Table of Contents 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, 2019 Commission File No. 001-33866 TITAN MACHINERY INC. (Exact name of registrant as specified in its charter) (State or Other Jurisdiction of Incorporation or Organization) Delaware No. 45-0357838 (IRS Employer Identification No.) 644 East Beaton Drive West Fargo, ND 58078-2648 (Addr ...

PART I [Business](index=3&type=section&id=Item%201.%20Business) Titan Machinery operates agricultural and construction equipment dealerships in the U.S. and Europe, generating revenue from equipment, parts, services, and rentals - The company operates through three reportable segments: Agriculture, Construction, and International, with a network of **74 stores in the U.S.** and **30 in Europe**[12](index=12&type=chunk)[13](index=13&type=chunk) Revenue Sources for Fiscal Year 2019 | Revenue Source | FY2019 % of Total Revenue | | :--- | :--- | | Equipment Sales | 72.1% | | Parts Sales | 16.7% | | Repair & Maintenance Services | 6.9% | | Rental & Other | 4.3% | - Titan Machinery is heavily reliant on CNH Industrial, which supplied approximately **72% of new equipment** sold across all segments in fiscal 2019[38](index=38&type=chunk) - The company's growth strategy involves increasing same-store sales and pursuing strategic acquisitions to consolidate the fragmented dealership market[34](index=34&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) Key risks include heavy reliance on CNH Industrial, cyclical market demand, international operational challenges, high debt levels, and intense competition - A majority of the business depends on CNH Industrial for equipment, parts, financing, and marketing support, with adverse changes posing severe harm to Titan Machinery[75](index=75&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk) - Sales are affected by market factors beyond the company's control, including cyclical demand in agriculture tied to net farm income and in construction tied to economic conditions and commodity prices[84](index=84&type=chunk)[85](index=85&type=chunk) - International operations, accounting for **18.4% of FY2019 revenue**, expose the company to risks like currency fluctuations, political instability, and diverse legal environments[95](index=95&type=chunk)[96](index=96&type=chunk) - The company's indebtedness, including floorplan financing and Senior Convertible Notes, could limit financial flexibility, with restrictive covenants potentially leading to debt acceleration upon breach[99](index=99&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) - Effective inventory management is critical, as equipment inventory represents over **50% of total assets**, with over-supply or inaccurate valuation negatively impacting margins and profitability[91](index=91&type=chunk)[93](index=93&type=chunk) [Unresolved Staff Comments](index=23&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - None[121](index=121&type=chunk) [Properties](index=23&type=section&id=Item%202.%20Properties) As of January 31, 2019, the company operates 104 equipment stores, predominantly leased, with its corporate headquarters also under lease Store Count by Segment as of January 31, 2019 | Segment | U.S. Stores | European Stores | Total Stores | | :--- | :--- | :--- | :--- | | Agriculture | 48 | 0 | 48 | | Construction | 26 | 0 | 26 | | International | 0 | 30 | 30 | | **Total** | **74** | **30** | **104** | - The company leases **120 facilities** with various expiration dates through January 2031, including its corporate headquarters in West Fargo, ND[124](index=124&type=chunk)[127](index=127&type=chunk) [Legal Proceedings](index=24&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ordinary course legal claims, generally covered by insurance and not expected to materially impact financial results - The company is involved in ordinary course legal claims and suits, which are generally covered by insurance and are not expected to have a material impact[128](index=128&type=chunk) [Mine Safety Disclosures](index=24&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not applicable[129](index=129&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=26&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Common stock trades on NASDAQ under "TITN"; no dividends paid or anticipated, with performance compared to market indices - The company's common stock is traded on the NASDAQ under the symbol **"TITN"**[136](index=136&type=chunk) - The company has not paid dividends and does not expect to in the foreseeable future, prioritizing expansion and debt service[137](index=137&type=chunk) Stock Performance Comparison (Value of $100 Investment) | Date | Titan Machinery Inc. | Russell 2000 Index | S&P 500 Retail Index | | :--- | :--- | :--- | :--- | | Jan 31, 2014 | $100.00 | $100.00 | $100.00 | | Jan 31, 2015 | $86.69 | $103.05 | $118.75 | | Jan 31, 2016 | $52.09 | $91.56 | $137.22 | | Jan 31, 2017 | $84.72 | $120.42 | $160.31 | | Jan 31, 2018 | $131.84 | $139.27 | $230.59 | | Jan 31, 2019 | $114.97 | $132.95 | $241.71 | [Selected Financial Data](index=28&type=section&id=Item%206.%20Selected%20Financial%20Data) Five-year financial summary shows FY2019 return to profitability with **$1.26 billion** revenue and **$12.2 million** net income, alongside store count changes Five-Year Selected Statement of Operations Data (in thousands, except per share data) | Metric | FY 2019 | FY 2018 | FY 2017 | FY 2016 | FY 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $1,261,505 | $1,192,606 | $1,201,697 | $1,355,792 | $1,882,430 | | Gross Profit | $231,588 | $215,300 | $213,729 | $205,914 | $308,384 | | Income (Loss) from Operations | $27,481 | $925 | $(2,372) | $(23,110) | $723 | | Net Income (Loss) | $12,182 | $(7,049) | $(14,179) | $(37,892) | $(32,157) | | Diluted EPS | $0.55 | $(0.32) | $(0.65) | $(1.76) | $(1.51) | Five-Year Selected Balance Sheet Data (in thousands) | Metric | Jan 31, 2019 | Jan 31, 2018 | Jan 31, 2017 | Jan 31, 2016 | Jan 31, 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Assets | $792,438 | $760,308 | $771,422 | $1,047,875 | $1,325,614 | | Total Liabilities | $457,127 | $438,453 | $450,243 | $709,526 | $947,255 | | Total Stockholders' Equity | $335,311 | $321,855 | $321,179 | $338,349 | $378,359 | - The company's store count ended fiscal 2019 at **104**, a net increase of **7 stores** during the year, following a net decrease of **12 stores** in fiscal 2018[146](index=146&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses FY2019 financial performance, noting a **5.8% revenue increase** to **$1.26 billion** and a return to **$12.2 million** net income, supported by cost controls and sufficient liquidity [Results of Operations](index=41&type=section&id=Results%20of%20Operations) FY2019 saw a **5.8% revenue increase** to **$1.26 billion** and a return to **$12.2 million** net income, driven by equipment sales and improved margins Consolidated Revenue by Source (FY2019 vs. FY2018) | Revenue Source | FY 2019 (in thousands) | FY 2018 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Equipment | $909,178 | $844,768 | 7.6% | | Parts | $210,796 | $203,231 | 3.7% | | Service | $86,840 | $88,794 | (2.2)% | | Rental and other | $54,691 | $55,813 | (2.0)% | | **Total Revenue** | **$1,261,505** | **$1,192,606** | **5.8%** | Segment Income (Loss) Before Income Taxes (FY2019 vs. FY2018) | Segment | FY 2019 (in thousands) | FY 2018 (in thousands) | | :--- | :--- | | Agriculture | $16,799 | $(3,678) | | Construction | $(4,400) | $(7,278) | | International | $5,160 | $2,205 | | **Total Segment Income (Loss)** | **$17,559** | **$(8,751)** | - The improvement in FY2019 results was driven by higher equipment gross profit margins, increased sales volume, operating expense savings from the Fiscal 2018 Restructuring Plan, and lower interest expense[209](index=209&type=chunk)[211](index=211&type=chunk)[219](index=219&type=chunk) - In FY2018, the company implemented a restructuring plan, closing **15 stores**, which led to **$10.5 million** in restructuring costs but resulted in decreased operating expenses compared to FY2017[168](index=168&type=chunk)[230](index=230&type=chunk) [Liquidity and Capital Resources](index=55&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is sufficient from operations and credit facilities, with **$640.0 million** in floorplan lines and **$45.6 million** Senior Convertible Notes maturing in May 2019 - Primary liquidity sources are cash from operations and borrowings under floorplan payable and other credit facilities[253](index=253&type=chunk) - As of January 31, 2019, the company had total floorplan payable lines of credit of **$640.0 million**, including a **$400.0 million** facility with CNH Industrial Capital and a **$140.0 million** line with Wells Fargo[255](index=255&type=chunk) - The remaining **$45.6 million** principal balance of the Senior Convertible Notes matures on May 1, 2019, with sufficient liquidity expected to satisfy this obligation[258](index=258&type=chunk) Contractual Obligations as of January 31, 2019 (in thousands) | Obligation Type | Total | Less Than 1 Year | 1 to 3 Years | 3 to 5 Years | More Than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term debt | $44,782 | $6,211 | $11,427 | $8,070 | $19,074 | | Senior convertible notes | $46,065 | $46,065 | $— | $— | $— | | Operating lease | $158,566 | $20,117 | $36,780 | $33,260 | $68,409 | | Purchase obligations | $5,317 | $1,849 | $2,941 | $527 | $— | | **Total** | **$254,730** | **$74,242** | **$51,148** | **$41,857** | **$87,483** | [Quantitative and Qualitative Disclosures About Market Risk](index=62&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rate fluctuations, potentially impacting pre-tax earnings by **$1.2 million** for a 1% rate increase, and foreign currency exposure - The company is exposed to interest rate risk on its variable rate debt, where a **1% increase** in interest rates would decrease pre-tax earnings by approximately **$1.2 million**[291](index=291&type=chunk) - Foreign currency exchange rate risk exists due to European operations, encompassing transactional risk from foreign-denominated assets/liabilities and translational risk from converting financial statements to U.S. dollars[292](index=292&type=chunk)[293](index=293&type=chunk) [Financial Statements and Supplementary Data](index=63&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for FY2019-FY2017, including balance sheets, operations, and cash flows, with FY2019 reporting **$792.4 million** total assets and **$1.26 billion** revenue Consolidated Balance Sheet Highlights (in thousands) | Account | Jan 31, 2019 | Jan 31, 2018 | | :--- | :--- | | Total Current Assets | $640,892 | $599,146 | | Total Assets | $792,438 | $760,308 | | Total Current Liabilities | $420,452 | $328,289 | | Total Liabilities | $457,127 | $438,453 | | Total Stockholders' Equity | $335,311 | $321,855 | Consolidated Statement of Operations Highlights (in thousands) | Account | FY 2019 | FY 2018 | FY 2017 | | :--- | :--- | :--- | :--- | | Total Revenue | $1,261,505 | $1,192,606 | $1,201,697 | | Gross Profit | $231,588 | $215,300 | $213,729 | | Income (Loss) from Operations | $27,481 | $925 | $(2,372) | | Net Income (Loss) | $12,182 | $(7,049) | $(14,179) | Consolidated Statement of Cash Flows Highlights (in thousands) | Account | FY 2019 | FY 2018 | FY 2017 | | :--- | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $46,605 | $95,812 | $140,997 | | Net Cash Used for Investing Activities | $(25,832) | $(24,589) | $(9,125) | | Net Cash Used for Financing Activities | $(16,727) | $(71,466) | $(167,976) | | Net Change in Cash | $3,349 | $245 | $(36,314) | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=128&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure - None[551](index=551&type=chunk) [Controls and Procedures](index=128&type=section&id=Item%209A.%20Controls%20and%20Procedures) As of January 31, 2019, management, including the CEO and CFO, concluded that disclosure controls and internal control over financial reporting were effective - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of January 31, 2019[552](index=552&type=chunk) - Management concluded that internal control over financial reporting was effective as of January 31, 2019, based on the COSO framework[553](index=553&type=chunk) [Other Information](index=128&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[556](index=556&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=128&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2019 Annual Meeting of Stockholders proxy statement - Information required by this item is incorporated by reference from the registrant's 2019 Annual Meeting of Stockholders proxy statement[558](index=558&type=chunk) [Executive Compensation](index=128&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive compensation is incorporated by reference from the 2019 Annual Meeting of Stockholders proxy statement - Information required by this item is incorporated by reference from the registrant's 2019 Annual Meeting of Stockholders proxy statement[559](index=559&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=128&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership and related stockholder matters is incorporated by reference from the 2019 Annual Meeting of Stockholders proxy statement - Information required by this item is incorporated by reference from the registrant's 2019 Annual Meeting of Stockholders proxy statement[560](index=560&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=129&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2019 Annual Meeting of Stockholders proxy statement - Information required by this item is incorporated by reference from the registrant's 2019 Annual Meeting of Stockholders proxy statement[561](index=561&type=chunk) [Principal Accounting Fees and Services](index=129&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information on principal accounting fees and services is incorporated by reference from the 2019 Annual Meeting of Stockholders proxy statement - Information required by this item is incorporated by reference from the registrant's 2019 Annual Meeting of Stockholders proxy statement[562](index=562&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=129&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed as part of the Form 10-K report - This item lists all financial statements, schedules (such as Schedule II—Valuation and Qualifying Accounts), and exhibits filed with the annual report[564](index=564&type=chunk)[565](index=565&type=chunk) [Form 10-K Summary](index=135&type=section&id=Item%2016.%20Form%2010-K%20Summary) This section is not applicable - Not applicable[573](index=573&type=chunk)