What changed in this filing

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Item 1. Financial Statements

2023-06-01 compared with 2022-12-08 · 111 added, 231 removed, 405 unchanged (46% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

October 31, 2022 January 31, 2022

April 30, 2023 January 31, 2023

Current Assets

32 unchanged sentences

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

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

22,669 shares issued and outstanding at April 30, 2023;

22,698 shares issued and outstanding at January 31, 2023

8 unchanged sentences

(in thousands, except per share data)

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

2022 2021 2022 2021

Three Months Ended April 30,

Equipment $ 429,376 $ 356,366

11 unchanged sentences

Operating Expenses 81,315 64,152

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

Income from Operations 37,265 24,542

16 unchanged sentences

(in thousands)

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

2022 2021 2022 2021

Three Months Ended April 30,

Net Income $ 26,965 $ 17,540

12 unchanged sentences

Net income 26,965 26,965

Other comprehensive loss — — — — ( 1,191 ) ( 1,191 )

Other comprehensive income 1,096 1,096

BALANCE, April 30, 2023 22,669 $ — $ 256,207 $ 311,749 $ ( 3,923 ) $ 564,033

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 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

6 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 )

Stock-based compensation expense — — 584 — — 584

Net income — — — 11,249 — 11,249

Other comprehensive income — — — — 938 938

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

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 ( 4 ) — ( 4 ) — — ( 4 )

Stock-based compensation expense — — 657 — — 657

Net income — — — 21,816 — 21,816

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

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

See Notes to Condensed Consolidated Financial Statements

2 unchanged sentences

(in thousands)

Nine Months Ended October 31,

Three Months Ended April 30,

Operating Activities

2 unchanged sentences

Depreciation and amortization 6,948 5,224

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

Deferred income taxes ( 904 ) ( 998 )

3 unchanged sentences

Changes in assets and liabilities, net of effects of acquisitions

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

Receivables ( 32,307 ) 9,846

Prepaid expenses and other assets 1,274 3,600

Inventories ( 140,107 ) ( 69,321 )

14 unchanged sentences

Principal payments on long-term debt and finance leases ( 3,207 ) ( 1,743 )

Payment of debt issuance costs — —

Other, net ( 994 ) ( 683 )

Net Cash Provided by (Used for) Financing Activities 34,333 ( 31,315 )

Net Cash Provided by Financing Activities 98,196 7,989

Effect of Exchange Rate Changes on Cash 252 ( 420 )

8 unchanged sentences

Net property and equipment financed with long-term debt, finance leases, accounts payable and accrued liabilities $ 1,473 $ 1,247

Long-term debt to acquire finance leases $ 7,119 $ 7,761

Net transfer of assets from (to) property and equipment to (from) inventories $ ( 4,686 ) $ 2,168

Net transfer of assets to property and equipment from inventories $ ( 935 ) $ ( 891 )

See Notes to Condensed Consolidated Financial Statements

8 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 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.

Therefore, operating results for the three-months ended April 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2024.

The information contained in the consolidated balance sheet as of January 31, 2023 was derived from the audited consolidated financial statements of the Company for the fiscal year then ended.

4 unchanged sentences

Russia/Ukraine Geopolitical Conflict

In February, 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 ten locations throughout Ukraine primarily in western and central Ukraine.

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.

In February 2022, the 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 the three months ended April 30, 2023 down 10.7% from the prior year period.

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

5 unchanged sentences

All material accounts, transactions and profits between the consolidated companies have been eliminated in consolidation.

Recently Adopted Accounting Guidance

In September 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.

The Company has agreements with financial institutions to facilitate the purchase of inventory from designated suppliers under certain terms and conditions.

Under these agreements, the Company receives extended payment terms and agrees to pay the financial institution a stated amount of confirmed invoices from its designated suppliers.

The Company may incur interest in accordance with the terms of the agreements.

Additionally, the Company has no involvement in establishing the terms or conditions of the arrangements between its suppliers and the financial institution.

The amounts outstanding under these agreements as of April 30, 2023 and January 31, 2023 were $26.3 million and $13.0 million, respectively, and are presented as Floorplan payable on the Condensed Consolidated Balance Sheet.

NOTE 2 - EARNINGS PER SHARE

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

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

2022 2021 2022 2021

Three Months Ended April 30,

(in thousands, except per share data)

13 unchanged sentences

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

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

Agriculture Construction International Total Agriculture Construction International Total

(in thousands) (in thousands)

Three Months Ended April 30, 2023

Agriculture Construction International Total

(in thousands)

Equipment $ 325,660 $ 45,458 $ 58,258 $ 429,376

6 unchanged sentences

Total revenues $ 423,195 $ 71,996 $ 74,440 $ 569,631

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

Agriculture Construction International Total Agriculture Construction International Total

(in thousands) (in thousands)

Three Months Ended April 30, 2022

Agriculture Construction International Total

(in thousands)

Equipment $ 251,093 $ 43,819 $ 61,454 $ 356,366

3 unchanged sentences

Revenue from contracts with customers 318,351 62,008 75,399 455,758

281,147 70,533 92,259 443,939 729,619 207,210 243,759 1,180,588

Rental 197 4,956 96 5,249

1 unchanged sentence

Unbilled Receivables and Deferred Revenue

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.

Unbilled receivables from contracts with customers amounted to $ 29.5 million and $ 19.8 million as of April 30, 2023 and January 31, 2023, 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 $ 55.8 million and $ 132.2 million as of October 31, 2022 and January 31, 2022, respectively.

Deferred revenue from contracts with customers amounted to $ 96.2 million and $ 118.1 million as of April 30, 2023 and January 31, 2023, 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 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.

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

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

During the three months ended April 30, 2023 and 2022, the Company recognized $ 66.4 million and $ 64.6 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, 2023 and January 31, 2022, respectively.

No material amount of revenue was recognized during the three months ended April 30, 2023 or 2022 from performance obligations satisfied in previous periods.

NOTE 4 - RECEIVABLES

9 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.

October 31, 2022 January 31, 2022

April 30, 2023 January 31, 2023

(in thousands)

21 unchanged sentences

Credit loss recoveries collected 12 1 2 15

Acquisition 94 — — 94

Foreign exchange impact — — 11 11

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

Balance at April 31, 2023 $ 365 $ 145 $ 2,778 $ 3,288

Agriculture Construction International Total

1 unchanged sentence

Balance at January 31, 2022 $ 232 $ 166 $ 1,502 $ 1,900

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

Write-offs charged against allowance 135 177 65 377

Current expected credit loss provision 3 43 768 814

Write-offs (recoveries) charged against allowance ( 4 ) 45 39 80

Credit loss recoveries collected 16 2 — 18

Foreign exchange impact — — ( 15 ) ( 15 )

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.

Balance at April 30, 2022 $ 255 $ 166 $ 2,216 $ 2,637

The increase in the credit loss provision in the International segment, during the three months ended April 30, 2023, was driven by a $ 0.2 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 October 31, Nine Months Ended October 31,

2022 2021 2022 2021

Three Months Ended April 30,

(in thousands)

2 unchanged sentences

Receivables from rental contracts 52 ( 11 )

$ 246 $ 74 $ 1,277 $ 364

NOTE 5 - INVENTORIES

October 31, 2022 January 31, 2022

April 30, 2023 January 31, 2023

(in thousands)

5 unchanged sentences

NOTE 6 - PROPERTY AND EQUIPMENT

October 31, 2022 January 31, 2022

April 30, 2023 January 31, 2023

(in thousands)

7 unchanged sentences

$ 233,830 $ 217,782

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 includes depreciation expense related to its rental fleet and its trucking fleet, for hauling equipment, in Cost of Revenue, which was $ 1.8 million and $ 1.5 million for the three months ended April 30, 2023 and 2022, respectively.

All other depreciation expense is included in Operating Expenses, which was $ 4.8 million and $ 3.5 million for the three months ended April 30, 2023 and 2022, 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 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 .

Due to the results of the analyses, the Company concluded no impairments were necessary, thus no impairment was recognized for the three months ended April 30, 2023 and 2022.

NOTE 7 - INTANGIBLE ASSETS AND GOODWILL

1 unchanged sentence

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

The following is a summary of intangible assets with finite lives as of April 30, 2023 and January 31, 2023.

April 30, 2023 January 31, 2023

Cost Accumulated Amortization Net Cost Accumulated Amortization Net

3 unchanged sentences

$ 1,563 $ (483) $ 1,080 $ 1,563 $ (402) $ 1,161

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:

Future amortization expense, as of April 30, 2023, is expected to be as follows:

Fiscal Year Ended January 31, Amount

1 unchanged sentence

2024 (remainder) $ 232

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 nine months ended October 31, 2022:

The following is a summary of the changes in indefinite-lived intangible assets, by segment, for the three months ended April 30, 2023:

Agriculture Construction Total

1 unchanged sentence

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

Arising from business combinations 842 — 842

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:

April 30, 2023 $ 17,178 $ 72 $ 17,250

The following presents changes in the carrying amount of goodwill, by segment, for the three months ended April 30, 2023:

Agriculture Total

2 unchanged sentences

Arising from business combinations 69 69

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

April 30, 2023 $ 30,691 $ 30,691

NOTE 8 - FLOORPLAN PAYABLE/LINES OF CREDIT

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

As of April 30, 2023, the Company had floorplan lines of credit totaling $ 781.0 million, which is primarily comprised of three floorplan lines of credit:

(i) a $ 500.0 million credit facility with CNH Industrial, (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 April 30, 2023 and January 31, 2023, consisted of the following:

April 30, 2023 January 31, 2023

(in thousands)

4 unchanged sentences

$ 442,950 $ 258,372

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.

As of April 30, 2023, the interest bearing U.S.

floorplan payables carried a variable interest rate of 6.42% compared to 5.94% as of January 31, 2023.

As of April 30, 2023, foreign floorplan payables carried a variable interest rate with a range of 5.37 % to 5.72 %, compared to a range of 4.16 % to 4.96 % as of January 31, 2023 on multiple lines of credit.

The Company had non-interest bearing floorplan payables of $ 303.8 million and $ 213.0 million, on April 30, 2023 and January 31, 2023, respectively.

NOTE 9 - LONG TERM DEBT

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

The following is a summary of long-term debt as of April 30, 2023 and January 31, 2023:

Description Maturity Dates Interest Rates April 30, 2023 January 31, 2023

(in thousands)

3 unchanged sentences

10,957 11,252

Vehicle loans, secured Various through September 2027 2.1% to 4.3%

Vehicle loans, secured Various through November 2028 2.1% to 6.2%

12,946 12,659

4 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 nine month periods ended October 31, 2022 and October 31, 2021:

The following is a summary of the changes in accumulated other comprehensive income (loss), by component, for the three month periods ended April 30, 2023 and April 30, 2022:

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

1 unchanged sentence

Balance, January 31, 2023 $ ( 7,730 ) $ 2,711 $ ( 5,019 )

Other comprehensive loss ( 1,191 ) — ( 1,191 )

Other comprehensive income (loss) 1,096 — 1,096

Balance, April 30, 2023 ( 6,634 ) 2,711 ( 3,923 )

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)

1 unchanged sentence

Balance, January 31, 2022 $ ( 4,883 ) $ 2,711 $ ( 2,172 )

Other comprehensive loss ( 2,379 ) — ( 2,379 )

Other comprehensive income (loss) ( 1,191 ) — ( 1,191 )

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

Other comprehensive income 938 — 938

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

The Company, as lessee, leases certain of its dealership locations, office space, equipment and vehicles under operating and financing classified leasing arrangements.

The Company has elected to not record leases with a lease term at commencement of 12 months or less on the consolidated balance sheet;

these leases are expensed on a straight-line basis over the lease term.

Many real estate lease agreements require the Company to pay the real estate taxes on the properties during the lease term and require that the Company maintain property insurance on each of the leased premises.

These payments are deemed to be variable lease payments as the amounts may change during the term of the lease.

Certain leases include renewal options that can extend the lease term for periods of one to ten years.

Most real estate leases grant the Company a right of first refusal or other options to purchase the real estate, generally at fair market value, either during the lease term or at its conclusion.

In most cases, the Company has not included these renewal and purchase options within the measurement of the right-of-use asset and lease liability.

Most often, the Company cannot readily determine the interest rate implicit in the lease and thus applies its incremental borrowing rate to capitalize the right-of-use asset and lease liability.

The Company estimates its incremental borrowing rate by incorporating considerations of lease term, asset class and lease currency and geographical market.

The Company's lease agreements do not contain any material non-lease components, residual value guarantees or material restrictive covenants.

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

All sublease arrangements are classified as operating leases.

The components of lease expense were as follows:

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

Classification 2022 2021 2022 2021

(in thousands) (in thousands)

Finance lease cost:

Amortization of leased assets Operating expenses $ 231 $ 227 $ 645 $ 915

Interest on lease liabilities Other interest expense 48 49 137 201

Operating lease cost Operating expenses and rental and other cost of revenue 3,424 3,632 10,062 11,132

Short-term lease cost Operating expenses — 66 71 198

Variable lease cost Operating expenses 501 502 1,519 1,755

Sublease income Interest and other income ( 358 ) ( 226 ) ( 1,087 ) ( 643 )

$ 3,846 $ 4,250 $ 11,347 $ 13,558

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

Classification October 31, 2022 January 31, 2022

(in thousands)

Operating lease assets Operating lease assets $ 52,091 $ 56,150

Finance lease assets (a)

Property and equipment, net of accumulated depreciation 2,440 9,045

Total leased assets $ 54,531 $ 65,195

Operating Current operating lease liabilities $ 9,671 $ 9,601

Finance Accrued expenses and other 623 7,466

Operating Operating lease liabilities 50,737 55,595

Finance Other long-term liabilities 2,144 1,518

Total lease liabilities $ 63,175 $ 74,180

(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

Leases Leases Total

Fiscal Year Ended January 31, (in thousands)

2023 (remainder) $ 3,285 $ 214 $ 3,499

2024 12,760 776 13,536

2025 12,393 727 13,120

2026 11,881 589 12,470

2027 11,220 458 11,678

2028 9,697 317 10,014

Thereafter 10,781 343 11,124

Total lease payments 72,017 3,424 75,441

Interest 11,609 657 12,266

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

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):

Operating leases 5.9

Financing leases 4.8

Weighted-average discount rate:

Operating leases 6.0 %

Financing leases 7.9 %

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

Our rental arrangements generally do not include minimum, noncancellable periods as the lessee is entitled to cancel the arrangement at any time.

Most often, our rental arrangements extend for periods ranging from a few days to a few months.

We maintain a fleet of dedicated rental assets within our Construction segment and, within all segments, we may also provide short-term rentals of certain equipment inventory assets.

Some rental arrangements may include rent-to-purchase options whereby customers are given a period of time to exercise an option to purchase the related equipment at an established price with any rental payments paid applied to reduce the purchase price.

All of the Company's leasing arrangements as lessor are classified as operating leases.

Rental revenue is recognized on a straight-line basis over the rental period.

Rental revenue includes amounts charged for loss and damage insurance on rented equipment.

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

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

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

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

The Company manages the residual value risk of its rented assets by (i) monitoring the quality, aging and anticipated retail market value of our rental fleet assets to determine the optimal period to remove an asset from the rental fleet, (ii) maintaining the quality of our assets through on-site parts and service support and (iii) requiring physical damage insurance of our lessee customers.

We primarily dispose of our rental assets through the sale of the asset by our retail sales force.

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 October 31, 2022 and January 31, 2022:

October 31, 2022 January 31, 2022

April 30, 2023 January 31, 2023

(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.

As of April 30, 2023, 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.

The estimated fair value of such assets as of January 31, 2022 was $ 3.1 million.

Fair value was estimated through 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, in the prior year, the Company estimated the fair value of long-lived assets to approximate zero as no future cash flows were assumed to be generated from the use of such assets and the expected value to be realized upon disposition was deemed to be nominal.

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 October 31, 2022 and January 31, 2022.

The carrying amounts of these financial instruments approximated their fair values as of April 30, 2023 and January 31, 2023.

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:

October 31, 2022 January 31, 2022

April 30, 2023 January 31, 2023

(in thousands)

2 unchanged sentences

NOTE 13 - INCOME TAXES

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 .

Our effective tax rate was 23.9 % and 25.6 % for the three months ended April 30, 2023 and 2022, respectively.

The effective tax rates for the three months ended April 30, 2023 and 2022 were subject to various other factors such as the impact of certain discrete items, mainly the vesting of share-based compensation, the mix of domestic and foreign income , and the change of valuation allowances in certain foreign jurisdictions.

NOTE 14 - BUSINESS COMBINATIONS

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

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

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

The total consideration transferred for the acquired business was $10.1 million paid in cash.

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

The Company anticipates completing the one remaining real estate acquisition by July 31, 2023.

In connection with the acquisition, the Company acquired from CNH Industrial and certain other manufacturers, equipment and parts inventory previously owned by Pioneer Farm Equipment Co.

Upon acquiring such inventories, the Company has been offered floorplan financing by the manufacturer.

In total, the Company acquired inventory and recognized a corresponding liability of $12.7 million.

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

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.

2 unchanged sentences

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.

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

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.

7 unchanged sentences

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

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

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

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

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

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

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

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

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

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

Purchase Price Allocation

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 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.

Each of the above acquisitions have 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 April 30, 2023, the purchase price allocation for all business combinations completed in fiscal year 2024 are preliminary as we finalize the valuation of our intangible assets acquired.

The purchase price allocation for all business combinations completed in fiscal year 2023 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

The following table presents the purchase price allocations for all acquisitions completed during the fiscal year ended January 31, 2023 and the three months ended April 30, 2023:

April 30, 2023 January 31, 2023

Assets acquired:

17 unchanged sentences

Other long-term liabilities — 5,152

72,635 1,844 1,261

Net assets acquired $ 17,463 $ 102,055

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.

For the business combinations occurring during the year ended January 31, 2023, the Company recognized a non-competition intangible asset of $0.8 million and a customer relationship intangible asset of $0.2 million.

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

1 unchanged sentence

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

Acquisition related costs, 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.

Acquisition related costs, amounted to $1.1 million for the period ended January 31, 2023, and acquisition related costs for the period ended April 30, 2023, 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 following summarized unaudited pro forma condensed statement of operations information for the three months ended April 30, 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.

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

2022 2021 2022 2021

Three Months Ended April 30,

(in thousands)

13 unchanged sentences

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

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

2022 2021 2022 2021

(in thousands) (in thousands)

Three Months Ended April 30,

(in thousands)

Agriculture $ 423,195 $ 318,548

9 unchanged sentences

Total $ 35,439 $ 23,584

October 31, 2022 January 31, 2022

April 30, 2023 January 31, 2023

(in thousands)

5 unchanged sentences

Total $ 1,378,105 $ 1,188,695

NOTE 17 - SUBSEQUENT EVENTS

On May 1, 2023, the Company, through its German Subsidiary, Titan Machinery Deutschland GmbH, acquired certain assets of MAREP GmbH "MAREP" related to full-service agriculture dealership businesses located in the following cities of Germany:

Mühlengeez and Radelübbe.

Our acquisitions of MAREP further expands our presence in the German market.

The total consideration transferred for the acquired business was $2.1 million paid in cash.

The business assets acquired consisted of $0.5 million of inventory and $1.6 million of other tangible assets.

The real estate of the Mühlengeez location was also purchased for $2.3 million.

Due to the limited time since the acquisition, the estimated fair values of acquired assets are provisional estimates but are based on the best information currently available.

These provisional estimates are subject to changes as the Company completes all remaining steps in finalizing the purchase price allocation.

Acquisition-related transaction costs were not material.

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

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