a substantial portion of the Company's inventory;

4 unchanged sentences

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

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Equipment Revenue.

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The Company satisfies its performance obligation and recognizes revenue at a point in time, upon delivery of the product to the customer.

Once a product is delivered, the Company has a present right to payment, the customer has physical possession of the asset, can direct the use of the asset, and has the significant risks and rewards of ownership of the asset.

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In many cases, customers tender payment at the time of delivery.

29 unchanged sentences

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

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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 the Company's retail rates.

7 unchanged sentences

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

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.

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

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

of parts inventory.

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

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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 three 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.

TITAN MACHINERY INC.

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.

8 unchanged sentences

However, if the sum of the undiscounted cash flows is less than the carrying value of the asset, the estimated fair value of the long-lived asset is compared to its carrying value and any amount by which the carrying value exceeds the fair value is recognized as an impairment charge.

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

When reviewing long-lived assets for impairment, we group long-lived assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

3 unchanged sentences

The aggregate carrying value of such assets totaled $12.6 million.

In light of these circumstances, the Company performed a long-lived asset impairment analysis for these assets and concluded that the carrying value was not recoverable.

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

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

In light of these circumstances, the Company performed a long-lived asset impairment analysis for these assets and concluded that the carrying value was recoverable.

Accordingly, the Company did not recognize any impairment charges in year ended January 31, 2023.

We performed similar impairment analyses at the end of fiscal 2022 and 2021.

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 $ 0.4 million on long-lived assets during the year ended January 31, 2022, which were related to the International segment.

10 unchanged sentences

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.

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Derivative Instruments

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Changes in the fair value of derivative instruments that are not designated as hedging instruments or do not qualify for hedge accounting treatment are reported currently in earnings.

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company uses the asset and liability method to account for income taxes.

23 unchanged sentences

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

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.

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company recognized, in interest and other income in its consolidated statements of operations, a net foreign currency transaction loss of $ 1.2 million, $ 0.1 million, and $ 2.8 million for the years ended January 31, 2023, 2022, and 2021 respectively.

Business Combinations

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Level 2—Values derived from observable inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets in markets that are not active.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Level 3—Values derived from unobservable inputs for which there is little or no market data available, thereby requiring the reporting entity to develop its own assumptions.

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Accounting guidance not yet adopted

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

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

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU No.

2020-04”), which provides temporary optional expedients and exceptions to accounting guidance on contract modifications and hedge accounting to ease entities’ financial reporting burdens as the market transitions from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates.

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

The Company is currently evaluating its contracts that reference LIBOR and is working with our creditors on updating credit agreements as necessary to include language regarding the successor or alternate rate to LIBOR.

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

In September of 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No.

2022-04 , Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations .

This new standard requires that the buyer in a supplier finance program discloses information about the key terms of the program, outstanding confirmed amounts as of the end of the period, a rollforward of such amounts during each annual period, and a description of where in the financial statements outstanding amounts are presented.

This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the disclosure of rollforward information, which is effective for fiscal years beginning after December 15, 2023.

Early adoption of this ASU is permitted.

Entities must apply the amendments of this ASU retrospectively to all periods in which a balance sheet is presented, with the exception of the amendment on disclosure of rollforward information, which entities only need to apply prospectively.

Management is currently evaluating this ASU to determine its impact on the Company's disclosures.

NOTE 2 - EARNINGS PER SHARE

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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.

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.

The decrease in deferred revenue from January 31, 2022 to January 31, 2023, was primarily due to lower trade-in activity on pending equipment sale transactions as customer's are less willing to give up their trade until their new equipment is delivered, due to the delays in getting new equipment over the past year.

During the year ended January 31, 2023, the Company recognized substantially all of the revenue that was included in the deferred revenue balance as of January 31, 2022.

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Receivables, net of allowance for expected credit losses $ 95,844 $ 94,287

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

1 unchanged sentence

(in thousands)

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

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

Current expected credit loss provision 137 186 ( 8 ) 315

8 unchanged sentences

Balance at January 31, 2023 $ 367 $ 124 $ 2,589 $ 3,080

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The increase in the credit loss provision in the International segment, during the twelve months ended January 31, 2023, was driven by a $1.0 million bad debt provision placed on the accounts receivables due from customers of Titan Machinery Ukraine.

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

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Receivables from rental contracts 127 ( 56 )

$ 1,617 $ 537

The increase in impairment losses on receivables from sales contracts with customers was primarily driven by an increase in the bad debt provision on accounts receivables due from customers of Titan Machinery Ukraine.

NOTE 5 - INVENTORIES

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$ 703,939 $ 421,758

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 6 - PROPERTY AND EQUIPMENT

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Such assets had gross carrying values totaling $ 18.8 million and $ 26.3 million, and accumulated amortization balances totaling $ 8.6 million and $ 8.3 million, as of January 31, 2023 and 2022.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 7 - INTANGIBLE ASSETS AND GOODWILL

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$ 1,563 $ ( 402 ) $ 1,161 $ 747 $ ( 331 ) $ 416

Intangible asset amortization expense was $ 0.1 million for each of the three years ended January 31, 2022, 2021 and 2020.

Intangible asset amortization expense was $ 0.2 million for the year ended January 31, 2023, and $0.1 million for the two years ended January 31, 2022 and 2021.

The covenants not to compete and customer relationships assets for the year ended January 31, 2023 have a weighted-average amortization period of 4.8 years and 5 years, respectively.

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(in thousands)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Indefinite-Lived Intangible Assets

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Arising from business combinations 7,042 — — 7,042

Foreign currency translation — — ( 22 ) ( 22 )

Impairment — — 1,139 1,139

Balance, January 31, 2023 $ 17,178 $ 72 $ — $ 17,250

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

The Company performs at least an annual impairment testing of its indefinite-lived distribution rights intangible 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.

2 unchanged sentences

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 annual distribution rights impairment test for the year ended January 31, 2023, indicated no impairment.

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.

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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.

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.

During the year ended January 31, 2023, no impairment charges were recognized in association with indefinite-lived intangible assets.

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 German reporting unit.

The Company had gross indefinite-lived intangible assets of $18.4 million and accumulated impairments of $1.1 million as of January 31, 2023.

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Changes in the carrying amount of goodwill during the years ended January 31, 2023 and 2022 are as follows:

Agriculture International Total

Agriculture Total

(in thousands)

1 unchanged sentence

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

5 unchanged sentences

During the years ended January 31, 2023 and 2022, the Company did not recognize any impairment charges.

TITAN MACHINERY INC.

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.

A s such, a goodwill impairment charge of $ 1.5 million was recognized, which is included in Impairment of Goodwill in the consolidated statements of operations.

During the year ended January 31, 2021, the quantitative goodwill impairment analysis for the German reporting unit indicated that the estimated fair value of the reporting unit was less than the carrying value.

The 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.

As such, a goodwill impairment charge of $1.5 million was recognized, which is included in Impairment of Goodwill in the consolidated statements of operations.

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

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.

This removed all of the remaining goodwill in the International segment during the year ended January 31, 2021, the Agriculture segment is the only segment with goodwill on its balance sheet.

NOTE 8 - FLOORPLAN PAYABLE/LINES OF CREDIT

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Generally, no interest is charged on outstanding balances.

However, in certain international markets the Company receives extended terms from CNH Industrial similar to what we receive domestically with reduced interest and interest free periods.

However, in certain international markets the Company receives extended terms from CNH

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Industrial similar to what we receive domestically with reduced interest and interest free periods.

Amounts outstanding are secured by the inventory purchased with the floorplan proceeds.

8 unchanged sentences

As of January 31, 2023, 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

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

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

The LIBOR Rate is based upon one-month, two-month, or three-month LIBOR, as chosen by the Company, but in no event shall the LIBOR Rate be less than 0.0%.

The Company elects at the time of any advance to choose a Base Rate Loan or a Secured Overnight Financing Rate ("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, plus 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;

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

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

The 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%.

(b) the Federal Funds Rate plus 0.5 %, or (c) the one-month SOFR Rate plus 1 % plus applicable margin, plus 11.4 basis points.

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

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

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.

Based on our excess availability and cash collateral, we were not subject to the fixed charge coverage ratio as of January 31, 2023.

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

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

As of January 31, 2023, under these provisions of the Bank Syndicate Agreement, the Company had an unrestricted dividend availability of approximately $ 95.4 million.

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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.

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.

As of January 31, 2023 and 2022, the Company did not have a need to utilize the revolver loan as the balance was zero for both periods.

TITAN MACHINERY INC.

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As of January 31, 2023, 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

The Company’s other lines of credit include various floorplan and working capital lines of credit primarily offered by non-manufacturer financing entities.

Interest charged on outstanding borrowings are generally variable rates of interest most often based on LIBOR or EURIBOR and include interest margins primarily ranging from 1.50% to 6.00%.

Interest charged on outstanding borrowings are generally variable rates of interest most often based on EURIBOR and include interest margins primarily ranging from 1.40% to 2.50%.

Outstanding balances are generally secured by inventory and other current assets.

In most cases these lines of credit have a one-year maturity, with an annual review process to extend the maturity date for an additional one-year period.

As of January 31, 2022, the Company had a compensating balance arrangement under one of its European 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.

Summary of Outstanding Amounts

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CNH Industrial $ 177,337 $ 94,054

Bank Syndicate Agreement Floorplan Loan 35,550 —

DLL Finance 9,914 8,558

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$ 258,372 $ 135,415

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

As of January 31, 2023, the interest-bearing U.S.

floorplan payables were primarily on the Bank Syndicate Agreement Loan with a variable interest rate of 5.94%.

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

floorplan payables were non-interest bearing.

As of January 31, 2023, foreign floorplan payables carried various interest rates primarily ranging from 4.16 % to 4.96 %, compared to a range of 1.40 % to 4.79 % as of January 31, 2022.

As of January 31, 2023 and 2022, $ 213.0 million and $ 106.8 million, respectively, of outstanding floorplan payables were non-interest bearing.

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9 - ACCRUED EXPENSES & OTHER

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$ 58,159 $ 59,339

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 10 - LONG-TERM DEBT

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11,252 12,382

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

Other January 2021 2.6 % — 77

Vehicle loans, secured Various through November 2028 1.7 % to 5.9 %

12,659 10,465

Other Various through July 2039 3.6 % 4,591 —

Total debt 97,191 80,648

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Long-term debt, net $ 89,950 $ 74,772

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:

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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

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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.

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

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

There were no outstanding foreign currency contracts as of January 31, 2022.

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

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.

There were no outstanding foreign currency contracts as of January 31, 2023 and 2022.

As of January 31, 2023, and 2022, the Company had no derivative instruments outstanding.

Derivative instruments recognized as assets are recorded in Prepaid expenses and other in the consolidated balance sheets, and derivative instruments recognized as liabilities are recorded in Accrued expenses and other in the consolidated balance sheets.

The following table sets forth the gains recognized in income related to the Company’s derivative instruments for the years ended January 31, 2022, 2021 and 2020.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth the gains and losses recognized in income related to the Company’s derivative instruments for the years ended January 31, 2023, 2022 and 2021.

Year Ended January 31,

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See additional information on operating lease commitments in Note 13.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 13 - LEASES

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Our lease agreements do not contain any material non-lease components, residual value guarantees or material restrictive covenants.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company subleases a small number of real estate assets to third parties, primarily dealership locations for which we have ceased operations.

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$ 15,281 $ 17,473 $ 22,652

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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Present value of lease liabilities $ 58,368 $ 2,440 $ 60,808

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The weighted-average lease term and discount rate as of January 31, 2023 and 2022 are as follows:

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Financing leases 8.3 % 4.6 %

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other lease information is as follows:

Year Ended January 31,

2023 2022 2021

(in thousands)

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In reviewing the foreign deferred tax assets as of January 31, 2023, 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.

The Company also concluded a full valuation allowance on the Company's German and Luxembourg subsidiaries continued to be warranted based on the presence of historical losses and our expected future sources of taxable income.

In the third quarter of fiscal 2023, the Company released the remaining valuation allowance on its Bulgarian subsidiary, resulting in a benefit of $0.3 million.

In total, valuation allowances of $6.5 million exist for our international entities as of January 31, 2023.

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.

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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

The Company recorded an additional $3.8 million valuation allowance related to the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 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.

Ukrainian and German subsidiaries.

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

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes RSA activity for the year ended January 31, 2023:

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Nonvested at January 31, 2023 280 $ 22.84

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The weighted-average grant date fair value of RSAs granted was $ 27.06 , $ 34.24 and $ 10.54 during the years ended January 31, 2023, 2022 and 2021.

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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.

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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, 2023:

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Granted 11 26.23

Forfeited ( 3 ) 17.11

Vested ( 13 ) 16.57

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As of January 31, 2023, based on the Company's stock price on that day, there was $ 0.5 million of unrecognized compensation cost related to nonvested awards that is expected to be recognized over a weighted-average period of 1.1 years.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 17 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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Income taxes are not provided for foreign currency translation adjustments arising from permanent investments in international subsidiaries.

Reclassifications are made to avoid double counting in comprehensive income items that are also recorded as part of net income (loss).

NOTE 18 - EMPLOYEE BENEFIT PLANS

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

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.

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

Effective January 1, 2022, the Company amended the 401(k) Plan where the Company matched 50% of the first 6% of the participating employee's contribution, to a company match of 50 % on the first 8 % of the participating employee's 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.

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

Additionally, the 401(k) Plan for the recent acquisition of the Heartland Companies has continued for those employees.

The plan allows all full-time employees at least 21 years of age, to be eligible, and the Company will match 100% of first 4% of the participating employee's contributions.

TITAN MACHINERY INC.

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NOTE 19 - BUSINESS COMBINATIONS

On August 1, 2022, the Company acquired all outstanding equity interests of three entities, Heartland Agriculture, LLC, Heartland Solutions, LLC, and Heartland Leveraged Lender, LLC, (collectively referred to as the 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 for the Heartland Companies from the August 1, 2022 closing date through January 31, 2023, were approximate ly $103.2 million of revenue and $4.6 million of pre-tax income.

The Company incurred $1.1 million i n acquisition related expenses in connection with this acquisition, included in operating expenses in the consolidated statements of operations for the year ended January 31, 2023.

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

The acquired business consisted of two agricultural equipment stores in Wagner and Yankton, South Dakota.

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

The total cash consideration transferred for the acquired business was $ 7.7 million.

In connection with the acquisition, the Company acquired from CNH Industrial and certain other manufacturers equipment and parts inventory previously owned by Mark's Machinery, 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 $3.2 million.

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

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

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

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

ESB is a full-service agriculture equipment dealership in Eastern Germany.

The Company's acquisition of ESB further expands its presence in the German market.

The total consideration transferred for the acquired business was $ 3.0 million paid in cash.

This acquisition was recognized in the fiscal year ended January 31, 2020 as the acquisition occurred within the Company's International segment in which all entities maintain a calendar year reporting period.

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

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

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 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.

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 $ 7.4 million.

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

TITAN MACHINERY INC.

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

As of January 31, 2023, all business combinations from fiscal years 2023, 2022, and 2021 are complete.

The following table presents the aggregate purchase price allocations for all acquisitions completed during the fiscal years ended January 31, 2023, 2022, and 2021:

Year Ended January 31,

2022 2021 2020

Heartland Companies Mark's Machinery Year Ended January 31,

August 1, 2022 April 1, 2022 2023 2022 2021

(in thousands)

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Liabilities Assumed:

Accounts payable 18,547 — 18,547 — —

Floorplan payable 31,699 — 31,699 — —

Current operating lease liabilities 541 — 541 — 159

Deferred revenue 5,195 1,844 7,039 1,261 —

Accrued expenses and other 3,523 — 3,523 — —

Long-term debt 4,591 — 4,591 — —

Operating lease liabilities 3,387 — 3,387 — 1,847

Other Long-term liabilities 5,152 5,152 — —

72,635 1,844 74,479 1,261 2,006

2 unchanged sentences

Agriculture $ 21,087 $ 583 $ 21,670 $ 7,519 $ 484

International — — 499

Goodwill expected to be deductible for tax purposes 21,087 583 21,670 7,519 484

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

The Company recognized, in the aggregate, a customer relationship intangible asset of $ 0.2 million, and $ 0.2 million for business combinations occurring during the years ended January 31, 2022 and 2020, respectively.

The Company recognized, in the aggregate, a non-competition intangible asset of $ 0.1 million each year for business combinations occurring during the years ended January 31, 2022, 2021, and 2020.

The Company recognized, in the aggregate, a customer relationship intangible asset of $ 0.2 million, and $ 0.2 million for business combinations occurring during th e years ended January 31, 2023 and 2022, res pectively.

The Company recognized, in the aggregate, a non-competition intangible asset of $ 0.8 million, $ 0.1 million, and $ 0.1 million for business combinations occurring during the years ended January 31, 2023, 2022, and 2021, respectively.

The Company recognized, in the aggregate, a distribution rights intangible asset of $ 7.0 million, $ 3.9 million and $ 0.2 million for business combinations occurring during the years ended January 31, 2023, 2022 and 2021, respectively.

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

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

Acquisition related costs for the fiscal year ended January 31, 2023, amounted to $1.1 million and acquisition related

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.

The most significant unobservable inputs include forecasted net cash generated from the use of the assets and the discount rate applied to such cash flows to arrive at a fair value estimate.

In addition, in certain instances, the Company estimated the fair value of long-lived assets to be approximately zero, as no future cash flows were assumed to be generated from the use of such assets and the expected sales values were deemed to be nominal.

costs for the fiscal years ended January 31, 2022 and 2021, were not material.

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

Pro Forma Information

The following summarized unaudited pro forma condensed statement of operations information for the twelve months ended January 31, 2023 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.

Year Ended January 31,

(in thousands)

Total Revenues $ 2,369,378 $ 1,928,193

Net Income $ 111,062 $ 77,664

NOTE 20 - FAIR VALUE OF FINANCIAL INSTRUMENTS

As of January 31, 2023 and 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, an income approach, utilizing readily observable market data as inputs, which is classified as a Level 2 fair value measurement.

The Company also estimated the fair value of long-lived assets to be approximately zero in certain instances when no future cash flows were assumed to be generated from the use of such assets and the expected sales values were deemed to be nominal.

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

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The carrying amounts of these financial instruments approximated their fair values as of January 31, 2023 and January 31, 2022.

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

Approximate 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:

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The Company’s International segment sells, services, and rents machinery, and related parts and attachments, for uses ranging from large-scale farming and construction to home and garden use to customers in Eastern Europe.

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenue generated from sales to customers outside of the United States was $ 299.1 million, $ 318.0 million and $ 219.0 million for the years ended January 31, 2023, 2022 and 2021.

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

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year Ended January 31,

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Total $ 6,944 $ 5,712 $ 7,182

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year Ended January 31,

2023 2022 2021

Depreciation and Amortization

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Total $ 25,197 $ 22,139 $ 23,701

TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year Ended January 31,

2022 2021 2020

(in thousands)

Capital Expenditures

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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.

On February 1, 2023, the Company acquired certain assets of Pioneer Equipment.

The acquired business consists of five agricultural equipment stores in American Falls, Blackfoot, Idaho Falls, Rexburg, and Rupert, Idaho.

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

In its most recently available completed fiscal year, ended December 31, 2021, Pioneer Equipment generated revenue of approximately $60.0 million.

The total cash consideration paid for the acquired business was $10.1 million, and the Company used cash on hand to fund the acquisition.

The Company has committed to acquire the real estate of Pioneer Equipment subject to customary closing conditions, for a purchase price of $9.4 million.

The Company closed on three of the properties on March 8, 2023 and anticipates closing on the remaining locations on or before April 30, 2023.

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

Schedule II—Valuation and Qualifying Accounts and Reserves

Titan Machinery Inc.

Classification Beginning Balance Additions Charged to Expenses Additions from CECL Adoption Additions from Business Combinations Deductions for Write-offs, Net of Recoveries Foreign Currency Translation Adjustments Ending Balance

Classification Beginning Balance Additions Charged to Expenses Additions from CECL Adoption Deductions for Write-offs, Net of Recoveries Foreign Currency Translation Adjustments Ending Balance

(in thousands)

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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-K

Item 8. Financial Statements and Supplementary Data