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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549
 FORM 10-Q
 
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended April 30, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____
 
Commission File No. 001-33866
 
TITAN MACHINERY INC.
(Exact name of registrant as specified in its charter)
Delaware   45-0357838
(State or Other Jurisdiction of
Incorporation or Organization)
  (IRS Employer
Identification No.)

644 East Beaton Drive
West Fargo, ND 58078-2648
(Address of Principal Executive Offices)
 
Registrant’s telephone number (701) 356-0130

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.00001 par value per share TITN The Nasdaq Stock Market LLC
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes     No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer   Accelerated filer  ☒
Non-accelerated filer Smaller reporting company  ☐
Emerging growth company  ☐

        If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES     NO  

As of May 29, 2020, 22,313,893 shares of Common Stock, $0.00001 par value, of the registrant were outstanding.


TITAN MACHINERY INC.
QUARTERLY REPORT ON FORM 10-Q
 
Table of Contents

  Page No.
PART I.
FINANCIAL INFORMATION
3
ITEM 1.
FINANCIAL STATEMENTS
3
  Consolidated Balance Sheets
3
  Consolidated Statements of Operations
4
  Consolidated Statements of Comprehensive Income
5
  Consolidated Statements of Stockholders' Equity
6
  Consolidated Statements of Cash Flows
7
 
Notes to Consolidated Financial Statements
8
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4.
CONTROLS AND PROCEDURES
PART II.
OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
ITEM 1A.
RISK FACTORS
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
ITEM 4.
MINE SAFETY DISCLOSURES
ITEM 5.
OTHER INFORMATION
ITEM 6.
EXHIBITS
Exhibit Index
Signatures

2

PART I. — FINANCIAL INFORMATION
 
ITEM 1.                FINANCIAL STATEMENTS
 
TITAN MACHINERY INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except per share data)
April 30, 2020 January 31, 2020
Assets
Current Assets
Cash $ 50,835    $ 43,721   
Receivables, net of allowance for expected credit losses 76,430    72,776   
Inventories 583,435    597,394   
Prepaid expenses and other 10,626    13,655   
Total current assets 721,326    727,546   
Noncurrent Assets
Property and equipment, net of accumulated depreciation 148,293    145,562   
Operating lease assets 84,577    88,281   
Deferred income taxes 3,783    2,147   
Goodwill 2,311    2,327   
Intangible assets, net of accumulated amortization 8,318    8,367   
Other 1,131    1,113   
Total noncurrent assets 248,413    247,797   
Total Assets $ 969,739    $ 975,343   
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 23,119    $ 16,976   
Floorplan payable 378,302    371,772   
Current maturities of long-term debt 3,787    13,779   
Current operating lease liabilities 12,320    12,259   
Deferred revenue 29,163    40,968   
Accrued expenses and other 30,726    38,409   
Total current liabilities 477,417    494,163   
Long-Term Liabilities
Long-term debt, less current maturities 49,522    37,789   
Operating lease liabilities 84,499    88,387   
Deferred income taxes 3,808    2,055   
Other long-term liabilities 7,415    7,845   
Total long-term liabilities 145,244    136,076   
Commitments and Contingencies
Stockholders' Equity
Common stock, par value $.00001 per share, 45,000 shares authorized; 22,314 shares issued and outstanding at April 30, 2020; 22,335 shares issued and outstanding at January 31, 2020 —    —   
Additional paid-in-capital 251,051    250,607   
Retained earnings 99,775    97,717   
Accumulated other comprehensive loss (3,748)   (3,220)  
Total stockholders' equity 347,078    345,104   
Total Liabilities and Stockholders' Equity $ 969,739    $ 975,343   
 See Notes to Consolidated Financial Statements
3

TITAN MACHINERY INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
  Three Months Ended April 30,
  2020 2019
Revenue
Equipment $ 218,505    $ 193,956   
Parts 56,614    51,938   
Service 25,600    22,831   
Rental and other 9,489    9,567   
Total Revenue 310,208    278,292   
Cost of Revenue
Equipment 197,046    173,154   
Parts 39,617    36,814   
Service 8,345    7,483   
Rental and other 6,790    6,941   
Total Cost of Revenue 251,798    224,392   
Gross Profit 58,410    53,900   
Operating Expenses 53,058    52,555   
Impairment of Long-Lived Assets 216    135   
Income from Operations 5,136    1,210   
Other Income (Expense)
Interest and other income 130    794   
Floorplan interest expense (1,152)   (877)  
Other interest expense (966)   (1,642)  
Income (Loss) Before Income Taxes 3,148    (515)  
Provision for (Benefit from) Income Taxes 886    (70)  
Net Income (Loss) $ 2,262    $ (445)  
Earnings per Share:
Basic $ 0.10    $ (0.02)  
Diluted $ 0.10    $ (0.02)  
Weighted Average Common Shares:
Basic 22,012    21,872   
Diluted 22,012    21,872   
 
See Notes to Consolidated Financial Statements

4

TITAN MACHINERY INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(in thousands)
 
  Three Months Ended April 30,
  2020 2019
Net Income (Loss) $ 2,262    $ (445)  
Other Comprehensive Income (Loss)
Foreign currency translation adjustments (528)   (771)  
Comprehensive Income (Loss) $ 1,734    $ (1,216)  
 
See Notes to Consolidated Financial Statements

5

TITAN MACHINERY INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
(in thousands)

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity
Shares Outstanding Amount
BALANCE, January 31, 2019 22,218    $ —    $ 248,423    $ 89,228    $ (2,340)   $ 335,311   
Cumulative-effect adjustment of adopting ASC 842, Leases —    —    —    (5,464)   —    (5,464)  
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 (34)   —    (492)   —    —    (492)  
Stock-based compensation expense —    —    603    —    —    603   
Net loss —    —    —    (445)   —    (445)  
Other comprehensive loss —    —    —    —    (771)   (771)  
BALANCE, April 30, 2019 22,184    $ —    $ 248,534    $ 83,319    $ (3,111)   $ 328,742   

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity
Shares Outstanding Amount
BALANCE, January 31, 2020 22,335    $ —    $ 250,607    $ 97,717    $ (3,220)   $ 345,104   
Cumulative-effect adjustment of adopting ASC 326, Credit Loss —    —    —    (204)   —    (204)  
Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax (21)   —    (201)   —    —    (201)  
Stock-based compensation expense —    —    645    —    —    645   
Net income —    —    —    2,262    —    2,262   
Other comprehensive loss —    —    —    —    (528)   (528)  
BALANCE, April 30, 2020 22,314    $ —    $ 251,051    $ 99,775    $ (3,748)   $ 347,078   

See Notes to Consolidated Financial Statements
6


TITAN MACHINERY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
  Three Months Ended April 30,
  2020 2019
Operating Activities
Net income (loss) $ 2,262    $ (445)  
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities
Depreciation and amortization 5,375    6,064   
Impairment 216    135   
Deferred income taxes 117    (316)  
Stock-based compensation expense 645    603   
Noncash interest expense 27    401   
Noncash lease expense 2,833    3,062   
Other, net (54)   11   
Changes in assets and liabilities
Receivables, prepaid expenses and other assets (1,125)   (5,593)  
Inventories 11,941    (78,254)  
Manufacturer floorplan payable (10,669)   89,599   
Accounts payable, deferred revenue, accrued expenses and other and other long-term liabilities (13,919)   (9,289)  
Operating lease liabilities (3,091)   (3,126)  
Net Cash Provided by (Used for) Operating Activities (5,442)   2,852   
Investing Activities
Rental fleet purchases (3,378)   (3,886)  
Property and equipment purchases (excluding rental fleet) (2,036)   (1,604)  
Proceeds from sale of property and equipment 313    416   
Acquisition consideration, net of cash acquired —    (2,972)  
Other, net (21)    
Net Cash Used for Investing Activities (5,122)   (8,038)  
Financing Activities
Net change in non-manufacturer floorplan payable 18,781    12,772   
Proceeds from long-term debt borrowings 1,112    373   
Principal payments on long-term debt and finance leases (1,309)   (878)  
Payment of debt issuance costs (670)   —   
Other, net (200)   (492)  
Net Cash Provided by Financing Activities 17,714    11,775   
Effect of Exchange Rate Changes on Cash (36)   (3)  
Net Change in Cash 7,114    6,586   
Cash at Beginning of Period 43,721    56,745   
Cash at End of Period $ 50,835    $ 63,331   
Supplemental Disclosures of Cash Flow Information
Cash paid during the period
Income taxes, net of refunds $ 365    $ 517   
Interest $ 2,262    $ 1,712   
Supplemental Disclosures of Noncash Investing and Financing Activities
Net property and equipment financed with long-term debt, finance leases, accounts payable and accrued liabilities $ 2,085    $ 5,861   
Net transfer of assets from (to) property and equipment to (from) inventories $ (888)   $ (371)  

See Notes to Consolidated Financial Statements
7

TITAN MACHINERY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
NOTE 1 - BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. The quarterly operating results for Titan Machinery Inc. (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 three-month period ended April 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2021. The information contained in the consolidated balance sheet as of January 31, 2020 was derived from the audited consolidated financial statements for the Company for the fiscal year then ended. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2020 as filed with the SEC.
Nature of Business
The Company is engaged in the retail sale, service and rental of agricultural and construction machinery through its stores in the United States and Europe. The Company’s North American stores are located in Arizona, Colorado, Iowa, Minnesota, Montana, Nebraska, North Dakota, South Dakota, Wisconsin and Wyoming, and its European stores are located in Bulgaria, Germany, Romania, Serbia and Ukraine. 
Impact of the COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, and the President of the United States declared the COVID-19 outbreak as a national emergency. The nature of COVID-19 led to worldwide shutdowns and halting of commercial and interpersonal activity as governments imposed regulations in efforts to control the spread of the pandemic, such as shelter-in-place orders and quarantines. The pandemic is a highly fluid and rapidly evolving situation, and we cannot anticipate with any certainty the length, scope, or severity of such restrictions in each of the markets that we operate. See Item 1A. Risk Factors for more information on possible impacts.
Since the beginning of the COVID-19 pandemic, the safety of our employees and customers has been and continues to be our top concern. At the onset of the pandemic we organized a COVID Task Force to implement safety protocols and to quickly respond to matters, in the event of a positive case at one of our locations.
Even though we are considered an essential business, in response to the COVID-19 pandemic, the company closed its U.S. stores to the public on March 23, 2020 but continued operations through social distancing means in all areas: equipment, parts, service and rental. Beginning May 4, 2020, we began fully reopening our stores to the public, following pandemic safety protocols applicable to the locations. Additionally, our International stores have also been following pandemic safety protocols applicable to each location.
Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates, particularly related to realization of inventory, impairment of long-lived assets, collectability of receivables, and income taxes.
Principles of Consolidation
        The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material accounts, transactions and profits between the consolidated companies have been eliminated in consolidation.

8

Recently Adopted Accounting Guidance
        In June 2016, the FASB issued a new standard, codified in ASC 326, that modifies how entities measure credit losses on most financial instruments. The new standard replaced the "incurred loss" model with an "expected credit loss" model that requires consideration of a broader range of information to estimate expected credit losses over the lifetime of the asset. The guidance impacts the Company on its accounts receivable portfolio but specifically excluded receivables from operating lease arrangements and, therefore, the Company’s receivables from rental contracts were not impacted. The guidance also requires new disclosures to allow the users of the financial statements to understand the credit risk inherent in a portfolio and how management monitors the credit quality of the portfolio, management’s estimate of expected credit losses, and changes in the estimate of expected credit losses that have taken place during the reporting period.
The Company adopted the new guidance on February 1, 2020 using a modified retrospective approach and recognized an immaterial cumulative-effect adjustment to retained earnings as of the effective date. The Company identified and updated existing internal controls and procedures to ensure compliance with the new guidance, but such modifications were not deemed to be material to the Company's overall system of internal control. While the adoption of this ASU did not have a material impact on the Company's consolidated financial statements, it required changes to the Company's process of estimating expected credit losses on trade receivables.
Following is a summary of allowance for credit losses on trade and unbilled accounts receivable:
Balance at February 1, 2020 Current Expected Credit Loss Provision Write-offs Charged Against the Allowance Credit Loss Recoveries Collected F/X Impact Balance at April 30, 2020
(in thousands)
Agriculture $ 181    $ 14    $   $ 40    $ —    $ 230   
Construction 1,016    113    71      —    1,062   
International 1,746    226    133      (29)   1,816   
$ 2,943    $ 353    $ 209    $ 50    $ (29)   $ 3,108   
In February 2018, the FASB issued guidance on the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract, codified in ASC 350-40. This guidance aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. This standard was adopted on February 1, 2020 and was applied using the prospective transition approach. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.
Unadopted Accounting Guidance
In March 2020, the FASB issued 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 and hedging relationships that reference LIBOR to determine if the Company will adopt the new guidance.
9

NOTE 2 - EARNINGS PER SHARE
The following table sets forth the calculation of basic and diluted EPS:
  Three Months Ended April 30,
  2020 2019
  (in thousands, except per share data)
Numerator:
Net income (loss) $ 2,262    $ (445)  
Allocation to participating securities (32)   —   
Net income (loss) attributable to Titan Machinery Inc. common stockholders $ 2,230    $ (445)  
Denominator:
Basic weighted-average common shares outstanding 22,012    21,872   
Plus: incremental shares from vesting of restricted stock units —    —   
Diluted weighted-average common shares outstanding 22,012    21,872   
Earnings Per Share:
Basic $ 0.10    $ (0.02)  
Diluted $ 0.10    $ (0.02)  
Anti-dilutive shares excluded from diluted weighted-average common shares outstanding:
Restricted stock units    
Shares underlying senior convertible notes —    1,057   

NOTE 3 - REVENUE
        Revenues are recognized when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration we expect to collect in exchange for those goods or services. Sales, value added and other taxes collected from our customers concurrent with our revenue activities are excluded from revenue.
        The following tables present our revenue disaggregated by revenue source and segment:
Three Months Ended April 30, 2020
Agriculture Construction International Total
(in thousands)
Equipment $ 139,749    $ 34,253    $ 44,503    $ 218,505   
Parts 35,079    11,460    10,075    56,614   
Service 17,720    6,212    1,668    25,600   
Other 733    518    104    1,355   
Revenue from contracts with customers
193,281    52,443    56,350    302,074   
Rental 346    7,671    117    8,134   
Total revenues $ 193,627    $ 60,114    $ 56,467    $ 310,208   

Three Months Ended April 30, 2019
Agriculture Construction International Total
(in thousands)
Equipment $ 107,864    $ 43,046    $ 43,046    $ 193,956   
Parts 29,976    12,704    9,258    51,938   
Service 14,985    6,521    1,325    22,831   
Other 618    593    22    1,233   
Revenue from contracts with customers
153,443    62,864    53,651    269,958   
Rental 332    7,879    123    8,334   
Total revenues $ 153,775    $ 70,743    $ 53,774    $ 278,292   
10

Unbilled Receivables and Deferred Revenue
        Unbilled receivables amounted to $17.1 million and $13.9 million as of April 30, 2020 and January 31, 2020. The increase in unbilled receivables is primarily the result of a seasonal increase in the volume of our service transactions in which we recognize revenue as our work is performed and prior to customer invoicing.
        Deferred revenue from contracts with customers amounted to $27.9 million and $39.5 million as of April 30, 2020 and January 31, 2020. 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 three months ended April 30, 2020 and 2019, the Company recognized $29.7 million and $30.5 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, 2020 and January 31, 2019, respectively. No material amount of revenue was recognized during the three months ended April 30, 2020 and 2019 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 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 and for such contracts we recognize revenue over time at the amount to which we have the right to invoice for services completed to date.
NOTE 4 - RECEIVABLES
The Company provides an allowance for expected credit losses on its nonrental receivables in accordance with the guidance in ASU 2016-13. To measure the expected credit losses, receivables have been grouped based on shared credit risk characteristics as shown in the table below.
Trade and unbilled receivables from contracts with customers have credit risk and the allowance is determined by applying expected credit loss percentages to aging categories based on historical experience that are updated each quarter. The rates may also be adjusted to the extent future events are expected to differ from historical results. Given that the credit terms for these receivables are short-term, changes in credit loss percentages due to future events may not occur on a frequent basis. In addition, the allowance is adjusted based on information obtained by continued monitoring of individual customer credit.
Trade receivables from finance companies, other receivables due from manufacturers, and other receivables have not historically resulted in any credit losses to the Company. These receivables are short-term in nature and deemed to be of good credit quality and have no need for any allowance for expected credit losses. Management continually monitors these receivables and should information be obtained that identifies potential credit risk, an adjustment to the allowance would be made if deemed appropriate.
Trade and unbilled receivables from rental contracts are primarily in the US and are specifically excluded from the guidance in ASU 2016-13 in determining an allowance for expected losses. The Company does provide an allowance for these receivables based on historical experience and using credit information obtained from continued monitoring of customer accounts.
11

April 30, 2020 January 31, 2020
(in thousands)
Trade and unbilled receivables from contracts with customers
Trade receivables due from customers $ 32,962    $ 36,400   
Trade receivables due from finance companies 17,388    12,352   
Unbilled receivables 17,076    13,944   
Trade and unbilled receivables from rental contracts
Trade receivables 5,581    7,381   
Unbilled receivables 741    861   
Other receivables
Due from manufacturers 6,565    5,763   
Other 1,346    1,198   
Total receivables 81,659    77,899   
Less allowance for expected credit losses (5,229)   (5,123)  
Receivables, net of allowance for expected credit losses $ 76,430    $ 72,776   
        The following table presents impairment losses on receivables arising from sales contracts with customers and receivables arising from rental contracts:
Three Months Ended April 30,
2020 2019
(in thousands)
Impairment losses on:
Receivables from sales contracts $ 143    $ 328   
Receivables from rental contracts 138    83   
$ 281    $ 411   

NOTE 5 - INVENTORIES
April 30, 2020 January 31, 2020
  (in thousands)
New equipment $ 346,703    $ 358,339   
Used equipment 154,538    157,535   
Parts and attachments 80,294    79,813   
Work in process 1,900    1,707   
$ 583,435    $ 597,394   

NOTE 6 - PROPERTY AND EQUIPMENT
April 30, 2020 January 31, 2020
  (in thousands)
Rental fleet equipment $ 104,888    $ 104,133   
Machinery and equipment 22,773    22,682   
Vehicles 51,837    51,850   
Furniture and fixtures 42,043    41,720   
Land, buildings, and leasehold improvements 72,407    70,408   
293,948    290,793   
Less accumulated depreciation (145,655)   (145,231)  
$ 148,293    $ 145,562   
12

        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 April 30, 2020, the Company determined that a current period operating loss combined with historical losses of certain store locations indicated that the long-lived asset group of the store locations may not be recoverable. The Company performed an impairment assessment of this asset group and as a result recognized an impairment charge of $0.2 million within its Construction segment.
        In March 2019, the Company completed an assessment of its Enterprise Resource Planning ("ERP") application and concluded that the Company would begin the process to prepare for conversion to a new ERP application. The Company currently anticipates a pilot store to be on the new ERP system in the second quarter of the current fiscal year and all stores to be on the new ERP application in the first half of the fiscal year ending January 31, 2022. We have prospectively adjusted the useful life of our current ERP application such that it will be fully amortized upon its estimated replacement date. The net book value of the ERP asset of $1.8 million as of April 30, 2020 will be amortized on a straight-line basis over the estimated remaining period of use.
NOTE 7 - FLOORPLAN PAYABLE/LINES OF CREDIT
        On April 3, 2020, the Company entered into a Third Amended and Restated Credit Agreement with a group of banks (the "Bank Syndicate"), that amended and restated the Company's prior $200.0 million credit facility, dated October 28, 2015. The Bank Syndicate provides for a secured credit facility in an amount up to $250.0 million, consisting of a $185.0 million floorplan facility (the "Floorplan Loan") and a $65.0 million operating line (the "Revolver Loan"), and changed the interest rates as compared to the prior credit facility, amongst other things. The amounts available under the Bank Syndicate are subject to base calculations and reduced by outstanding standby letters of credit and certain reserves. The Bank Syndicate has a variable interest rate on outstanding balances, has a 0.25% non-usage fee on the average monthly unused amount (replacing the previous non-usage fee of 0.25% to 0.375%), 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 0.50%. 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%, (c) one month LIBOR 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 and ranges from 0.5% to 1.0% for Base Rate Loans and 1.5% to 2.0% for LIBOR Rate Loans. The new applicable margins under the Bank Syndicate are up to 0.5% less than the existing margins under the prior credit facility.
The Bank Syndicate does not obligate the Company to maintain financial covenants, except in the event that excess availability (each as defined in the Bank Syndicate) 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 (“FCCR”) of at least 1.10:1.00. The Bank Syndicate includes various restrictions on the Company and its subsidiaries’ activities, including, under certain conditions, limitations on the Company’s ability to make certain cash payments including cash dividends and stock repurchases, issuance of equity instruments, acquisitions and divestitures, and entering into new indebtedness transactions. The Bank Syndicate matures on April 3, 2025.
The Floorplan Loan under the Bank Syndicate is used to finance equipment inventory purchases. Amounts outstanding are recorded as floorplan payable, within current liabilities on the consolidated balance sheets, as the Company intends to repay amounts borrowed within one year.
The Revolver Loan under the Bank Syndicate is used to finance rental fleet equipment and for general working capital requirements of the Company. Amounts outstanding are recorded as long-term debt, within long-term liabilities on the consolidated balance sheets, as the Company does not have the intention or obligation to repay amounts borrowed within one year.
As of April 30, 2020, the Company had floorplan lines of credit totaling $762.0 million, which is primarily comprised of three significant floorplan lines of credit: (i) a $450.0 million credit facility with CNH Industrial, (ii) a $185.0 million line of credit with the Bank Syndicate, and (iii) a $60.0 million credit facility with DLL Finance LLC.
13

As of April 30, 2020 and January 31, 2020, the Company's outstanding balances of floorplan payables and lines of credit consisted of the following:
April 30, 2020 January 31, 2020
(in thousands)
CNH Industrial $ 179,602    $ 187,690   
Bank Syndicate Floorplan Loan 102,900    —   
Wells Fargo Floorplan Payable Line —    82,700   
DLL Finance 30,198    30,657   
Other outstanding balances with manufacturers and non-manufacturers 65,602    70,725   
$ 378,302    $ 371,772   
        As of April 30, 2020, the interest-bearing U.S. floorplan payables carried various interest rates ranging primarily from 2.52% to 4.12%, compared to a range of 4.05% to 4.81% as of January 31, 2020. As of April 30, 2020, foreign floorplan payables carried various interest rates primarily ranging from 0.98% to 6.33%, compared to a range of 0.86% to 7.66% as of January 31, 2020. As of April 30, 2020 and January 31, 2020, $201.9 million and $205.2 million, respectively, of outstanding floorplan payable were non-interest bearing. As of April 30, 2020, the Company had a compensating balance arrangement under one of its foreign floorplan credit facilities, which requires a minimum cash deposit to be maintained with the lender in the amount of $5.0 million for the term of the credit facility.
NOTE 8 - DEFERRED REVENUE
April 30, 2020 January 31, 2020
(in thousands)
Deferred revenue from contracts with customers $ 27,889    $ 39,512   
Deferred revenue from rental and other contracts 1,274    1,456   
$ 29,163    $ 40,968   

NOTE 9 - SENIOR CONVERTIBLE NOTES
        The Company's senior convertible notes matured, and the outstanding principal balance of $45.6 million was repaid in full, on May 1, 2019.
The Company recognized interest expense associated with its senior convertible notes as follows:
Three Months Ended April 30,
2020 2019
(in thousands)
Cash Interest Expense
Coupon interest expense $ —    $ 421   
Noncash Interest Expense
Amortization of debt discount —    350   
Amortization of transaction costs —    45   
$ —    $ 816   
The effective interest rate of the liability component was equal to 0.0% for the three months ended April 30, 2019.
14

NOTE 10 - LONG TERM DEBT
        The following is a summary of long-term debt as of April 30, 2020 and January 31, 2020:
April 30, 2020 January 31, 2020
(in thousands)
Sale-leaseback financing obligations, interest rates ranging from 3.4% to 10.3% with various maturity dates through December 2030 $ 17,469    $ 17,781   
Bank Syndicate - Working Capital Line, interest accrues at a variable rate on outstanding balances, requires monthly payments of accrued interest, matures April 2025 10,000    10,000   
Real estate mortgage bearing interest at 5.11%, payable in annual installments of $0.3 million, maturing on May 15, 2039, secured by real estate assets 6,827    6,827   
Equipment financing loan, payable in monthly installments over a 72-month term for each funded tranche, bearing interest at 3.89%, secured by vehicle assets 7,350    7,468   
Real estate mortgage bearing interest at 4.62%, payable in monthly installments of $0.04 million with a final payment at maturity of $3.4 million, maturing on June 10, 2024, secured by real estate assets 4,366    4,416   
Real estate mortgage bearing interest at 4.4%, payable in monthly installments of $0.01 million with a final payment at maturity of $1.0 million, maturing on January 1, 2027, secured by real estate assets 1,474    1,489   
Real estate mortgage bearing interest at 2.09%, payable in monthly installments, maturing on June 30, 2026, secured by real estate assets 2,396    2,520   
Other long-term debt primarily bearing interest at three-month EURIBOR plus 2.6%, payable in quarterly installments, maturing on January 31, 2021 3,427    1,067   
53,309    51,568   
Less current maturities (3,787)   (13,779)  
$ 49,522    $ 37,789   

NOTE 11 - DERIVATIVE INSTRUMENTS
The Company holds derivative instruments for the purpose of minimizing exposure to fluctuations in foreign currency exchange rates to which the Company is exposed in the normal course of its operations.
        The Company uses foreign currency forward contracts to hedge the effects of fluctuations in exchange rates on outstanding intercompany loans. The Company does not formally designate and document such derivative instruments as hedging instruments; however, the instruments are an effective economic hedge of the underlying foreign currency exposure. Both the gain or loss on the derivative instrument and the offsetting gain or loss on the underlying intercompany loan are recognized in earnings immediately, thereby eliminating or reducing the impact of foreign currency exchange rate fluctuations on net income. The Company's foreign currency forward contracts generally have three-month maturities, maturing on the last day of each fiscal quarter. No foreign currency contracts were outstanding as of January 31, 2020. The notional value of outstanding foreign currency contracts as of April 30, 2020 was $13.0 million.
        As of April 30, 2020, the fair value of the Company's outstanding derivative instruments was not material. Derivative instruments recognized as assets are recorded in prepaid expenses and other in the consolidated balance sheets, and derivative instruments recognized as liabilities are recorded in accrued expenses and other in the consolidated balance sheets.
        The following table sets forth the gains and losses recognized in income from the Company’s derivative instruments for the three months ended April 30, 2020 and 2019. Gains and losses are recognized in interest income and other income (expense) in the consolidated statements of operations:
Three Months Ended April 30,
2020 2019
  (in thousands)
Foreign currency contract gain (loss) $ (13)   $ 202   

15

NOTE 12 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
        The following is a summary of the changes in accumulated other comprehensive income (loss), by component, for the periods ended April 30, 2020 and April 30, 2019:
Foreign Currency Translation Adjustment Net Investment Hedging Gain Total Accumulated Other Comprehensive Income (Loss)
(in thousands)
Balance, January 31, 2020 $ (5,931)   $ 2,711    $ (3,220)  
Other comprehensive loss (528)   —    (528)  
Balance, April 30, 2020 $ (6,459)   $ 2,711    $ (3,748)  

Foreign Currency Translation Adjustment Net Investment Hedging Gain Total Accumulated Other Comprehensive Income (Loss)
(in thousands)
Balance, January 31, 2019 $ (5,051)   $ 2,711    $ (2,340)  
Other comprehensive loss (771)   —    (771)  
Balance, April 30, 2019 $ (5,822)   $ 2,711    $ (3,111)  

NOTE 13 - LEASES
As Lessee
        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; such 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. Such 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:
Classification Three Months Ended April 30, 2020 Three Months Ended April 30, 2019
(in thousands)
Finance lease cost:
Amortization of leased assets Operating expenses    $ 392    $ 376   
Interest on lease liabilities Other interest expense    126    139   
Operating lease cost Operating expenses & rental and other cost of revenue    4,463    4,816   
Short-term lease cost Operating expenses    80    80   
Variable lease cost Operating expenses    635    620   
Sublease income Interest income and other income (expense)   (152)   (168)  
$ 5,544    $ 5,863   
16


        Right-of-use lease assets and lease liabilities consist of the following:
Classification April 30, 2020 January 31, 2020
(in thousands)
Assets
Operating lease assets Operating lease assets $ 84,577    $ 88,281   
Finance lease assets(a)
Property and equipment, net of accumulated depreciation 6,002    6,297   
Total leased assets $ 90,579    $ 94,578   
Liabilities
Current
Operating Current operating lease liabilities $ 12,320    $ 12,259   
Finance Accrued expenses and other 1,714    1,708   
Noncurrent
Operating Operating lease liabilities 84,499    88,387   
Finance Other long-term liabilities 3,747    4,103   
Total lease liabilities $ 102,280    $ 106,457   
(a)Finance lease assets are recorded net of accumulated amortization of $1.8 million as of April 30, 2020. 
        Maturities of lease liabilities as of April 30, 2020 are as follows:
Operating Finance
Leases Leases Total
Fiscal Year Ended January 31, (in thousands)
2021 (remainder) $ 13,393    $ 1,609    $ 15,002   
2022 16,887    1,851    18,738   
2023 15,748    1,206    16,954   
2024 14,824    476    15,300   
2025 13,691    393    14,084   
2026 13,539    312    13,851   
Thereafter 33,624    1,083    34,707   
Total lease payments 121,706    6,930    128,636   
Less: Interest 24,887    1,469    26,356   
Present value of lease liabilities $ 96,819    $ 5,461    $ 102,280   
        The weighted-average lease term and discount rate as of April 30, 2020 are as follows:
April 30, 2020
Weighted-average remaining lease term (years):
Operating leases 7.7
Financing leases 5.3
Weighted-average discount rate:
Operating leases 6.1  %
Financing leases 9.8  %
As Lessor
        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, may also provide short-term rentals of certain equipment inventory assets. Certain 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
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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 of our Construction segment as of April 30, 2020 and January 31, 2020:
April 30, 2020 January 31, 2020
(in thousands)
Rental fleet equipment $ 104,888    $ 104,133   
Less accumulated depreciation 39,814    42,076   
$ 65,074    $ 62,057   

NOTE 14 - FAIR VALUE MEASUREMENTS
As of April 30, 2020 and January 31, 2020, the fair value of the Company's foreign currency contracts, which are either assets or liabilities measured at fair value on a recurring basis, was not material. These foreign currency contracts were valued using a discounted cash flow analysis, an income approach, utilizing readily observable market data as inputs, which is classified as a Level 2 fair value measurement.
The Company also valued certain long-lived assets at fair value on a non-recurring basis as of April 30, 2020 and January 31, 2020 as part of its long-lived asset impairment testing. The estimated fair value of such assets as of April 30, 2020 and January 31, 2020 was $0.4 million and $2.8 million, respectively. 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 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 April 30, 2020 and January 31, 2020. Fair value of these financial instruments was estimated based on Level 2 fair value inputs.
NOTE 15 - INCOME TAXES
        Our effective tax rate was 28.1% for the three months ended April 30, 2020 compared to an effective tax rate of 13.6% for the three months ended April 30, 2019. Our effective tax rate differs from the domestic federal statutory tax rate due to the mix of domestic and foreign income or losses and the impact of the recognition of valuation allowances on our foreign deferred tax assets, including net operating losses.
NOTE 16 - BUSINESS COMBINATIONS
        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. Our acquisition of ESB further expanded our 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 our 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. The service area is contiguous to the Company's existing locations in Grand Forks and Casselton, North Dakota and Ada, Minnesota. The total consideration transferred for the acquired business was $10.9 million paid in cash, including the acquired real estate, which was finalized in January 2020 for $2.1 million.
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        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 manufacturer. 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.
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. The accounting for all business combinations was complete as of January 31, 2020. The following table presents the aggregate purchase price allocations for all acquisitions completed as of January 31, 2020:
January 31, 2020
(in thousands)
Assets acquired:
Receivables $ 440   
Inventories 6,466   
Property and equipment 3,810   
Intangible assets 1,973   
Goodwill 1,198   
13,887   
Liabilities assumed: —   
—   
Net assets acquired $ 13,887   
Goodwill recognized by segment:
Agriculture $ 699   
Construction —   
International 499   
Goodwill expected to be deductible for tax purposes $ 1,198   
        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 business combinations occurring during the twelve months ended January 31, 2020, the Company recognized a customer relationship intangible asset of $0.2 million, a non-competition intangible asset of $0.1 million, and a distribution rights intangible asset of $1.6 million. The customer relationship and non-competition assets will be amortized over periods ranging from three to five years. The distribution rights assets are indefinite-lived intangible assets not subject to amortization. The Company estimated the fair value of the intangible assets using a multi-period excess earnings model, an income approach. Acquisition related costs were not material for fiscal year ended January 31, 2020, and have been expensed as incurred and recognized as operating expenses in the consolidated statements of operations.
NOTE 17 - CONTINGENCIES
        On October 11, 2017, the Romania Competition Council (“RCC”) initiated an administrative investigation of the Romanian Association of Manufacturers and Importers of Agricultural Machinery (“APIMAR”) and all its members, including Titan Machinery Romania. The RCC's investigation involves whether the APIMAR members engaged in anti-competitive practices in their sales of agricultural machinery not involving European Union ("EU") subvention funding programs, by referring to the published sales prices governing EU subvention funded transactions, which prices are mandatorily disclosed to and published by AFIR, a Romanian government agency that oversees the EU subvention funding programs in Romania. The investigation is in a preliminary stage and the Company is currently unable to predict its outcome or reasonably estimate any potential loss that may result from the investigation.
        The Company is also engaged in other legal proceedings incidental to the normal course of business. Due to their nature, such legal proceedings involve inherent uncertainties, including but not limited to, court rulings, negotiations between
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affected parties and governmental intervention. Based upon the information available to the Company and discussions with legal counsel, it is the Company's opinion that the outcome of these various legal actions and claims will not have a material impact on the financial position, results of operations or cash flows. These matters, however, are subject to many uncertainties, and the outcome of any matter is not predictable with assurance.
NOTE 18 - SEGMENT INFORMATION
The Company has three reportable segments: Agriculture, Construction and International. Revenue between segments is immaterial. The Company retains various unallocated income/(expense) items and assets at the general corporate level, which the Company refers to as “Shared Resources” in the table below. Shared Resources assets primarily consist of cash and property and equipment.
Certain financial information for each of the Company’s business segments is set forth below.
  Three Months Ended April 30,
  2020 2019
  (in thousands)
Revenue
Agriculture $ 193,627    $ 153,775   
Construction 60,114    70,743   
International 56,467    53,774   
Total $ 310,208    $ 278,292   
Income (Loss) Before Income Taxes
Agriculture $ 6,162    $ 1,876   
Construction (2,873)   (2,222)  
International (280)   216   
Segment income (loss) before income taxes 3,009    (130)  
Shared Resources 139    (385)  
Total $ 3,148    $ (515)  
 
April 30, 2020 January 31, 2020
  (in thousands)
Total Assets
Agriculture $ 436,040    $ 444,942   
Construction 272,402    275,645   
International 192,966    191,513   
Segment assets 901,408    912,100   
Shared Resources 68,331    63,243   
Total $ 969,739    $ 975,343   

NOTE 19 - SUBSEQUENT EVENTS
        On January 31, 2020, the Company entered into a definitive purchase agreement to acquire HorizonWest Inc., which owns a three store CaseIH agriculture dealership complex in Scottsbluff and Sidney, Nebraska and Torrington, Wyoming. In its most recent fiscal year, HorizonWest generated revenue of approximately $26 million. The Company closed on the acquisition on May 4, 2020. The total purchase price was $6.9 million, which does not include the $2.7 million of associated inventory that the Company concurrently purchased from CNH Industrial under standard terms. Due to the limited time since the date of the acquisition, it is impracticable for the Company to make certain business combination disclosures at this time as the Company is still gathering information that is necessary for the required business combination disclosures. The net assets acquired consist primarily of working capital and fixed assets.
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ITEM 2.                        MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our interim unaudited consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report, and the audited consolidated financial statements and related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020. 
Overview
We own and operate a network of full service agricultural and construction equipment stores in the United States and Europe. Based upon information provided to us by CNH Industrial N.V. or its U.S. subsidiary CNH Industrial America, LLC, we are the largest retail dealer of Case IH Agriculture equipment in the world, the largest retail dealer of Case Construction equipment in North America and a major retail dealer of New Holland Agriculture and New Holland Construction equipment in the U.S. We operate our business through three reportable segments: Agriculture, Construction and International. Within each segment, we have four principal sources of revenue: new and used equipment sales, parts sales, service, and equipment rental and other activities.
Demand for agricultural equipment and, to a lesser extent, parts and service support, are impacted by agricultural commodity prices and net farm income. Based on U.S. Department of Agriculture publications, the most recent estimate of net farm income for calendar year 2019 indicated an approximate 11.0% increase as compared to calendar year 2018, and an approximate 3.3% increase in net farm income for calendar year 2020, as compared to calendar year 2019.
For the first quarter of fiscal 2021, our net income was $2.3 million, or $0.10 per diluted share, compared to a fiscal 2020 first quarter loss of $0.4 million, or $0.02 per diluted share. Our adjusted diluted earnings per share was $0.15 for the first quarter of fiscal 2021, compared to $0.02 for the first quarter of fiscal 2020. See the Non-GAAP Financial Measures section below for a reconciliation of adjusted diluted earnings per share to diluted earnings per share, the most comparable GAAP financial measure. Significant factors impacting the quarterly comparisons were:
Revenue in the first quarter of fiscal 2021 was 11.5% higher than the first quarter of fiscal 2020. Increased revenue from equipment, parts and service was offset by slightly lower rental and other revenue. The higher revenue was driven by increased equipment, parts and service revenue in our Agriculture segment. Some of the increase in the Agriculture segment came from our Northwood location, which was purchased in October 2019.
Gross profit margin in the first quarter of fiscal 2021 declined to 18.8%, compared to 19.4% for the first quarter of fiscal 2020. The decline in gross profit margin was primarily the result of lower equipment margins and a change in our revenue mix with more revenue generated by our equipment business than our higher margin parts and service businesses in the first quarter of fiscal 2021, as compared to the first quarter last year.
Floorplan and other interest expense decreased a combined 15.9% in the first quarter of fiscal 2021, as compared to the first quarter last year, primarily due the repayment in full of our senior convertible notes in the second quarter of fiscal 2020.
Impact of the COVID-19 Pandemic on the Company
In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, and the President of the United States declared the COVID-19 outbreak as a national emergency. The nature of COVID-19 led to worldwide shutdowns and halting of commercial and interpersonal activity as governments imposed regulations in efforts to control the spread of the pandemic, such as shelter-in-place orders and quarantines. The pandemic is a highly fluid and rapidly evolving situation, and we cannot anticipate with any certainty the length, scope, or severity of such restrictions in each of the markets that we operate. See Item 1A. Risk Factors for more information on possible impacts.
Since the beginning of the COVID-19 pandemic, the safety of our employees and customers has been and continues to be our top concern. At the onset of the pandemic we organized a COVID Task Force to implement safety protocols and to quickly respond to matters, in the event of a positive case at one of our locations.
Even though we are considered an essential business, in response to the COVID-19 pandemic, the company closed its U.S. stores to the public on March 23, 2020 but continued operations through social distancing means in all areas: equipment, parts, service and rental. Beginning May 4, 2020, we began fully reopening our stores to the public, following pandemic safety protocols applicable to the locations. Additionally, our International stores have also been following pandemic safety protocols applicable to each location.
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We believe that each of our business segments will be impacted by the pandemic to varying degrees, although the actual impact will be subject to many variables and uncertainties which are currently unknown and outside of our control.
Agriculture
Overall, COVID-19 has created industry challenges such as lower agriculture commodity prices as demand deterioration and supply chain disruptions are affecting areas such as ethanol, livestock and international trade. We believe that the existing and anticipated lower commodity prices will reduce our equipment sales, but it is difficult to estimate the extent and timing of this impact given all the variables and uncertainties. We believe our parts and service business will be less impacted, as our customers will be experiencing similar levels of wear and tear on their equipment. Also offsetting some of the challenges in the agriculture industry, will be government support programs for our farm customers, such as the recently announced $16 billion Coronavirus Food Assistance Program (CFAP).
Construction
We believe all revenue categories of equipment, parts, service and rental will be impacted in this segment, with such effects continuing so long as pandemic related macroeconomic stress and uncertainties persist. Examples of such macroeconomic stress include: lower oil prices, higher unemployment, lower GDP, and reduced government spending on infrastructure projects. All of these factors we believe will lead to lower overall U.S. construction spending.
International
In addition to the industry challenges indicated for our Agriculture Segment, International is also being impacted by border shutdowns, timing of equipment shipments and more stringent in-country pandemic regulations. We believe all revenue categories in this segment will experience greater negative impacts than our Agriculture Segment because of these additional challenges along with the general lack of government support programs to our International farm customers.
Acquisitions
Fiscal 2020
        On October 1, 2019, we acquired certain assets of Uglem-Ness Co., a single Case IH agriculture equipment store in Northwood, North Dakota. The acquisition continues our strategy of acquiring dealerships in agriculture markets contiguous to our current North American agriculture stores. The service area of Uglem-Ness is contiguous to our existing locations in Grand Forks and Casselton, North Dakota and Ada, Minnesota. The total consideration paid in the acquisition was $10.9 million, which the Company financed through available cash resources and capacity under our existing floorplan payable and other credit facilities. The Northwood, ND dealership is included within our Agriculture segment.
ERP Transition
The Company is in the process of converting to a new Enterprise Resource Planning ("ERP") application. The new ERP application is expected to provide data-driven and mobile-enabled sales and support tools to improve employee efficiency and deliver an enhanced customer experience. The Company currently anticipates a pilot store to be on the new ERP system in the second quarter of the current fiscal year and all stores to be on the new ERP application in the first half of the fiscal year ending January 31, 2022. We have prospectively adjusted the useful life of our current ERP application such that it will be fully amortized upon its estimated replacement date.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are included in the Management's Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the fiscal year ended January 31, 2020. Other than the adoption of the accounting standard for current expected credit loss and the standard for cloud computing described in Note 1 to our consolidated financial statements in this Quarterly Report on Form 10-Q, there have been no changes in our critical accounting policies since January 31, 2020.
Results of Operations
The results presented below include the operating results of any acquisition made during these periods as well as the operating results of any stores closed during these periods, up to the date of the store closure. The period-to-period comparisons included below are not necessarily indicative of future results. Segment information is provided later in the discussion and analysis of our results of operations.
Same-store sales for any period represent sales by stores that were part of the Company for the entire comparable period in the current and preceding fiscal years. We do not distinguish between relocated or recently expanded stores in this
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same-store analysis. Closed stores are excluded from the same-store analysis. Stores that do not meet the criteria for same-store classification are described as excluded stores throughout the Results of Operations section in this Quarterly Report on Form 10-Q.
Comparative financial data for each of our four sources of revenue are expressed below.
  Three Months Ended April 30,
  2020 2019
  (dollars in thousands)
Equipment    
Revenue $ 218,505    $ 193,956   
Cost of revenue 197,046    173,154   
Gross profit $ 21,459    $ 20,802   
Gross profit margin 9.8  % 10.7  %
Parts
Revenue $ 56,614    $ 51,938   
Cost of revenue 39,617    36,814   
Gross profit $ 16,997    $ 15,124   
Gross profit margin 30.0  % 29.1  %
Service
Revenue $ 25,600    $ 22,831   
Cost of revenue 8,345    7,483   
Gross profit $ 17,255    $ 15,348   
Gross profit margin 67.4  % 67.2  %
Rental and other
Revenue $ 9,489    $ 9,567   
Cost of revenue 6,790    6,941   
Gross profit $ 2,699    $ 2,626   
Gross profit margin 28.4  % 27.4  %
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The following table sets forth our statements of operations data expressed as a percentage of total revenue for the periods indicated:
  Three Months Ended April 30,
  2020 2019
Revenue    
Equipment 70.4  % 69.7  %
Parts 18.3  % 18.7  %
Service 8.3  % 8.2  %
Rental and other 3.1  % 3.4  %
Total Revenue 100.0  % 100.0  %
Total Cost of Revenue 81.2  % 80.6  %
Gross Profit Margin 18.8  % 19.4  %
Operating Expenses 17.1  % 18.9  %
Impairment of Intangible and Long-Lived Assets 0.1  % —  %
Restructuring Costs —  % —  %
Income from Operations 1.7  % 0.4  %
Other Income (Expense) (0.6) % (0.6) %
Income Before Income Taxes 1.0  % (0.2) %
Provision for Income Taxes 0.3  % —  %
Net Income 0.7  % (0.2) %

Three Months Ended April 30, 2020 Compared to Three Months Ended April 30, 2019
Consolidated Results
Revenue
  Three Months Ended April 30, Increase/ Percent
  2020 2019 (Decrease) Change
  (dollars in thousands)  
Equipment $ 218,505    $ 193,956    $ 24,549    12.7  %
Parts 56,614    51,938    4,676    9.0  %
Service 25,600    22,831    2,769    12.1  %
Rental and other 9,489    9,567    (78)   (0.8) %
Total Revenue $ 310,208    $