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What changed in Titan Machinery Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Titan Machinery Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+352 added−333 removedSource: 10-K (2024-04-03) vs 10-K (2023-03-30)

Top changes in Titan Machinery Inc.'s 2024 10-K

352 paragraphs added · 333 removed · 272 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

106 edited+24 added−14 removed46 unchanged
Biggest changeIf Titan acquires a Case IH full-line dealer within any of the territories in which Titan then possesses the Non-Footprint Commercial Application Distribution Rights, as part of its approval process, Case IH may require Titan to pay an agreed upon amount for the inclusion of the commercial application sprayer distribution rights in the new dealer agreement for the acquired location.
Biggest changeIf we acquire a Case IH full-line dealer location within any of the territories for which we then possess the Non-Footprint Commercial Application Distribution Rights, as part of its approval process, Case IH may require Titan to pay an agreed upon amount for the inclusion of the commercial application sprayer distribution rights in the new dealer agreement for the acquired location. 6 Table of Contents CNH Industrial has the right to terminate its dealer agreements with us immediately in certain circumstances, including in the event of (i) our insolvency or bankruptcy, (ii) a material breach by us of the provisions of a CNH Industrial Dealer Agreement or (iii) our failure to secure the consent of CNH Industrial prior to the occurrence of a “change in control” event.
We service our fleet through our on-site parts and services team and market our rental equipment through our retail sales force. Our rental activities create cross-selling opportunities in equipment sales, including rent-to-own purchase options on our non-fleet rentals.
We service our rental fleet through our on-site parts and services team and market our rental equipment through our retail sales force. Our rental activities create cross-selling opportunities in equipment sales, including rent-to-own purchase options on our non-fleet rentals.
Parts Managers and Service Managers Our parts sales managers and service managers at our stores are involved in our efforts to market our parts and service offerings, taking advantage of our seasonal marketing campaigns in parts and service sales.
Parts Sales Managers and Service Managers Our parts sales managers and service managers at our stores are involved in our efforts to market our parts and service offerings, taking advantage of our seasonal marketing campaigns in parts and service sales.
The Comprehensive Environmental Response, Compensation and Liability Act and similar state statutes, can impose strict and joint and several liability for cleanup costs on those that are considered to have contributed to the release of a "hazardous substance." We also are subject to the Clean Water Act, analogous state statutes, and their implementing regulations which, among other things, prohibit discharges of pollutants into regulated waters without permits, require containment of potential discharges of oil or hazardous substances, and require preparation of spill contingency plans.
The federal Comprehensive Environmental Response, Compensation and Liability Act and similar state statutes, can impose strict and joint and several liability for cleanup costs on those that are considered to have contributed to the release of a "hazardous substance." We also are subject to the federal Clean Water Act, analogous state statutes, and their implementing regulations which, among other things, prohibit discharges of pollutants into regulated waters without permits, require containment of potential discharges of oil or hazardous substances, and require preparation of spill contingency plans.
CNH Industrial Capital charges variable market rates of interest based on the prime rate on balances outstanding after any interest-free periods and receives a security interest in inventory and other assets. Interest-free periods are generally about four months in duration for both new and used agriculture and construction equipment.
CNH Industrial Capital charges variable market rates of interest based on the prime rate on balances outstanding after any interest-free periods and receives a security interest in inventory and other assets. Interest-free periods are generally four months in duration for both new and used agriculture and construction equipment.
Equipment Rental and Other Business Activities We rent equipment to our customers, primarily in the Construction segment, for periods ranging from a few days to seasonal rentals. We actively manage the size, quality, age and composition of our rental fleet and closely monitor and analyze customer demand and rate trends.
Equipment Rental and Other Business Activities We rent equipment to our customers, primarily in the Construction segment, for periods ranging from a few days to seasonal rentals. We manage the size, quality, age and composition of our rental fleet and closely monitor and analyze customer demand and rate trends.
ITEM 1. BUSINESS Our Company Titan Machinery Inc. and its subsidiaries (collectively, "Titan Machinery," the "Company," "we," or "our") own and operate a network of full service agricultural and construction equipment stores in the United States and Europe.
ITEM 1. BUSINESS Our Company Titan Machinery Inc. and its subsidiaries (collectively, "Titan Machinery," the "Company," "we," or "our") own and operate a network of full service agricultural and construction equipment stores in the United States, Europe and Australia.
We make available, free of charge, copies of our annual report on Form 10-K (the "Form 10-K"), quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, on our website, www.titanmachinery.com , as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the Securities and Exchange Commission ("SEC").
We make available, free of charge, copies of our annual report on Form 10-K (the "Form 10-K"), quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on our website, www.titanmachinery.com, as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the Securities and Exchange Commission ("SEC").
Our Agriculture stores in the U.S. are located in Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota, Washington, Wisconsin, and Wyoming and include several highly productive farming regions, such as the Red River Valley in eastern North Dakota and northwestern Minnesota, portions of the corn belt in Iowa, eastern South Dakota and southern Minnesota, along the I-80 corridor in Nebraska, which sits on top of the Ogallala Aquifer, and the Snake River Valley in eastern Idaho.
Our Agriculture stores in the U.S. are located in Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota, Washington, Wisconsin, and Wyoming and include several highly productive farming regions, such as the Red River Valley in eastern North Dakota and northwestern Minnesota, portions of the corn belt in Iowa, eastern South Dakota and southern Minnesota, the I-80 corridor region in Nebraska, which sits on top of the Ogallala Aquifer, and the Snake River Valley in eastern Idaho.
While we believe we compete favorably on each of these competitive factors, our sales and margins may be impacted by (i) aggressive pricing competition by equipment manufacturers or their dealers, (ii) our ability to obtain higher service margins based on our service quality and reputation, and (iii) our ability to attract new and maintain existing customers based on the availability and quality of the products we offer and our local relationships and reputation.
While we believe we compete favorably on each of these competitive factors, our sales and margins may be impacted by (i) aggressive pricing competition by equipment manufacturers or their dealers, (ii) our ability to obtain higher service margins based on our service quality and reputation, and (iii) our ability to attract new and retain existing customers based on the availability and quality of the products we offer and our local relationships and reputation.
We are one of the established regional-scale agricultural and construction equipment dealers in the United States and Europe. The number of other agricultural and construction equipment dealers operating on a regional scale is limited.
We are one of the established regional-scale agricultural and construction equipment dealers in the United States. The number of other agricultural and construction equipment dealers operating on a regional scale is limited.
Other sales and financing programs are also marketed through our website. Customers can view construction rental equipment rates and specifications on the website and submit rental requests by completing a simple form. All external job openings are listed as well as detailed information about our internship program, tech school sponsorships and other student programs.
Other sales and financing programs are also marketed through our website. Customers can view construction rental equipment rates and specifications on the website and submit rental requests by completing a simple form. All external job openings are listed as well as detailed information about our apprenticeship and internship programs, tech school sponsorships and other student programs.
In that regard, we believe that it is in each company's interest to maintain and develop the longstanding strong relationship we share. Dealership Agreements We have entered into separate dealership agreements with CNH Industrial to sell and service the Case IH Agriculture, New Holland Agriculture, Case Construction and New Holland Construction brands (collectively the “CNH Industrial Dealer Agreements”).
In that regard, we believe that it is in each company’s interest to maintain and develop the longstanding strong relationship we share. Dealership Agreements We have separate dealership agreements with CNH Industrial to sell and service the Case IH Agriculture, New Holland Agriculture, Case Construction and New Holland Construction brands (collectively the “CNH Industrial Dealer Agreements”).
Seasonality & Weather The agricultural and construction equipment businesses are highly seasonal, which causes our quarterly results and our cash flow to fluctuate during the year. Our customers generally purchase and rent equipment in preparation for, or in conjunction with, their busy seasons. For farmers, the busy seasons are spring planting and fall harvesting.
Seasonality & Weather The agricultural and construction equipment businesses are highly seasonal, which causes our quarterly results and our cash flow to fluctuate during the year. Our customers generally purchase and rent equipment in preparation for, or in conjunction with, their busy seasons. For farmers, the busy seasons are the planting and harvesting seasons.
We must obtain the approval or consent of CNH Industrial in the event of proposed fundamental changes to our ownership, governance or business structure (defined as "change in control" events) including, among other things, (i) a merger, consolidation or reorganization, unless securities representing more than 50% of the total combined voting power of the successor corporation are immediately owned, directly or indirectly, by persons that owned our securities prior to the transaction; (ii) a sale of all or substantially all of our assets; (iii) any transaction or series of transactions resulting in a person or affiliated group acquiring 30% or more of the combined voting power of our securities or, in the case of a competitor of CNH Industrial, acquiring 20% or more of the combined voting power of our securities; (iv) a substantial disposition of shares of our common stock by certain named executives; (v) certain significant changes in the composition of our Board of Directors; and (vi) replacement of our Chief Executive Officer.
We must obtain the approval or consent of CNH Industrial in the event of proposed fundamental changes to our ownership, governance or business structure (defined as “change in control” events) including, among other things, (i) a merger, consolidation or reorganization, unless securities representing more than 50% of the total combined voting power of the successor corporation are immediately owned, directly or indirectly, by persons that owned our securities prior to the transaction; (ii) a sale of all or substantially all of our assets; (iii) any transaction or series of transactions resulting in a person or affiliated group acquiring 30% or more of the combined voting power of our securities or, in the case of a competitor of CNH Industrial, acquiring 20% or more of the combined voting power of our securities; (iv) a substantial disposition of shares of our common stock by certain named executives; (v) certain significant changes in the composition of our Board of Directors (the “Board”); and (vi) replacement of our Chief Executive Officer.
Competition among equipment dealers, whether they offer agricultural or construction products or both, is primarily based on the price, value, reputation, quality and design of the products, technology, customer service including repair and maintenance service provided by the dealer, the availability of equipment and parts, and the accessibility of stores.
Competition among equipment dealers, whether they offer agricultural or construction products or both, is primarily based on the price, value, reputation, quality and design of the products, technology, customer service including repair and maintenance service provided by the dealer, the availability of equipment and parts, and the proximity of stores.
In addition, CNH Industrial provides financing and insurance products and services to our end-user customers through its affiliate CNH Industrial Capital America, LLC ("CNH Industrial Capital"). Our relationship with CNH Industrial is more than a typical supply relationship; it is strategic for both our Company and CNH Industrial.
In addition, CNH Industrial provides financing and insurance products and services to our end-user customers through its affiliate CNH Industrial Capital America, LLC (“CNH Industrial Capital”). Our relationship with CNH Industrial is more than a typical supply relationship; it is strategic for both our Company and CNH Industrial.
Equipment Sales Consultants and Centralized Support Our equipment sales employees (who we refer to as "equipment sales consultants") perform a variety of functions, such as servicing customers at our stores, calling on existing customers, and soliciting new business at farming, construction and industrial sites.
Equipment Sales Consultants and Centralized Support Our equipment sales employees (who we refer to as “equipment sales consultants”) perform a variety of functions, such as servicing customers at our stores, calling on existing customers, and soliciting new business at farming, construction and industrial sites.
Finally, our website provides dealer locator search functions and provides the contact information for the various departments at each of our stores. Print, Broadcast and Web-Based Advertising Campaigns Each year we initiate several targeted direct mail, print and broadcast advertising and marketing campaigns.
Finally, our website provides dealer locator search functions and contact information for the various departments at each of our stores. Print, Broadcast and Web-Based Advertising Campaigns Each year we initiate numerous targeted direct mail, print and broadcast advertising and marketing campaigns.
We are not including the information on our website as a part of, or incorporating it by reference into, this Form 10-K.Our SEC filings are also available at www.sec.gov. Intellectual Property We have registered trademarks for certain names and designs used in our business and have trademark applications pending for certain others.
We are not including the information on our website as a part of, or incorporating it by reference into, this Form 10-K.Our SEC filings are also available at www.sec.gov. 9 Table of Contents Intellectual Property We have registered trademarks for certain names and designs used in our business and have trademark applications pending for certain others.
We ensure that safety performance data is tracked, aggregated, and reviewed on an ongoing basis across our organization. Our corporate safety team collects data on recordable injury rates, serious injury rates, and near misses from each of our facilities, and engages in a root cause analysis and identifies corrective action to prevent future occurrences.
We ensure that safety performance data is tracked, aggregated, and reviewed on an ongoing basis across our organization. Our risk/management team collects data on recordable injury rates, serious injury rates, and near misses from each of our facilities, and engages in a root cause analysis and identifies corrective action to prevent future occurrences.
We have built a large amount of content related to the equipment we sell and service, the technology used by our customers in conjunction with the equipment, and information about our Company and what we have to offer prospective employees. Used equipment inventories are one of the most highly trafficked sections of our website, www.titanmachinery.com .
We have built a large amount of content related to the equipment we sell and service, the technology used by our customers in conjunction with the equipment, and information about our Company and what we have to offer prospective employees. Used equipment inventories are one of the most highly trafficked sections of our website.
Employee Recruitment We strive to attract the best talent from a variety of sources to meet the current and future needs of our business. We have established relationships with multiple high schools, trade schools and colleges across our footprint, which we utilize as a source for entry-level talent.
Employee Recruitment and Inclusion We strive to attract the best talent from a variety of sources to meet the current and future needs of our business. We have established relationships with many high schools, trade schools and colleges across our footprint, which we utilize as a source for entry-level talent.
The CNH Industrial Dealer Agreements impose 5 Table of Conten ts various dealer standards on us regarding the location and appearance of facilities, satisfactory levels of new equipment and parts inventories, the training of personnel, adequate business enterprise and information technology systems, adequate working capital, a maximum adjusted debt to tangible net worth ratio, development of annual sales and marketing goals, and furnishing of monthly and annual financial information to CNH Industrial.
The CNH Industrial Dealer Agreements impose various dealer standards on us regarding the location and appearance of facilities, satisfactory levels of new equipment and parts inventories, the training of personnel, adequate business enterprise and information technology systems, adequate working capital, a maximum adjusted debt to tangible net worth ratio, development of annual sales and marketing goals, and furnishing of monthly and annual financial information to CNH Industrial.
Strategic Acquisitions Since January 1, 2003, we have completed over 55 acquisitions located in 15 U.S. states and four European countries. In addition, we have added dealership locations in Ukraine through new start-up operations. The agricultural and construction equipment dealership industries are fragmented and consist of many relatively small, independent businesses serving discrete local markets.
Strategic Acquisitions Since January 1, 2003, we have completed over 60 acquisitions located in 15 U.S. states, four European countries and three Australian states. In addition, we have added dealership locations in Ukraine through new start-up operations. The agricultural and construction equipment dealership industries are fragmented and consist of many relatively small, independent businesses serving discrete local markets.
We provide ancillary equipment support activities such as equipment transportation, Global Positioning System ("GPS") signal subscriptions and other precision farming products, farm data management products, and CNH Industrial finance and insurance products. Equipment rental and other revenue represented 1.8%, 2.2% and 3.1% of total revenue for the fiscal years ended January 31, 2023, 2022 and 2021.
We provide ancillary equipment support activities such as equipment transportation, Global Positioning System ("GPS") signal subscriptions and other precision farming products, farm data management products, and CNH Industrial finance and insurance products. Equipment rental and other revenue represented 1.6%, 1.8% and 2.2% of total revenue for the fiscal years ended January 31, 2024, 2023 and 2022.
Customers Our North America agriculture customers vary from small, single machine owners to large farming operations to large commercial application operations, primarily in the states of Idaho, Iowa, Kansas, Missouri, Minnesota, Montana, Nebraska, North Dakota, South Dakota, Washington, Wisconsin, and Wyoming. In fiscal 2023, no single agriculture customer accounted for more than 1.0% of our Agriculture revenue.
Customers Our North America agriculture customers vary from small, single machine owners to large farming operations to large commercial application operations, primarily in the states of Idaho, Iowa, Kansas, Missouri, Minnesota, Montana, Nebraska, North Dakota, South Dakota, Washington, Wisconsin, and Wyoming. In fiscal 2024, no single agriculture customer accounted for more than 2.0% of our Agriculture revenue.
U.S federal legislation, such as the Farm Bill, attempts to stabilize the agriculture industry through various policies including (i) commodity programs consisting of direct, counter-cyclical and price support payments to farmers; (ii) conservation programs; (iii) crop insurance programs; and (iv) disaster relief programs.
U.S federal legislation, such as the 2018 Farm Bill and its subsequent extensions, attempts to stabilize the agriculture industry through various policies including (i) commodity programs consisting of direct, counter-cyclical and price support payments to farmers; (ii) conservation programs; (iii) crop insurance programs; and (iv) disaster relief programs.
Professional Centralized Marketing Systems Our centralized shared resource group includes a professional marketing team that supports all aspects of brand and solution awareness, customer analytics and targeting, and lead generation through multichannel campaigns that typically incorporate digital marketing (email, website, search, social and syndication), direct mail, and regional and local advertising and sponsorships.
Professional Centralized Marketing Systems Our centralized shared resource group based in our corporate headquarters includes a professional marketing team that supports all aspects of brand and solution awareness, customer analytics and targeting, and lead generation through multichannel campaigns that typically incorporate digital marketing (email, website, search, display, social and syndication), direct mail, and regional and local advertising and sponsorships.
We seek to generate growth in same-store sales and market share through the following: • employing significant marketing and advertising programs, including targeted direct mailings, internet based marketing, advertising with targeted local media outlets, participation in and sponsorship of trade shows and industry events, our Titan Trader semi-annual magazine, and by hosting open houses, service clinics, equipment demonstrations, product showcases and customer appreciation outings; • supporting and providing customers with training on evolving technologies, such as precision farming and farm data management, which can be difficult for small dealers to support; • maintaining state-of-the-art service facilities, mobile service trucks and trained service technicians to maximize our customers' equipment uptime through preventative maintenance programs and seasonal 24/7 service support; and • centrally managing our inventory to optimize the availability of equipment and parts for our customers.
We seek to generate growth in same-store sales and market share through the following: • employing significant marketing and advertising programs, including targeted direct mailings, Titan website efforts, internet based marketing, advertising with targeted local media outlets, participation in and sponsorship of trade shows and industry events, regular direct mail advertising, and by hosting open houses, service clinics, equipment demonstrations, product showcases and customer appreciation outings. • supporting and providing customers with training on evolving technologies, such as precision farming and farm data management, which can be difficult for small dealers to make available; 4 Table of Contents • maintaining state-of-the-art service facilities, mobile service trucks and trained service technicians to maximize our customers’ equipment uptime through preventative maintenance programs and seasonal 24/7 service support; and • centrally managing our inventory to optimize the availability of equipment and parts for our customers.
If we seek to sell our commercial sprayer application business or any portion thereof related to the Non-Footprint Commercial Application Distribution Rights prior to the expiration date of August 1, 2030 (or such later date as agreed to by the parties), then we are required to pay to CNH Industrial the sales consideration paid by such buyer for the applicable commercial application distribution rights; provided, that Titan will receive sales consideration from the buyer in an amount not less than the fair value of the facilities, fixed assets, current assets, and other investments applicable to the location and market being sold.
If we sell a portion of our commercial sprayer application business related to the Non-Full-Line Commercial Application Distribution Rights prior to the expiration date of August 1, 2030 (or such later date as agreed to by the parties), then we are required to pay to CNH Industrial the sales consideration paid by such buyer for the applicable commercial application distribution rights; provided that Titan would receive sales consideration from the buyer in an amount not less than the fair value of the facilities, fixed assets, current assets, and other investments applicable to the location and market being sold.
Our shared resources group provides centralized sales and marketing support for our field operations, and coordinates centralized media buys, strategic planning, sales support, training and files for available cooperative advertising reimbursement from our suppliers. In addition, we enable our regional and area managers and their sales teams to develop localized sales and marketing strategies.
Our shared resources group provides centralized sales and marketing support for our field operations, and coordinates centralized media buys, strategic planning, sales support, training, and manages advertising reimbursement opportunities from our suppliers. In addition, we enable our regional and area managers and their sales teams to develop localized sales and marketing strategies.
In addition to the CNH Industrial Capital floorplan line of credit, as of January 31, 2023, we also had a $185.0 million wholesale floorplan line of credit under the Bank Syndicate Agreement, and a $50.0 million credit facility with DLL Finance LLC that can be used to finance inventory purchases.
In addition to the CNH Industrial Capital floorplan line of credit, as of January 31, 2024, we also had a $275.0 million wholesale floorplan line of credit under the Bank Syndicate Agreement, and a $80.0 million credit facility with DLL Finance LLC that can be used to finance inventory purchases.
In addition to the CNH Industrial brands, we sell and service equipment made by a variety of other manufacturers.
In addition to the CNH Industrial brands, we sell and service equipment supplied by a variety of other manufacturers and distributors.
Our after-market repair and maintenance services have historically provided a high-margin, relatively stable source of revenue through changing economic cycles. Service revenue represented 5.9%, 6.8% and 7.6% of total revenue for the fiscal years ended January 31, 2023, 2022 and 2021.
Our aftermarket repair and maintenance services have historically provided a high-margin and stable source of revenue through changing economic cycles. Service revenue represented 5.7%, 5.9% and 6.8% of total revenue for the fiscal years ended January 31, 2024, 2023 and 2022.
We also partner with several technical colleges to offer scholarships and sponsor students who we plan to eventually employ as service technicians.
We partner with many technical colleges to offer scholarships and sponsor students who we plan to eventually employ as service technicians.
The Non-Footprint Commercial Application Distribution Rights expire on August 1, 2030, at which time these distribution rights are ceded back to Case IH, unless the term therefor is further extended by the parties.
The Non-Full-Line Commercial Application Distribution Rights expire on August 1, 2030, at which time these distribution rights are ceded back to Case IH, unless the term thereof is further extended by the parties.
CNH Industrial and industry reports show that demand for construction equipment in our markets is driven by several factors, including (i) public spending on roads, highways, sewer and water projects, and other public works projects; (ii) public and private expenditures for the energy industries, which are driven in part by demand for fossil fuels, metals and other commodities; (iii) business conditions in the agriculture industry; and (iv) general economic and market conditions of the construction sector for residential and commercial buildings.
CNH Industrial and industry reports show that demand for construction equipment in our markets is driven by several factors, including (i) public spending on roads, highways, sewer and water projects, and other public works projects; (ii) public and private expenditures for the energy, mining, and forestry industries; (iii) business conditions in the agriculture industry; and (iv) general economic and market conditions of the construction sector for residential and commercial buildings.
CNH Industrial can terminate these agreements immediately in certain circumstances constituting cause, and for any reason upon 24 months' prior written notice. Other Suppliers In addition to products supplied by CNH Industrial, we sell a variety of new equipment and parts supplied by other manufacturers.
CNH Industrial can terminate these agreements immediately in certain circumstances constituting cause, and for any reason upon 24 months’ prior written notice in Europe and consistent with franchise law notice requirements in Australia. Other Suppliers In addition to products supplied by CNH Industrial, we sell a variety of new equipment and parts supplied by other manufacturers.
Parts revenue represented 14.8%, 15.6% and 17.3% of total revenue for the fiscal years ended January 31, 2023, 2022 and 2021. Equipment Repair and Maintenance Services We provide repair and maintenance services, including warranty repairs, for our customers' equipment. All of our stores have service shops staffed by trained service technicians.
Parts revenue represented 14.9%, 14.8% and 15.6% of total revenue for the fiscal years ended January 31, 2024, 2023 and 2022. Equipment Repair and Maintenance Services We provide set-up and repair and maintenance services, including warranty repairs, for our customers' equipment. Our stores have service shops staffed by trained service technicians.
In fiscal 2023, no single construction equipment customer accounted for more than 2.0% of our Construction revenue. Our international customers vary from small, single machine owners to large farming operations, primarily in the European countries of Bulgaria, Germany, Romania, and Ukraine. We also sell Case construction equipment in Bulgaria and Romania.
In fiscal 2024, no single construction equipment customer accounted for more than 3.0% of our Construction revenue. 7 Table of Contents Our European customers vary from small, single machine owners to large farming operations, primarily in the countries of Bulgaria, Germany, Romania, and Ukraine. We also sell Case Construction equipment in Bulgaria and Romania.
Additionally, the consent of our lender group, consisting of a number of national and regional banks (the "Bank Syndicate"), is required for acquisitions meeting certain thresholds or other criteria as defined in our credit agreement.
Additionally, the consent of our lender group, consisting of a number of national and regional banks (the “Bank Syndicate”), is required for acquisitions over certain thresholds or other criteria as defined in our credit agreement.
We operate our business in three reportable segments, Agriculture, Construction and International, within which we engage in four principal business activities: • new and used equipment sales; • parts sales; • equipment repair and maintenance services; and • equipment rental and other activities.
We operate our business in four reportable segments, Agriculture, Construction, Europe (formerly known as "International"), and Australia, within which we engage in four principal business activities: • new and used equipment sales; • parts sales; • equipment repair and maintenance services; and • equipment rental and other activities.
Suppliers CNH Industrial—Case IH Agriculture, Case Construction, New Holland Agriculture and New Holland Construction CNH Industrial is a publicly-traded, global leader in the agricultural and construction equipment industries. In 2022, CNH Industrial generated $21.5 billion in revenue from its equipment operations.
Suppliers CNH Industrial—Case IH Agriculture, Case Construction, New Holland Agriculture and New Holland Construction CNH Industrial is a publicly-traded, global leader in the agricultural and construction equipment industries. In 2023, CNH Industrial generated $22.1 billion in revenue from its equipment operations.
We are paid by the OEM for repairs we perform on equipment under warranty. We generally sell used equipment "as is" and without OEM warranty unless the original warranty period has not expired and is transferable. We also offer extended warranty programs on certain used equipment through various third-party warranty providers.
We generally sell used equipment "as is" and without OEM warranty unless the original warranty period has not expired and is transferable. We also offer extended warranty programs on certain used equipment through various third-party warranty providers.
Approximately 27% of our total new equipment sales in fiscal 2023 resulted from sales of products manufactured by companies other than CNH Industrial, with our single largest manufacturer other than CNH Industrial representing approximately 4% of our total new equipment sales during fiscal 2023.
Approximately 29% of our total new equipment sales in fiscal 2024 resulted from sales of products manufactured by companies other than CNH Industrial, with our single largest manufacturer other than CNH Industrial representing approximately 3% of our total new equipment sales during fiscal 2024.
As of January 31, 2023, we had a $500.0 million floorplan credit facility with CNH Industrial Capital.
As of January 31, 2024, we had a $875.0 million floorplan credit facility with CNH Industrial Capital.
These efforts result in improved customer experience and reduced cost of ownership for our customers as well as securing a steady and reliable stream of aftermarket sales. Website Our website is the central hub for all our marketing campaigns.
We believe these efforts result in improved customer experience and reduced cost of ownership for our customers as well as securing a steady and reliable stream of aftermarket sales. 8 Table of Contents Website Our website, www.titanmachinery.com, is the central hub for all our marketing campaigns.
Commitment to Core Values and Ethical Culture In addition to our focus on performance, our employees are also guided by our corporate core values of: “Our People”, “Integrity”, “Excellence”, and “Teamwork.” We continue to promote these values from the top down.
Commitment to Core Values and Ethical Culture Our employees are guided by our corporate core values of: “Our People”, “Integrity”, “Excellence”, and “Teamwork.” We promote these values from the top down.
To date, we have not experienced any work stoppages as a result of labor disputes, and we consider our relationship with our employees to be good. Our employees are not covered by a collective bargaining agreement.
We do not regularly use independent contractors in our business operations. To date, we have not experienced any work stoppages as a result of labor disputes, and we consider our relationship with our employees to be good. Our employees are not covered by a collective bargaining agreement.
Separate CNH Industrial Dealer Agreements exist for each of our North American stores or store complexes, and for each of the European countries in which we operate. The structure of the North American and European agreements are very similar. Except as noted, the following discussion describes each of the North American CNH Industrial Dealer Agreements.
Separate CNH Industrial Dealer Agreements exist for each of our North American stores or store complexes, for each of the European countries in which we operate and for our Australian operations. The structure of the North American, European and Australian agreements are very similar.
We also believe our scale, customer service, diverse and stable customer base, centralized resources, and experienced management team provide us with a competitive advantage in many of our local markets. Throughout our 42-year operating history, we have built an extensive network of 86 stores in the United States and 35 stores in Europe.
We also believe our scale, customer service, centralized resources, and experienced management team provide us with a competitive advantage in many of our local markets. Throughout our 43-year operating history, we have built an extensive network of 94 full service stores in the United States, 39 stores in Europe and 15 stores in Australia.
CNH Industrial Capital offers floorplan payable financing to CNH Industrial dealers to finance the purchase of inventory from CNH Industrial and for used equipment inventory purchased on trade-ins from our customers.
Floorplan Payable Financing The cost of floorplan payable financing is an important factor affecting our financial results. CNH Industrial Capital offers floorplan payable financing to CNH Industrial dealers to finance the purchase of inventory from CNH Industrial and for used equipment inventory purchased on trade-ins from our customers.
Industry Overview Agricultural Equipment Industry Agricultural equipment is purchased primarily by commercial farmers and cooperatives for the production of crops used for food, fiber, feed grain and feedstock for renewable energy. Agricultural equipment is also purchased by "life-style farmers" and for home and garden applications, and for maintenance of commercial, residential and government properties.
Industry Overview Agricultural Equipment Industry Agricultural equipment is purchased primarily by farmers and commercial entities, such as cooperatives, that provide services to farmers for the production of crops used for food, fiber, feed grain and feedstock for renewable energy. Agricultural equipment is also purchased for "lifestyle farms", home and garden applications, and maintenance of commercial, residential and government properties.
For purposes of this Form 10-K, the granted distribution rights for the commercial application sprayers and floaters in territories outside of Titan’s full-line footprint as of the date of closing of the Heartland transaction are referred to as the “Non-Footprint Commercial Application Distribution Rights”.
For purposes of this Form 10-K, the granted distribution rights for the commercial application sprayers and floaters in territories without full-line dealer locations are referred to as the “Non-Full-Line Footprint Commercial Application Distribution Rights”.
On occasion, we have acquired all of the outstanding equity of a company. Acquisitions are typically financed with available cash balances, floorplan payable line of credit capacity, and long-term debt. The consent of CNH Industrial is required to acquire any CNH Industrial dealership.
Acquisitions are typically financed with available cash balances, floorplan payable line of credit capacity, and long-term debt. The consent of CNH Industrial is required to acquire any CNH Industrial dealership.
We intend to pursue acquisitions with the objectives of 4 Table of Conten ts consolidating distribution within our existing footprint, entering new markets, and strengthening our competitive position. We expect that strategic acquisitions will continue to be a component of our long-term growth strategy.
We intend to pursue acquisitions with the objectives of consolidating distribution within our existing footprint, entering new markets, and strengthening our competitive position. We expect that strategic acquisitions will continue to be a component of our long-term growth strategy. We regularly assess the acquisition landscape, evaluating potential acquisitions in terms of availability and alignment to our long-term growth strategy.
Channels for Selling Aged Equipment Inventory In certain circumstances, we sell aged equipment inventories through the use of alternative channels such as onsite and online auctions. 8 Table of Conten ts Competition The agricultural and construction equipment sales and distribution industries are highly competitive and fragmented, with large numbers of companies operating on a regional or local scale.
Channels for Selling Aged or Excess Equipment Inventory In certain circumstances, we sell aged equipment inventories through the use of alternative channels such as onsite and online auctions. Competition The agricultural and construction equipment sales and distribution industries are highly competitive and fragmented.
Deere & Company ("Deere"), CNH Industrial, AGCO Corporation ("AGCO"), and Kubota Corporation ("Kubota"), are the largest global manufacturers of agricultural equipment, and they each manufacture a full line of equipment and parts that supply the primary machinery requirements of farmers. In addition to the major manufacturers, several short-line manufacturers produce specialized equipment that satisfies various niche requirements of farmers.
Deere & Company ("Deere"), CNH Industrial, AGCO Corporation ("AGCO"), and Kubota Corporation ("Kubota"), are the largest global manufacturers of agricultural equipment, and they each manufacture a full line of equipment and parts that supply the primary machinery requirements of farmers and other users of agricultural equipment.
Compensation Programs and Employee Benefits We conduct regular assessments of our pay and benefit practices. Our compensation programs are designed to attract, retain, motivate and reward employees who must operate in a highly competitive, fast-paced environment.
Our compensation programs are designed to attract, retain, motivate and reward employees who must operate in a highly competitive, fast-paced environment.
In addition to the environmental regulations discussed above, we are subject to numerous federal, state, and local laws regulating the conduct of our business, including those relating to sales and marketing, taxation, employment practices, working 11 Table of Conten ts conditions, data privacy, and corruption.
In addition to the environmental regulations discussed above, we are subject to numerous federal, state, and local laws regulating the conduct of our business, including those relating to sales and marketing, taxation, employment practices, working conditions, data privacy, and corruption. The foreign countries and domestic states that we operate in, subject us to a significant number of regulatory jurisdictions.
For our full-line distribution footprint existing as of the time of closing, these distribution rights were granted through amendments to our full-line dealer agreements that added floaters and sprayers as authorized products permitted to be sold to commercial application customers.
For our full-line distribution dealer locations, these distribution rights are granted through amendments to our full-line dealer agreements adding floaters and sprayers as authorized products permitted to be sold to commercial application customers.
None of our dealerships have been subject to any material liabilities in the past, nor do we know of any fact or condition that would result in any material liabilities being incurred in the future.
We believe that our operations currently are conducted in substantial compliance with all applicable regulations. None of our dealerships has been subject to any material liabilities in the past, nor do we know of any fact or condition that would result in any material liabilities being incurred in the future.
The CNH Industrial Dealer Agreements for our European operations, with the exception of Ukraine, grant to us exclusive territories. We are restricted in our ability to sell competing products in our assigned territories. Our CNH Industrial Dealer Agreements for our European operations do not have a fixed term.
In both Europe and Australia, we are restricted in our ability to sell competing products in our assigned territories. Our CNH Industrial Dealer Agreements for our European and Australian operations do not have a fixed term.
In general, our compensation programs consist of a base salary or hourly rate, commissions for employees in front-line customer facing sales roles, cash performance bonuses, health and dental insurance benefits, health savings and flexible spending accounts, a 401(k) plan, paid time off, family leave, an employee assistance program, tuition assistance, and other benefit programs.
In general, our compensation programs consist of competitive, market-based salaries or hourly rates, commissions for employees in front-line customer facing sales roles, cash performance bonuses, long-term equity-based incentives for eligible employees, health, dental, and vision insurance benefits, an employee wellness program to promote and reward healthy lifestyles, health savings and flexible spending accounts, a 401(k) plan, paid time off, family leave, an employee assistance program which provides mental health and wellness services, tuition assistance, and other benefit programs.
Since January 1, 2003, we have completed over 55 acquisitions located in 15 U.S. states and four European countries, along with establishing a new network of dealership stores in Ukraine.
Those acquisitions vary from single dealerships to larger dealership groups with locations in multiple states. Since January 1, 2003, we have completed over 60 acquisitions located in 15 U.S. states, four European countries, and three Australian states, along with establishing a new network of dealership locations in Ukraine.
We believe there are many factors that influence demand for agricultural equipment, parts, and repair and maintenance services, including net farm income, commodity markets, production yields, tariffs and trade policies, interest rates, government policies, European Union subvention funds and individual European country subsidies, tax policies, local growing conditions, and general economic conditions.
Agricultural equipment manufacturers typically grant dealers in the United States defined sales and marketing territories with designated store locations to distribute their products. 2 Table of Contents We believe there are many factors that influence demand for agricultural equipment, parts, and repair and maintenance services, including net farm income, commodity markets, production yields, tariffs and trade policies, interest rates, government policies, European Union subvention funds and individual European country subsidies, tax policies, local growing conditions, and general economic conditions.
Our other executive team members, managers in the field, and equipment sales consultants also have extensive knowledge and experience in our industry. We compensate, develop and review our managers and sales employees based on an approach that aligns their incentives with the goals and objectives of our Company, including achievement of revenue, profitability, market share and balance sheet objectives.
We compensate, develop and review our managers and sales employees based on an approach that aligns their incentives with the goals and objectives of our Company, including achievement of revenue, profitability, market share and balance sheet objectives. We believe the strength of our management team assists in our success in the marketplace.
Seasonal weather trends, particularly severe wet or dry conditions, can have a significant impact on regional agricultural and construction market performance by affecting crop production yields and the ability to undertake construction 9 Table of Conten ts projects.
Seasonal weather trends, particularly severe wet or dry conditions, can have a significant impact on regional agricultural and construction market performance by affecting crop production yields and the ability to undertake construction projects. Weather conditions that adversely affect the agricultural or construction markets would have a negative effect on the demand for our products and services.
Revenue from customers located outside of the United States is primarily included in our International segment, which represented 13.5%, 18.6% and 15.5% of total consolidated revenue during fiscal 2023, 2022 and 2021, respectively.
During fiscal 2024, none of our customers accounted for more than 1.0% of our total revenue. Revenue from customers located outside of the United States is primarily included in our Europe and Australia segments, which represented 13.8%, 13.5% and 18.6% of total consolidated revenue during fiscal 2024, 2023 and 2022, respectively.
In addition, we have other lines of credit offered by various financial institutions as well as floorplan payable financing programs offered by manufacturers and suppliers, or their third party lenders, from which we purchase equipment inventory. 7 Table of Conten ts Sales and Marketing We currently market our products and services through: • our sales employees, who operate out of our network of local stores and call on customers in the markets surrounding each store; • our area product support managers, and our store parts managers and service managers, who provide our customers with comprehensive after-market support; • our website; • local and regional advertising efforts, including broadcast, cable, direct mail, print and web-based media, social media channels; and • alternative channels, such as auctions, for selling our aged equipment inventories.
Sales and Marketing We currently market our products and services through: • our sales employees, who operate out of our network of local stores and call on customers in the markets surrounding each store; • our store parts managers and service managers, who provide our customers with comprehensive after-market support; • our website, including a parts e-commerce website • local and regional advertising efforts, including broadcast, cable, direct mail, print and web-based media, and social media channels; and • alternative channels, such as auctions, for selling our aged equipment inventories.
We believe our mix of equipment sales and recurring parts and service sales, as well as our geographic footprint, provide us with diversification, lowering our overall exposure to adverse economic cycles that affect particular geographic markets or segments.
We believe our mix of principal business activities, as well as our broad geographic footprint, provide us with crop, weather and market diversification. This diversification helps to lower our overall exposure to adverse economic cycles that affect particular geographic markets or segments.
We strongly believe that a safe work environment will help us gain a competitive advantage, and that doing what is right, honest and ethical is essential to developing trust with our partners. This includes providing a safe place to work, safety training relevant to the employee's position, and following all safety and environmental regulations.
Health and Safety Employee health and safety is of paramount importance to us. We strongly believe that a safe work environment will help us gain a competitive advantage, and that doing what is right, honest and ethical is essential to developing trust with our partners.
Product Warranties Product warranties for new equipment and parts are provided by the original equipment manufacturer ("OEM"). The term and scope of these warranties vary greatly by OEM and by product. At the time equipment is purchased, we also offer customers the option of purchasing extended warranty protection provided by the OEM or through various third-party warranty providers.
At the time equipment is purchased, we also offer customers the option of purchasing extended warranty protection provided by the OEM or through various third-party warranty providers. We are paid by the OEM for repairs we perform on equipment under warranty.
Training and Development We devote significant resources to staff training and development, including tuition assistance for career-enhancing academic programs. Our training and development programs are designed to facilitate the development and advancement of talent from within our organization to ensure we continuously fill our ranks with qualified employees for critical positions in the organization.
Our training and development programs are designed to facilitate the development and advancement of talent from within our organization to ensure we continuously fill our ranks with qualified employees for critical positions in the organization. Employees are supported for growth within their current positions through technical and skill-specific training.
Our Construction stores are located in Colorado, Iowa, Minnesota, Nebraska, North Dakota, South Dakota, and Wisconsin. Our international stores are located in the European countries of Bulgaria, Germany, Romania, and Ukraine. We have a history of growth through acquisitions. Those acquisitions vary from a single dealership to larger dealership groups with locations in multiple states.
Our Construction stores are located in Colorado, Iowa, Minnesota, Nebraska, North Dakota, South Dakota, and Wisconsin. Internationally, the Company's European stores are located in the countries of Bulgaria, Germany, Romania, and Ukraine, and our Australian stores are located in the states of New South Wales, South Australia, and Victoria in Southeastern Australia. We have a history of growth through acquisitions.
We believe that these various federal policies reduce financial volatility in the agriculture industry and assist farmers in continuing to operate their farms during economic down cycles and through the adverse headwinds caused by trade policies and tariffs. 2 Table of Conten ts Construction Equipment Industry Construction equipment is purchased primarily for use in commercial, residential and infrastructure construction, as well as for agriculture, demolition, energy production and forestry operations.
We believe that these various federal policies reduce financial volatility in the agriculture industry and assist farmers in continuing to operate their farms during economic down cycles and through the adverse headwinds caused by trade policies and tariffs.
In fiscal 2023, CNH Industrial supplied approximately 76% of the new equipment sold in our Agriculture segment, 76% of the new equipment sold in our Construction segment, and 60% of the new equipment sold in our International segment.
In fiscal 2024, CNH Industrial supplied approximately 75% of the new equipment sold in our Agriculture segment, 81% of the new equipment sold in our Construction segment, 51% of the new equipment sold in our Europe segment and 58% of the new equipment sold in our Australia segment.
Parts Sales We maintain an extensive in-house parts inventory to provide timely parts and repair and maintenance support to our customers. Our parts sales provide a relatively stable revenue stream that is less sensitive to economic cycles than our equipment sales.
Equipment revenue represented 77.8%, 77.5% and 75.4% of total revenue for the fiscal years ended January 31, 2024, 2023 and 2022. Parts Sales We maintain an extensive in-house parts inventory to provide timely parts and repair and maintenance support to our customers. Our parts sales provide a revenue stream that is less sensitive to economic cycles than our equipment sales.
We operate each of our stores under the Titan Machinery name. Case IH, Case and New Holland are registered trademarks of CNH Industrial, which we are authorized to use pursuant to the terms of the CNH Industrial Dealer Agreements. We also license trademarks and trade names from other suppliers of equipment to us.
We operate our North American and European stores under the Titan Machinery name, and plan to convert our Australian stores to the Titan brand in the near future. Case IH, Case and New Holland are registered trademarks of CNH Industrial, which we are authorized to use pursuant to the terms of the CNH Industrial Dealer Agreements.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese risks include: • difficulties in implementing our business model in foreign markets; • costs and diversion of domestic management attention related to oversight of international operations; • unexpected adverse changes in export duties, currency or payment controls that impact our ability to repatriate funds from the county, quotas and tariffs and difficulties in obtaining import licenses; • cyclicality of demand in European Union member states for agricultural equipment, based on availability of European Union government subsidy programs and tax incentives; • unexpected adverse changes in foreign laws or regulatory requirements; • compliance with a variety of tax regulations, foreign laws and regulations; • compliance with the Foreign Corrupt Practices Act and other U.S. laws that apply to the international operations of U.S. companies which may be difficult and costly to implement and monitor, can create competitive disadvantages if our competitors are not subject to such laws, and which, if violated, may result in substantial financial and reputational harm; • fluctuations in foreign currency exchange rates to which we are exposed may adversely affect the results of our operations, the value of our foreign assets and liabilities and our cash flows; • the laws of the European countries in which we operate, unlike U.S. states, do not include specific dealer protection laws and, therefore, we may be more susceptible to actions of suppliers that are adverse to our interests such as termination of our dealer agreements for any reason or installing additional dealers in our designated territories; and • geopolitical or economic instability in the regions in which we operate, including the impact of the Russian invasion of Ukraine. 15 Table of Conten ts The Russian-Ukraine conflict has presented significant challenges and risks for our Ukraine operations.
Biggest changeForeign Corrupt Practices Act of 1977, as amended, and other U.S. laws that apply to the international operations of U.S. companies which may be difficult and costly to implement and monitor, can create competitive disadvantages if our competitors are not subject to such laws, and which, if violated, may result in substantial financial and reputational harm; • fluctuations in foreign currency exchange rates to which we are exposed may adversely affect the results of our operations, the value of our foreign assets and liabilities and our cash flows; • the laws of the European countries in which we operate, unlike U.S. states, do not include specific dealer protection laws and, therefore, we may be more susceptible to actions of suppliers that are adverse to our interests such as termination of our dealer agreements for any reason or installing additional dealers in our designated territories; and • geopolitical or economic instability in the regions in which we operate, including the impact of the Russian invasion of Ukraine.
Second, CNH Industrial supports our business by providing financial assistance and marketing support including the following: • Floorplan payable financing for the purchase of a substantial portion of our equipment inventory; • Retail financing used by many of our customers to purchase CNH Industrial equipment from us; • Incentive, financing, and discount programs offered from time to time that enable us to price our products more competitively; and • Promotional and marketing activities on national, regional and local levels.
Second, CNH Industrial supports our business by providing inventory financing, financial assistance and marketing support including the following: • Floorplan payable financing for the purchase of a substantial portion of our equipment inventory; • Retail financing used by many of our customers to purchase CNH Industrial equipment from us; • Incentive, financing, and discount programs offered from time to time that enable us to price our products more competitively; and • Promotional and marketing activities on national, regional and local levels.
Each of our credit agreements include cross-default provisions which state that certain types of defaults under any other indebtedness agreement will also constitute a default under that credit agreement. If an event of default occurred, and the lender demanded accelerated payment, we may not be able to satisfy a pay-off request, whether through internal funds or a new financing.
Each of our credit agreements include cross-default provisions which state that certain types of defaults under any other indebtedness agreement will also constitute a default under that credit agreement. If an event of default occurred, and the lender demanded accelerated payment, we may not be able to satisfy a pay-off request, whether through internal funds or new financing.
In addition, to the extent CNH Industrial's equipment manufacturer competitors (such as Deere, Caterpillar, Komatsu, Volvo, and AGCO) provide their dealers with more innovative or higher quality products, lower cost products, better customer financing, or have more effective marketing programs, or the CNH Industrial reputation is tarnished in the marketplace or with our customers, our ability to compete and our results of operations could be adversely affected.
In addition, to the extent CNH Industrial's equipment manufacturer competitors (such as Deere, Caterpillar, Komatsu, Volvo Group, and AGCO) provide their dealers with more innovative or higher quality products, lower cost products, better customer financing, or have more effective marketing programs, or the CNH Industrial reputation is tarnished in the marketplace or with our customers, our ability to compete and our results of operations could be adversely affected.
When leased equipment comes off lease, there may be an increase in the availability of late-model used equipment, which can create an inventory over-supply condition and put pressure on our equipment sales and margins, and have an adverse effect on values of our used equipment inventory and rental fleet equipment.
When leased equipment comes off lease, there may be an increase in the availability of late-model used equipment, which can create a used equipment inventory over-supply condition and put pressure on our used equipment sales and margins, and have an adverse effect on values of our used equipment inventory and rental fleet equipment.
If CNH Industrial were to change the terms of our CNH Industrial Dealer Agreements or its operating practices in a manner that adversely affects us, our business and results of operations would be harmed. Our CNH Industrial Dealer Agreements impose obligations and restrictions on us.
If CNH Industrial were to change the terms of our CNH Industrial Dealer Agreements or its operating practices in a manner that adversely affects us, our business and results of operations would be harmed. Our CNH Industrial Dealer Agreements impose significant obligations and restrictions on us.
The success of our stores, and our business as a whole, is dependent on CNH Industrial in several key respects. First, we rely on CNH Industrial for new equipment inventory.
The success of our stores, and our business as a whole, is dependent on CNH Industrial in several key respects. First, we rely on CNH Industrial for new equipment and parts inventory.
Separately, the American Farm Bureau Federation and CNH Industrial brands, Case IH and New Holland, signed a memorandum of understanding in March 2023 that allows farmers and independent repair shops to access CNH Industrial's brand manuals, tools, product guides and information to self-diagnose and self-repair machines, as well as provides support from CNH Industrial brands for farmers and independent repair shops to directly purchase diagnostic tools.
Separately, the American Farm Bureau Federation and CNH Industrial brands, Case IH and New Holland, signed a memorandum of understanding in March 2023 (the “Memorandum of Understanding”) that allows farmers and independent repair shops to access CNH Industrial's brand manuals, tools, product guides and information to self-diagnose and self-repair machines, as well as provides support from CNH Industrial brands for farmers and independent repair shops to directly purchase diagnostic tools.
If CNH Industrial is unwilling to consent to any future proposed acquisition of additional dealerships, our ability to execute on our acquisition strategy and to grow our business may be impaired.
If CNH Industrial is unwilling to consent to any future proposed acquisition of additional dealerships, our ability to execute our acquisition strategy and grow our business may be impaired.
Because the impact of any future GHG legislative, regulatory or product standard requirements is dependent on the timing and design of mandates or standards, we are unable to predict their potential impact at this time. Risks of our Growth Strategy If our acquisition plans are unsuccessful, we may not achieve our planned long-term revenue growth.
Because the impact of any future GHG legislative, regulatory or product standard requirements is dependent on the timing and design of mandates or standards, we are unable to predict with any specificity their potential impact at this time. Risks of our Growth Strategy If our acquisition plans are unsuccessful, we may not achieve our planned long-term revenue growth.
Periods of elevated inflation and increased interest rates will increase financing costs and installment payment obligations of our customers, which may make equipment purchases less affordable for customers and impact purchasing decisions and, as a result, our revenue and profitability may decrease.
Periods of elevated inflation and increased interest rates will increase financing costs and installment payment obligations of our customers, which may make equipment purchases less affordable for customers and impact or delay purchasing decisions and, as a result, our revenue and profitability may decrease.
The agricultural and construction equipment businesses are highly seasonal, which causes our quarterly results and cash flows to fluctuate during the year. Farmers generally purchase agricultural equipment and service work in preparation for, or in conjunction with, the spring planting and fall harvesting seasons.
The agricultural and construction equipment businesses are highly seasonal, which causes our quarterly results and cash flows to fluctuate during the year. Farmers generally purchase agricultural equipment and service work in preparation for, or in conjunction with, the planting and harvesting seasons.
Our level of indebtedness could limit our financial and operational flexibility. As of January 31, 2023, our indebtedness included floorplan payable financing, real estate mortgage financing arrangements that are secured by real estate assets and other long-term debt. In addition, we have obligations under our lease agreements for our store locations and corporate headquarters.
Our level of indebtedness could limit our financial and operational flexibility. As of January 31, 2024, our indebtedness included floorplan payable financing, real estate mortgage financing arrangements that are secured by real estate assets and other long-term debt. In addition, we have obligations under our lease agreements for many of our store locations and corporate headquarters.
Delinquencies and credit losses generally would be expected to increase if there was a worsening of economic conditions in any of our reporting segments. Our rental operations subject us to risks including increased maintenance costs as our rental fleet ages, increased costs of new replacement equipment we use in our fleet, and losses upon disposition of rental fleet units .
Delinquencies and credit losses generally would be expected to increase if there was a worsening of economic conditions in any of our reporting segments. 19 Table of Contents Our rental operations subject us to risks including increased maintenance costs as our rental fleet ages, increased costs of new replacement equipment we use in our fleet, and losses upon disposition of rental fleet units .
The construction equipment market is influenced by factors such as: • the amount and timing of public infrastructure spending; • the level of new residential and non-residential construction; and • the amount of capital spending in oil and gas, forestry, agricultural and mining.
The construction equipment market is influenced by factors such as: • the amount and timing of public infrastructure spending; • the level of new residential and non-residential construction; and • the amount of capital spending in oil and gas, forestry, agriculture and mining.
In particular, given our Europe operations, the European Union General Data Protection Regulation imposes stringent data protection requirement and provides significant penalties for noncompliance. In addition, as security threats continue to evolve and increase in frequency and sophistication, we may need to invest additional resources to protect the security of our systems.
In particular, given our Europe segment operations, the European Union General Data Protection Regulation imposes stringent data protection requirements and provides significant penalties for noncompliance. In addition, as security threats continue to evolve and increase in frequency and sophistication, we may need to invest additional resources to protect the security of our systems.
ITEM 1A. RISK FACTORS The following risks should be considered in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations, including the risks and uncertainties described in the forward-looking statements, and our financial statements and the related notes appearing under Item 8 of this Form 10-K.
ITEM 1A. RISK FACTORS The following risks should be considered in conjunction with Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, including the risks and uncertainties described in the forward-looking statements, and our financial statements and the related notes appearing under Item 8, Financial Statements and Supplementary Data, of this Form 10-K.
If we are unable to manage these credit risk issues adequately, or if a large number of customers should have financial difficulties at the same time, our credit losses could increase above historical levels and our operating results would be adversely affected.
If we are unable to manage these credit risk issues adequately, or if a large number of customers experience financial difficulties at the same time, our credit losses could increase above historical levels and our operating results would be adversely affected.
The terms of our CNH Industrial dealer agreements subject us to restrictions that may adversely impact our business. We have entered into CNH Industrial Dealer Agreements under which we sell CNH Industrial’s branded agricultural and construction equipment, along with after-market parts and repair services.
The terms of our CNH Industrial dealer agreements subject us to restrictions that may adversely impact our business. We have entered into CNH Industrial Dealer Agreements under which we sell CNH Industrial’s branded agricultural and construction equipment, along with aftermarket parts and repair services.
The acquisition of additional CNH Industrial geographic areas of responsibility and store locations in our Agriculture, Construction and International segments requires the consent of CNH Industrial under our CNH Industrial Dealer Agreements. CNH Industrial may decline, in its sole discretion, to consent to any acquisition of an additional CNH Industrial store location we may pursue.
The acquisition of additional CNH Industrial geographic areas of responsibility and store locations in our Agriculture, Construction, Europe and Australia segments requires the consent of CNH Industrial under our CNH Industrial Dealer Agreements. CNH Industrial may decline, in its sole discretion, to consent to any acquisition of an additional CNH Industrial store location we may pursue.
Risks related to our Reliance on CNH Industrial We are substantially dependent upon CNH Industrial, our primary supplier of equipment and parts inventory. The substantial majority of our business involves the sale and distribution of new equipment and after-market parts supplied by CNH Industrial and the servicing of equipment manufactured by CNH Industrial.
Risks Related to our Reliance on CNH Industrial We are substantially dependent upon CNH Industrial, our primary supplier of equipment and parts inventory. The substantial majority of our business involves the sale and distribution of new equipment and aftermarket parts supplied by CNH Industrial and the servicing of equipment manufactured by CNH Industrial.
If actual sales are materially less than our forecasts, for example because of a significant drop in net farm income, weather disruptions to the agricultural growing regions, or a construction industry recession, we would experience an over-supply of new equipment inventory.
If actual sales are materially less than our forecasts, for example because of a significant drop in net farm income, weather disruptions in our agricultural growing regions, or a construction industry recession, we would experience an over-supply of new equipment and parts inventory.
In addition, the fourth quarter typically is a significant period for equipment sales in the United States because of our customers’ year-end tax planning considerations, the timing of dealer incentives and the increase in availability of farmers’ funds from completed harvests and construction customers' funds from completed projects.
In addition, the fourth quarter typically is a significant period for equipment sales in the U.S. because of our customers’ year-end tax planning considerations, the timing of dealer incentives and the increase in availability of farmers’ funds from completed harvests and construction customers' funds from completed projects.
Over-production of equipment by one or more manufacturers, or a sudden reduction in demand for equipment, can dramatically disrupt the equipment market and cause downward pressure on our equipment profit margins. Customer leasing arrangements in the agriculture and construction equipment industries may also impact the level of industry-wide equipment inventory supplies.
Over-production of equipment by one or more manufacturers, or a sudden reduction in demand for equipment, can dramatically disrupt the equipment market, cause downward pressure on our equipment profit margins and increase our carrying costs of higher inventory levels. Customer leasing arrangements in the agriculture and construction equipment industries may also impact the level of industry-wide equipment inventory supplies.
Similarly, rental house companies engage in regular sales of rental fleet units, which can further disrupt the supply-demand balance. We have no control over or ability to significantly influence any of the foregoing factors affecting the equipment distribution markets. Our industry is highly competitive.
Similarly, rental house companies engage in regular sales of rental fleet units, which can further disrupt the supply-demand balance in the used equipment department. We have no control over or ability to significantly influence any of the foregoing factors affecting the equipment distribution markets. 15 Table of Contents Our industry is highly competitive.
Supply chain issues, labor disputes such as strikes, and labor shortages could diminish the manufacturing output of CNH Industrial's plants, resulting in our stores not receiving inventories in the expected quantities and timelines necessary to satisfy customer demand.
Supply chain issues, labor disputes such as strikes, and labor shortages have in the past, and could in the future, diminish the manufacturing output of CNH Industrial's plants, resulting in our stores not receiving inventories in the expected or required quantities and timelines necessary to satisfy customer demand.
If no crops are planted or the upcoming growing season is negatively impacted, it will limit our ability to generate cash and repay outstanding debt, and as a result of imposed currency exchange controls and other restrictions, restrict our ability to manage our cash held in Ukraine and our investment in our Ukrainian business.
If no crops are planted or a growing season is negatively impacted, this occurrence will limit our Ukrainian subsidiary's ability to generate cash and repay outstanding debt, and as a result of imposed currency exchange controls and other restrictions, restrict our ability to manage our cash held in Ukraine and our investment in our Ukrainian business.
Construction equipment customers’ purchases of equipment and service work, as well as rental of equipment, are also seasonal in our stores located in colder climates where 17 Table of Conten ts construction work slows significantly in the winter months.
Construction equipment customers’ purchases of equipment and service work, as well as rental of equipment, are also seasonal in our stores located in colder climates where construction work slows significantly in the winter months.
Despite the security measures and business continuity plans, put in place by us and our third party providers, our information technology and infrastructure may be vulnerable to damage, disruptions or shutdowns due to attacks by hackers or breaches due to employee error or malfeasance or other disruptions arising from power outages, telecommunication failures, terrorist acts, natural disasters, or other catastrophic events.
Despite the security measures and business continuity plans, put in place by us and our third party providers, our information technology and infrastructure may be vulnerable to damage, disruptions or shutdowns due to attacks by hackers or breaches due to employee error or malfeasance or other disruptions arising from power outages, telecommunication failures, terrorist acts, including state-sponsored cyberterrorism targeted at the U.S., natural disasters, or other catastrophic events.
Our rental fleet margins are materially impacted by utilization of fleet assets, which is seasonal and can fluctuate materially due to weather and economic factors. If our rental equipment ages, the costs of maintaining that equipment, if not replaced within a certain period of time, will likely increase.
Our rental fleet margins are materially impacted by utilization of fleet assets, which is seasonal and can fluctuate materially due to weather and economic factors. If our rental equipment ages, the costs of maintaining that equipment, if not timely replaced, will likely increase.
These factors, in addition to others, have negatively impacted our financial condition and results of operations in 2022 and may continue to impact our business in Ukraine in future periods, including on a more acute basis. Risks Related to Financial Matters Our financial performance is dependent on our ability to effectively manage our inventory.
These factors, in addition to others, have negatively impacted our Ukrainian subsidiary's financial condition and results of operations in fiscal year 2024 and may continue to impact our business in Ukraine in future periods, including on a more acute basis. 17 Table of Contents Risks Related to Financial Matters Our financial performance is dependent on our ability to effectively manage our inventory.
Our success in executing our operating and strategic plans depends on the efforts and abilities of our management team and key employees, including the managers of our field operations and our country managers in our international operations. The failure to attract and retain members of our management team and key employees will harm us.
Our success in executing our operating and strategic plans depends on the efforts and abilities of our management team and key employees, including the managers of our field operations and our country managers in our international operations.
We use information technology systems to record, process and summarize financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal and tax requirements.
The efficient operation of our business is dependent on our information technology systems. We use information technology systems to record, process and summarize financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal and tax requirements.
We currently operate dealership locations in Bulgaria, Germany, Romania, and Ukraine. In fiscal 2023, total International segment revenues were 13.5% of our consolidated total revenue. As of January 31, 2023, total International segment assets were 14.4% of our consolidated total assets.
We currently operate dealership locations in Bulgaria, Germany, Romania, Ukraine and Australia. In fiscal 2024, total Europe and Australia segment revenues were 13.8% of our consolidated total revenue. As of January 31, 2024, total Europe and Australia segment assets were 25.4% of our consolidated total assets.
The Memorandum of Understanding follows a similar format as agreed to by John Deere earlier this year which, in turn, follows the auto industry format. It is difficult to predict the impact that right to repair legislation, if enacted in any our states of operation, or the CNH Memorandum of Understanding, will have on our repair services business.
The Memorandum of Understanding follows a similar format as agreed to by Deere in January 2023 which, in turn, follows the auto industry format. It is difficult to predict the long-term impact that right to repair legislation, if enacted in any area of our footprint, or the Memorandum of Understanding, will have on our repair services business.
Net farm income is influenced by factors such as: • the price of agricultural commodities and the ability to competitively export agricultural commodities; • the cost of farm inputs including value of land, seed, fertilizer, fuel, labor and other inputs; • the demand for food products and products made with farm commodities such as bio fuels; ▪ the availability of stocks from previous harvests; and • agricultural policies, including aid and subsidies to agricultural enterprises provided by governments, policies impacting commodity prices or limiting the export or import of commodities, and alternative fuel mandates. 13 Table of Conten ts In addition to macroeconomic drivers of net farm income, local growing conditions also influence farmers’ buying sentiment.
Net farm income is influenced by factors such as: 14 Table of Contents • the price of agricultural commodities and the ability to competitively export agricultural commodities; • the cost of farm inputs including value of land, seed, fertilizer, fuel, labor and other inputs; • the demand for food products and other products made with farm commodities such as biofuels; ▪ the availability of stocks from previous harvests; and • agricultural policies, including aid and subsidies to agricultural enterprises provided by governments, policies impacting commodity prices or limiting the export or import of commodities, and alternative fuel mandates.
New or more stringent greenhouse gas emission standards designed to address climate change could increase costs of the equipment we purchase from our suppliers and increase our customers’ costs of operations.
We anticipate that climate change-related risks will increase over time. 20 Table of Contents New or more stringent greenhouse gas emission standards designed to address climate change could increase costs of the equipment we purchase from our suppliers and increase our customers’ costs of operations.
Any significant decline in the selling prices for used rental equipment, or increased costs resulting from our rental operations, could have an adverse effect on our results of operations and cash flows. Climate and Weather Risks Weather conditions may negatively impact the agricultural and construction equipment markets and affect our financial results.
Any significant decline in the selling prices for used rental equipment, or increased costs resulting from our rental operations, could have an adverse effect on our results of operations and cash flows.
Risks Related to Economic Conditions Affecting our Customers' Demand for our Products and Services Our agriculture equipment sales are significantly affected by net farm income, which is influenced by factors over which we have no control.
These restrictions may discourage or prevent us from pursuing activities that we believe will grow our business. Risks Related to Economic Conditions Affecting our Customers' Demand for our Products and Services Our agriculture equipment sales are significantly affected by net farm income, which is influenced by factors over which we have no control.
CNH Industrial may be adversely impacted by global economic conditions and economic downturns, industry declines, natural disasters, labor strikes or similar disruptions, changes in interest rates, energy prices, inflation, financial performance and liquidity concerns, supply shortages or rising raw materials costs, failed strategic initiatives, or other adverse events.
CNH Industrial’s commitment to its product warranties is important to both our market share success and our warranty related parts and service revenue. 13 Table of Contents CNH Industrial may be adversely impacted by global economic conditions and economic downturns, industry declines, natural disasters, labor strikes or similar disruptions, changes in interest rates, energy prices, inflation, financial performance and liquidity concerns, supply shortages or rising raw materials costs, failed strategic initiatives, or other adverse events.
There is global scientific consensus that emissions of greenhouse gases (GHG) continue to alter the composition of Earth’s atmosphere in ways that are affecting and are expected to continue to affect the global climate. These considerations may lead to new international, national, regional or local legislative or regulatory responses.
There is global scientific consensus that emissions of greenhouse gases (GHG) continue to alter the composition of Earth’s atmosphere in ways that are affecting and are expected to continue to affect the global climate.
In fiscal 2023, CNH Industrial supplied approximately 76% of the new equipment sold in our Agriculture segment, 76% of the new equipment sold in our Construction segment, and 60% of the new equipment sold in our International segment, and supplied a significant portion of our parts inventory.
In fiscal 2024, CNH Industrial supplied approximately 75% of the new equipment sold in our Agriculture segment, 81% of the new equipment sold in our Construction segment, 51% of the new equipment sold in our Europe segment and 58% of the new equipment sold in our Australia segment, and supplied a significant portion of our parts inventory.
Therefore, droughts, excess rain, hail, and other unfavorable climatic conditions affecting certain geographic regions will adversely impact the local farmers’ buying sentiment.
In addition to macroeconomic drivers of net farm income, local growing conditions also influence farmers’ buying sentiment. Therefore, droughts, excess rain, hail, and other unfavorable climatic conditions affecting certain geographic regions will adversely impact the local farmers’ buying sentiment.
Our business, results of operations, and financial condition could be materially adversely affected as a result of any event that has a material adverse effect on CNH Industrial. 12 Table of Conten ts Furthermore, our financial performance and future success are highly dependent on the overall reputation, brand and success of CNH Industrial in the agricultural and construction equipment manufacturing industries, including its ability to maintain a competitive position in product innovation, product quality, and product pricing.
Furthermore, our financial performance and future success are highly dependent on the overall reputation, brand and success of CNH Industrial in the agricultural and construction equipment manufacturing industries, including its ability to maintain a competitive position in product innovation, product quality, and product pricing.
Moreover, the technician shortage may increase our service technician compensation expense, and reduce our gross margins on service work. In addition, in recent years it has been unusually difficult to hire and retain employees, which we believe is primarily attributable to market conditions which in turn has created increased competition in labor markets.
In addition, in recent years it has been increasingly difficult to hire and retain employees, which we believe is primarily attributable to market conditions which in turn has created increased competition in labor markets.
Quarterly fluctuations resulting from the seasonality of our business may cause our results of operations and cash flows to underperform in relation to the expectations of financial analysts or investors, which may cause volatility or decreases in our stock price.
Quarterly fluctuations resulting from the seasonality of our business may cause our results of operations and cash flows to underperform in relation to the expectations of financial analysts or investors, which may cause volatility or decreases in our stock price. 22 Table of Contents Data Security Risks Security breaches and other disruptions could compromise our information systems and expose us to liability, which would cause our business and reputation to suffer.
An uninsured or partially insured claim for which indemnification from the manufacturer is not available could have a material adverse effect on our financial condition or results of operations.
Our commercial liability insurance may not be adequate to cover significant product liability claims, or we may not be able to secure such insurance on economically reasonable terms. An uninsured or partially insured claim for which indemnification from the manufacturer is not available could have a material adverse effect on our financial condition or results of operations.
In recent years, the equipment industry has experienced a shortage of qualified service technicians. If this trend worsens and we are not able to hire and retain qualified service technicians at acceptable levels, our ability to satisfy customers' service needs would be negatively impacted.
If this trend worsens and we are not able to hire and retain qualified service technicians at acceptable levels, our ability to satisfy customers' service needs would be negatively impacted. Moreover, the technician shortage may increase our service technician compensation expense, and reduce our gross margins on service work.
The credit agreements governing our indebtedness contain covenants that, among other things, may limit or place conditions on our ability to: • incur more debt; • make investments; • create liens; • merge, consolidate, or make certain acquisitions; • transfer and sell assets, or divest of dealership stores; • pay dividends or repurchase stock; and • issue equity instruments.
The credit agreements governing our indebtedness contain covenants that, among other things, may limit or place conditions on our ability to: • incur more debt; • make investments; • create liens; • merge, consolidate, or make certain acquisitions; • transfer and sell assets, or divest of dealership stores; • pay dividends or repurchase stock; and • issue equity instruments. 18 Table of Contents Our credit facilities with CNH Industrial Capital, DLL Finance, and certain of our real estate lenders require us to satisfy a net leverage ratio and fixed charge coverage ratio on an ongoing basis, measured at the end of each fiscal quarter.
We maintain cyber risk insurance, but this insurance may not be sufficient to cover all of our losses from any future breaches of our systems.
We maintain cyber risk insurance, but this insurance may not be sufficient to cover all of our losses from any future breaches of our systems, and we cannot guarantee that applicable insurance will be available to us in the future on economically reasonable terms or at all.
The Russian military occupation of Ukraine has significantly disrupted our Ukrainian operations and resulted in the temporary shut-down of our 9 Ukrainian stores during early fiscal 2023, all locations have since reopened. The outcome of the Russian military operation remains unclear and we cannot predict the impact this conflict will have on our Ukrainian operations.
The Russian-Ukraine conflict has presented significant challenges and risks for our Ukraine operations. The Russian military occupation of Ukraine has significantly disrupted our Ukrainian operations. While all of our Ukrainian stores are open, the outcome of the Russian military operation remains unclear, and we cannot predict the impact this conflict will have on our Ukrainian operations.
In addition, e-commerce companies selling parts have negatively impacted dealers' parts sales and margins, and we expect that this competitive pressure will continue to increase in the future. 14 Table of Conten ts The recent agreements of equipment manufacturers, including CNH Industrial, to provide farmers and independent repair shops access to diagnostic tools, combined with an enactment of proposed right to repair legislation, could negatively impact our repair services business .
The recent agreements of equipment manufacturers, including CNH Industrial, to provide farmers and independent repair shops access to diagnostic tools, combined with an enactment of proposed right to repair legislation, could negatively impact our repair services business .
In fiscal 2023, revenues of our Ukrainian subsidiary declined 40.5% from fiscal 2022 and the conflict could continue to negatively impact revenues in fiscal 2024. The military conflict and related political instability, if it intensifies, may make it impossible for us to effectively operate our Ukraine dealerships, which may result in our decision to cease operations in Ukraine.
The military conflict and related political instability, if it intensifies, may make it impossible for us to effectively operate our Ukraine dealerships, which may result in our decision to cease operations in Ukraine. This would result in asset write-offs and a loss in revenues and profits.
In addition, our CNH Industrial Dealer Agreement for Case Construction equipment prohibits us from carrying other suppliers' products (new equipment and parts) at our Case Construction stores that are competitive with CNH Industrial's products. These restrictions may discourage or prevent us from pursuing activities that we believe will grow our business.
In addition, our CNH Industrial Dealer Agreements for domestic Case Construction equipment and our CNH Industrial Dealer Agreements for international Case Construction equipment prohibit us from carrying other suppliers' products (new equipment and parts) at our domestic and international Case Construction stores that are competitive with CNH Industrial's products, unless consented to by CNH Industrial.
Weather conditions, particularly severe floods and droughts, can have a significant adverse effect on growing conditions and on regional agricultural and construction markets. Adverse weather conditions may result in fewer acres being planted or harvested by farmers and reduced crop yields on those acres that are planted, and in delays or cancellations of construction projects.
Adverse weather conditions may result in fewer acres being planted or harvested by farmers, reduced crop yields on those acres that are planted, and in delays or cancellations of construction projects. This in turn could result in lower demand for our agricultural and construction equipment and services and adversely affect our results of operation.
Various stakeholders, including legislators and regulators, shareholders and non-governmental organizations, as well as companies in many business sectors are continuing to look for ways to reduce GHG emissions. The regulation of GHG emissions from the equipment we sell could result in additional manufacturing costs to our suppliers who, in turn, will likely pass along those costs to us.
The associated compliance costs are currently uncertain, we expect that they will be substantial. Various stakeholders, including legislators and regulators, shareholders and non-governmental organizations, as well as companies in many business sectors are continuing to look for ways to reduce GHG emissions.
We may not be successful in passing along the equipment price 18 Table of Conten ts increases to our customers, which could impact our results of operation. To the extent that we attempt to pass along price increases to our customers, the increased costs of equipment may negatively affect their purchasing decisions.
To the extent that we attempt to pass along price increases to our customers, the increased costs of equipment may negatively affect their purchasing decisions or result in their decision to purchase equipment from a different brand.
Even if we are able to continue operations, we expect that the military conflict has significantly impacted, and we expect will continue to impact our customers' liquidity and their purchasing decisions for our products and services.
See additional information in Note 1 to the Consolidated Financial Statements at Item 8, Financial Statements and Supplementary Data, of this Form 10-K. Even if we continue operations, the military conflict has significantly impacted, and we expect that it will continue to impact, our customers' liquidity and purchasing decisions for our products and services.
The occurrence of these events could compromise our networks, and the information stored there could be accessed, publicly disclosed, lost or stolen.
The occurrence of these events could compromise our networks or the networks of our third-party providers, and the information stored there could be accessed, publicly disclosed, lost or stolen. In addition, the rapid evolution and increased adoption of artificial intelligence technologies and the potential for abuse of these technologies by bad actors amplifies these concerns.
However, our cash flow and ability to borrow depends on our future performance, which will be affected by financial, business, economic and other factors, many of which may be beyond our control. 16 Table of Conten ts The credit agreements governing our indebtedness restrict our ability to engage in certain corporate and financial transactions, and require us to satisfy financial covenants.
We expect to use cash flow from operations and borrowings under our credit facilities to fund our operations, debt service and capital expenditures. However, our cash flow and ability to borrow depends on our future performance, which will be affected by financial, business, economic and other factors, many of which may be beyond our control.
The unionization of all or a substantial portion of our workforce could result in work slowdowns or stoppages, could increase our overall costs, could reduce our operating margins and reduce the efficiency of our operations at the affected locations, could adversely affect our flexibility to run our business competitively, and could otherwise have an adverse effect on our business. 19 Table of Conten ts Liability Risks Selling and renting agricultural and construction equipment, selling parts, and providing repair services subject us to liability risks that could adversely affect our financial condition and reputation.
The unionization of all or a substantial portion of our workforce could result in work slowdowns or stoppages, increased overall costs, reduced operating margins and reduced efficiency of our operations at the affected locations, and reduced flexibility in running our business competitively.
Products sold, rented or serviced by us may expose us to potential liabilities for personal injury or property damage claims that arise from the use of those products. Our commercial liability insurance may not be adequate to cover significant product liability claims, or we may not be able to secure such insurance on economically reasonable terms.
Liability Risks Selling and renting agricultural and construction equipment, selling parts, and providing repair services subject us to liability risks that could adversely affect our financial condition and reputation. Products sold, rented or serviced by us may expose us to potential liabilities for personal injury or property damage claims that arise from the use of those products.
This in turn could result in lower demand for our agricultural and construction equipment and services and adversely affect our results of operation. Many scientific reports predict that severe weather events can be expected to become more frequent as a result of global climate change.
Many scientific reports predict that severe weather events can be expected to become more frequent as a result of global climate change. Furthermore, the long-term impacts of climate change, whether involving physical risks (such as the extreme weather conditions discussed above) or transition risks (such as regulatory changes discussed below) are expected to be widespread and unpredictable.
Removed
CNH Industrial’s commitment to its product warranties is important to both our market share success and our warranty related parts and service revenue.
Added
Our business, results of operations, and financial condition could be materially adversely affected as a result of any event that has a materially adverse effect on CNH Industrial.
Removed
Risks Related to Supply Chain Our business has been adversely impacted by supply chain distributions. Our suppliers have experienced continuing supply chain disruptions, including country of origin production and port delays. Additionally, trucker, dockworker, and labor shortages, a surge of consumer demand, and other factors have led to industry-wide delays and inflationary trends, which have also impacted the Company.
Added
In addition, e-commerce companies selling parts have negatively impacted dealers' parts sales and margins, and we expect that this competitive pressure will continue to increase in the future.
Removed
Our suppliers' challenges directly affect us through price increases, which we may be unable to pass along to our customers, and disruptions and delays on delivery of certain products, which may cause us to lose business or delay our ability to recognize revenue. Risks of International Operations Our international operations expose us to risks and uncertainties.
Added
Risks Related to Supply Chain Our business has been adversely impacted by supply chain distributions. Our business has been adversely impacted by supply chain disruptions which has caused variability and unpredictability in lead times. Starting in calendar year 2020, our suppliers experienced significant disruptions in upstream supply chain production and shipping delays.
Removed
This would result in asset write-offs and a loss in revenues and profits. See additional information in Note 1 to the Consolidated Financial Statements at Item 8.
Added
This caused lead times from our suppliers to extend beyond normal time frames. Recently, these disruptions have largely been mitigated and lead times have condensed back down to normal levels.
Removed
We expect to use cash flow from operations and borrowings under our credit facilities to fund our operations, debt service and capital expenditures.
Added
When lead times condense, our manufacturers may be able to produce and deliver more of our orders in a shorter period of time than originally anticipated, causing variability in our inventory balances from quarter to quarter or year over year. Risks of International Operations Our international operations expose us to risks and uncertainties.
Removed
Our credit facilities with CNH Industrial Capital, DLL Finance, and certain of our real estate lenders require us to satisfy a net leverage ratio and fixed charge coverage ratio on an ongoing basis, measured at the end of each fiscal quarter.
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These risks include: • difficulties in implementing our business model in foreign markets and operating our business across a significant number of different time zones; • costs and diversion of domestic management attention related to oversight of international operations; • unexpected adverse changes in export duties, currency or payment controls that impact our ability to repatriate funds from the country, quotas and tariffs and difficulties in obtaining import licenses; • cyclicality of demand in European Union member states for agricultural equipment, based on availability of European Union government subsidy programs and tax incentives; • unexpected adverse changes in foreign laws or regulatory requirements; 16 Table of Contents • compliance with a variety of tax regulations, foreign laws and regulations; • compliance with the U.S.
Removed
Data Security Risks Security breaches and other disruptions could compromise our information systems and expose us to liability, which would cause our business and reputation to suffer. The efficient operation of our business is dependent on our information technology systems.
Added
In fiscal 2024, revenues of our Ukrainian subsidiary were 1% of the Company total Revenue and as of January 31, 2024, the assets of our Ukraine subsidiary were 2% of the Company’s total Net Assets.
Added
The credit agreements governing our indebtedness restrict our ability to engage in certain corporate and financial transactions, and require us to satisfy financial covenants.
Added
Tax Rates and New Tax Legislation - Changes in tax rates or the adoption of new tax legislation may affect our results of operations, cash flows and financial condition. The Company is subject to taxes in the U.S. and a number of foreign jurisdictions where it conducts business.
Added
The Company’s effective tax rate has been and may continue to be affected by changes in the mix of earnings in jurisdictions with differing statutory tax rates, changes in the valuation of deferred tax assets, and changes in tax laws or their interpretation, such as the 15% global minimum tax under the Organization for Economic Cooperation and Development ("OECD") Pillar Two, Global Anti-Base Erosion Rules.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES Equipment Stores As of January 31, 2023, we operated 121 agricultural and construction equipment stores in the United States and Europe in the following locations: Agriculture Segment Construction Segment International Segment Total United States North Dakota 12 4 — 16 Minnesota 13 3 — 16 Iowa 12 3 — 15 Nebraska 14 2 — 16 South Dakota 10 2 — 12 Colorado — 3 — 3 Idaho 1 — — 1 Kansas 1 — — 1 Missouri 1 — — 1 Montana 1 — — 1 Washington 1 — — 1 Wisconsin 1 1 — 2 Wyoming 1 — — 1 European Countries Bulgaria — — 7 7 Germany — — 5 5 Romania — — 14 14 Ukraine — — 9 9 Total 68 18 35 121 Store Lease Arrangements As of January 31, 2023, we leased 67 store facilities with lease arrangements expiring at various dates through February 28, 2031.
Biggest changePROPERTIES Equipment Stores As of January 31, 2024, we operated 148 full service agricultural and construction equipment stores globally in the following locations: Agriculture Segment Construction Segment Europe Segment Australia Segment Total United States North Dakota 12 4 — — 16 Minnesota 15 3 — — 18 Iowa 12 3 — — 15 Nebraska 14 2 — — 16 South Dakota 11 2 — — 13 Colorado — 3 — — 3 Idaho 6 — — — 6 Kansas 1 — — — 1 Missouri 1 — — — 1 Montana 1 — — — 1 Washington 1 — — — 1 Wisconsin 1 1 — — 2 Wyoming 1 — — — 1 European Countries Bulgaria — — 8 — 8 Germany — — 7 — 7 Romania — — 14 — 14 Ukraine — — 10 — 10 Australian States New South Wales — — — 1 1 South Australia — — — 4 4 Victoria — — — 10 10 Total 76 18 39 15 148 Store Lease Arrangements As of January 31, 2024, we leased 76 store facilities with lease arrangements expiring at various dates through April 30, 2042.
The remainder of our U.S. and international store locations are leased from third parties. As part of our due diligence review prior to a dealership acquisition, we evaluate the adequacy, suitability and condition of the related real estate.
The remainder of our U.S. and international store locations are leased from third parties. 25 Table of Contents As part of our due diligence review prior to a dealership acquisition, we evaluate the adequacy, suitability and condition of the related real estate.
Headquarters We currently lease and occupy approximately 48,000 square feet in West Fargo, North Dakota for our headquarters and this lease expires on January 31, 2028. We continually review our location needs, including the adequacy of our 21 Table of Conten ts headquarters space, to ensure our space is sufficient to support our operations.
Headquarters We currently lease and occupy approximately 48,000 square feet in West Fargo, North Dakota for our headquarters and this lease expires on January 31, 2028. We continually review our location needs, including the adequacy of our headquarters space, to ensure our space is sufficient to support our operations.
All of the leases require that we maintain public liability, property casualty, and personal property insurance on each of the leased premises. The leases generally require us to indemnify the lessor in connection with any claims arising from the leased premises during our occupation of the property. We believe our facilities are adequate to meet our current and anticipated needs.
All of the leases require that we maintain public liability, property casualty, and personal property insurance on each of the leased premises. The leases generally require us to indemnify the lessor in connection with any claims arising from the leased premises during our occupation of the property.
In recent years, we have been strategically purchasing real estate and financing the purchases with long term debt, to take advantage of low interest rates. We currently own the store facilities for 50 U.S. dealership locations and four Germany dealership locations. We have incurred debt financing and have been granted mortgages on these owned facilities.
We believe our owned and leased facilities are adequate to meet our current and anticipated needs. In recent years, we have been strategically purchasing real estate of certain dealership locations, and have financed those purchases using long term debt. We currently own the store facilities for 68 U.S. dealership locations, six European dealership locations and one Australian dealership location.
Added
We have incurred debt financing and have been granted mortgages on most of those owned facilities in connection with incurring such debt financing.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

3 edited+7 added−2 removed0 unchanged
Biggest changeMr. Meyer worked for JI Case Company in 1975. From 1976 to 1980, Mr. Meyer was a partner in a Case/New Holland Dealership with locations in Lisbon, North Dakota and Wahpeton, North Dakota. In 1980, Mr. Meyer, along with a partner, founded Titan Machinery Inc. Mr. Meyer has served on both the Case CE and CaseIH Agriculture Dealer Advisory Boards.
Biggest changeDavid served as Chief Executive Officer from 1985 until transitioning to the Executive Chairman role in February 2024. Prior to incorporating Titan in 1980, David was a partner in a JI Case/New Holland Dealership with locations in Lisbon and Wahpeton, North Dakota. Prior to that, he worked for JI Case Company.
MINE SAFETY DISCLOSURES Not applicable. 22 Table of Conten ts INFORMATION ABOUT OUR EXECUTIVE OFFICERS The names, ages and positions of our executive officers are as follows: Name Age Position David Meyer 69 Board Chair and Chief Executive Officer Robert Larsen 37 Chief Financial Officer and Treasurer Bryan Knutson 44 President and Chief Operating Officer David Meyer is our Board Chair and Chief Executive Officer.
MINE SAFETY DISCLOSURES Not applicable. 26 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The names, ages and positions of our executive officers are as follows: Name Age Position Bryan Knutson 45 Chief Executive Officer and President Robert Larsen 38 Chief Financial Officer and Treasurer David Meyer 70 Executive Chairman Bryan Knutson became our Chief Executive Officer in February 2024.
Mr. Meyer is the past chairman of the North Dakota Implement Dealers Association, and currently serves as a Trustee on the University of Minnesota Foundation. Robert Larsen became our Chief Financial Officer in December 2022. Prior to joining us, he served as the Head of Finance for CNH Industrial’s team focused on precision technology. Prior to joining CNH Industrial, Mr.
Robert Larsen became our Chief Financial Officer in December 2022. Prior to joining us, he served as the Head of Finance for CNH Industrial’s team focused on precision technology. Prior to joining CNH Industrial, Mr. Larsen held various positions at Raven Industries starting in 2016, including Director of Finance, Director of Investor Relations and various other roles. Mr.
Removed
Larsen held various positions at Raven Industries starting in 2016, including Director of Finance, Director of Investor Relations and various other roles. Mr. Larsen began his career as an accountant with PricewaterhouseCoopers LLP and is a Certified Public Accountant. Bryan Knutson became our Chief Operating Officer in August 2017 and previously served as our Vice President, Ag Operations since 2016.
Added
Bryan leverages his more than 20 years of progressive experience in sales, operations, and leadership at Titan Machinery to deliver significant value for the Company’s customers and stockholders.
Removed
In 2022 Mr.Knutson was appointed to President. Mr . Knutson joined the company in 2002 where he began his career in equipment sales later advancing to store manager, complex manager and region manager prior to his current role. Mr. Knutson is a current board member and Chairman of the Pioneer Equipment Dealers Association. PART II
Added
Bryan has been with Titan Machinery since 2002, and has performed at the highest levels as an Equipment Sales Consultant (ESC), Store Manager, Complex Manager, and held Senior Field positions including Valley Region Manager and Vice President of Titan Machinery’s North American Agriculture Equipment Business.
Added
He joined the executive leadership team in 2017 as the Company’s Chief Operating Officer and was promoted to President and Chief Operating Officer in 2022.
Added
In addition to involvement in several industry organizations, Bryan is past chairman and currently on the Board of Directors of the Pioneer Equipment Dealers Association representing Member Equipment Dealers in Minnesota, North Dakota and South Dakota and has served long tenures on both the Case IH Agriculture and Case Construction Dealer Advisory Boards.
Added
Larsen began his career as an accountant with PricewaterhouseCoopers LLP and is a Certified Public Accountant. David Meyer is our Executive Chairman of our Board of Directors.
Added
David co-founded Titan Machinery in 1980 on the principle of best-in-class product support, and as an early pioneer of dealer consolidation, saw the benefits of consolidating dealership resources to leverage scale, equipment and parts inventories, training, and other industry expertise to provide world-class equipment support to all our agricultural and construction customers.
Added
David has served on both the Case Construction and CaseIH Agriculture Dealer Advisory Boards. He is two-term past chairman and board member of the North Dakota Implement Dealers Association. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS For information on securities authorized for issuance under our equity compensation plans, refer to Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters." REPURCHASES We did not engage in any repurchases of our common stock during the fiscal quarter ended January 31, 2023. 23 Table of Conten ts STOCK PERFORMANCE GRAPH The following graph compares the cumulative total return for the last trading day of our last five fiscal years on a $100 investment (assuming dividend reinvestment) on January 31, 2018, the last trading day before our fifth preceding fiscal year, in each of our common stock, the Russell 2000 Index and the S&P 500 Retail Index.
Biggest changeSTOCK PERFORMANCE GRAPH The following graph compares the cumulative total return for the last trading day of our last five fiscal years on a $100 investment (assuming dividend reinvestment) on January 31, 2019, the last trading day before our fifth preceding fiscal year, in each of our common stock, the Russell 2000 Index and the S&P 500 Retail Index.
Payment of future cash dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, outstanding indebtedness and plans for expansion and restrictions imposed by lenders, if any.
Payment of future cash dividends, if any, will be at the discretion of the Board after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, outstanding indebtedness and plans for expansion and restrictions imposed by lenders, if any.
UNREGISTERED SALES OF EQUITY SECURITIES We did not have any unregistered sales of equity securities during the fiscal quarter ended January 31, 2023.
UNREGISTERED SALES OF EQUITY SECURITIES We did not have any unregistered sales of equity securities during the fiscal quarter ended January 31, 2024.
As of March 24, 2023, there were approximately 580 record holders of our common stock, which excludes holders whose stock is held either in nominee name or street name brokerage accounts. DIVIDENDS We have not historically paid any dividends on our common stock.
As of March 25, 2024, there were approximately 695 record holders of our common stock, which excludes holders whose stock is held either in nominee name or street name brokerage accounts. DIVIDENDS We have not historically paid any dividends on our common stock.
January 31, 2018 2019 2020 2021 2022 2023 Titan Machinery Inc. $ 100.00 $ 87.20 $ 56.82 $ 99.12 $ 143.32 $ 204.47 Russell 2000 Index 100.00 95.20 102.48 131.66 128.79 122.66 S&P 500 Retail Index 100.00 104.82 125.27 176.00 191.64 154.13 ITEM 6. [RESERVED] 24 Table of Conten ts
January 31, 2019 2020 2021 2022 2023 2024 Titan Machinery Inc. $ 100.00 $ 65.15 $ 113.66 $ 164.35 $ 234.47 $ 142.64 S&P 500 Retail Index 100.00 119.51 167.91 182.83 147.04 188.29 Russell 2000 Index 100.00 107.65 138.30 135.28 128.85 129.87 ITEM 6. [RESERVED] 28 Table of Contents
Added
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS For information on securities authorized for issuance under our equity compensation plans, refer to Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, of this Form 10-K. 27 Table of Contents REPURCHASES We did not engage in any repurchases of our common stock during the fiscal quarter ended January 31, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

84 edited+28 added−38 removed67 unchanged
Biggest changeSee Note 14 to our consolidated financial statements for further details on our effective tax rate. 34 Table of Conten ts Segment Results Year Ended January 31, Increase/ Percent 2023 2022 (Decrease) Change (dollars in thousands) Revenue Agriculture $ 1,601,720 $ 1,076,751 $ 524,969 48.8 % Construction 308,457 317,164 (8,707) (2.7) % International 299,129 317,991 (18,862) (5.9) % Total $ 2,209,306 $ 1,711,906 $ 497,400 29.1 % Income (Loss) Before Income Taxes Agriculture $ 102,733 $ 60,567 $ 42,166 69.6 % Construction 18,569 15,543 3,026 19.5 % International 20,197 12,552 7,645 60.9 % Segment income before income taxes 141,499 88,662 52,837 59.6 % Shared Resources (6,258) (1,761) (4,497) n/m Total $ 135,241 $ 86,901 $ 48,340 55.6 % Agriculture Agriculture segment revenue for fiscal 2023 increased 48.8% or $525.0 million compared to the same period last year.
Biggest changeThe effective tax rate for each of the years ended January 31, 2024 and 2023, is subject to variation primarily due to the impact of items related to the vesting of share-based compensation, limitation on the tax deductibility of officers' compensation and the mix of domestic and foreign income. 36 Table of Contents Segment Results Year Ended January 31, Increase/ Percent 2024 2023 (Decrease) Change (dollars in thousands) Revenue Agriculture $ 2,044,263 $ 1,601,720 $ 442,543 27.6 % Construction 332,463 308,457 24,006 7.8 % Europe 311,910 299,129 12,781 4.3 % Australia 69,809 — 69,809 *N/M Total $ 2,758,445 $ 2,209,306 $ 549,139 24.9 % Income Before Income Taxes Agriculture $ 121,072 $ 102,733 $ 18,339 17.9 % Construction 18,346 18,569 (223) (1.2) % Europe 16,487 20,197 (3,710) (18.4) % Australia 4,115 — 4,115 *N/M Segment income before income taxes 160,020 141,499 18,521 13.1 % Shared Resources (8,980) (6,258) (2,722) 43.5 % Total $ 151,040 $ 135,241 $ 15,799 11.7 % *N/M = Not Meaningful Agriculture Agriculture segment revenue for fiscal 2024 increased 27.6%, or $442.5 million, compared to the same period last year.
Certain of the manufacturers from which we purchase new equipment inventory offer financing on these purchases, either offered directly from the manufacturer or through the manufacturers’ captive finance affiliate. CNH Industrial's captive finance subsidiary, CNH Industrial Capital, also provides financing of used equipment inventory. We also have floorplan payable balances with non-manufacturer lenders for new and used equipment inventory.
Certain manufacturers from which we purchase new equipment inventory offer financing on these purchases, either offered directly from the manufacturers or through the manufacturers’ captive finance affiliate. CNH Industrial's captive finance subsidiary, CNH Industrial Capital, also provides financing of used equipment inventory. We also have floorplan payable balances with non-manufacturer lenders for new and used equipment inventory.
Our ability to service our debt will depend upon our ability to generate necessary cash. This will in turn depend on our future acquisition activity, operating performance, general economic conditions, and financial, competitive, business and other factors, some of which are beyond our immediate control.
Our ability to service our debt will depend upon our ability to generate necessary cash. This will in turn depend on our operating performance, general economic conditions, and financial, competitive, business and other factors, some of which are beyond our immediate control, and future acquisition activity.
Critical Accounting Policies and Use of Estimates In the preparation of financial statements prepared in conformity with U.S. generally accepted accounting principles ("GAAP"), we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosures.
Critical Accounting Policies and Use of Estimates In the preparation of financial statements prepared in conformity with U.S. generally accepted accounting principles, we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosures.
Our forward-looking statements in this Form 10-K generally relate to the following: • our beliefs and intentions with respect to our growth strategies, including growth through strategic acquisitions, the types of acquisition targets we intend to pursue, the availability of suitable acquisition targets, the industry climate for dealer consolidation, and our ability to implement our growth strategies; • our beliefs with respect to factors that will affect demand and seasonality of purchasing in the agricultural and construction industries; • our beliefs with respect to our primary supplier (CNH Industrial) of equipment and parts inventory; • our beliefs with respect to the equipment market, our competitors and our competitive advantages; • our beliefs with respect to the impact of U.S federal government policies on the agriculture economy; • our beliefs with respect to the impact of commodity prices for the fossil fuels and other commodities on our operating results; • our beliefs with respect to the impact of government regulations; • our beliefs with respect to our business strengths and the diversity of our customer base; • our plans and beliefs with respect to real property used in our business; • our plans and beliefs regarding future sales, sales mix, and marketing activities; • our beliefs and assumptions regarding the payment of dividends; • our beliefs and assumptions regarding valuation reserves, equipment inventory balances, fixed operating expenses, and absorption rate; • our beliefs and expectations regarding the impact of the Russia-Ukraine military conflict on our Ukrainian operations; • our beliefs and assumptions with respect to our rental equipment operations; • our beliefs with respect to our employee relations; 41 Table of Conten ts • our assumptions, beliefs and expectations with respect to past and future market conditions, including interest rates, and public infrastructure spending, new environmental standards, and the impact these conditions will have on our operating results; • our beliefs with respect to the impact of our credit agreements, including future interest expense, limits on corporate transactions, financial covenant compliance, and ability to negotiate amendments or waivers, if needed; • our beliefs with respect to the impact of increase or decrease in applicable foreign exchange rates; • our plans and assumptions for future capital expenditures and rental fleet purchases; • our cash needs, sources of liquidity, and the adequacy of our working capital.
Our forward-looking statements in this Form 10-K generally relate to the following: • our beliefs and intentions with respect to our growth strategies, including growth through strategic acquisitions, the types of acquisition targets we intend to pursue, the availability of suitable acquisition targets, the industry climate for dealer consolidation, and our ability to implement our growth strategies; • our beliefs with respect to factors that will affect demand and seasonality of purchasing in the agricultural and construction industries; • our beliefs with respect to our primary supplier (CNH Industrial) of equipment and parts inventory; • our beliefs with respect to the equipment market, our competitors and our competitive advantages; • our beliefs with respect to the impact of U.S federal government policies on the agriculture economy; • our beliefs with respect to the impact of commodity prices for crops, fossil fuels and other commodities on our operating results; • our beliefs with respect to the impact of government regulations; • our beliefs with respect to our business strengths and the diversity of our customer base; • our plans and beliefs with respect to real property used in our business; • our plans and beliefs regarding future sales, sales mix, and marketing activities; • our beliefs and assumptions regarding the payment of dividends; • our beliefs and assumptions regarding valuation reserves, equipment inventory balances, fixed operating expenses, and absorption rate; 42 Table of Contents • our beliefs and expectations regarding the impact of the Russia-Ukraine military conflict on our Ukrainian operations; • our beliefs and assumptions with respect to our rental equipment operations; • our beliefs with respect to our employee relations; • our assumptions, beliefs and expectations with respect to past and future market conditions, including interest rates, and public infrastructure spending, new environmental standards, and the impact these conditions will have on our operating results; • our beliefs with respect to the impact of our credit agreements, including future interest expense, limits on corporate transactions, financial covenant compliance, and ability to negotiate amendments or waivers, if needed; • our beliefs with respect to the impact of increase or decrease in applicable foreign exchange rates; • our plans and assumptions for future capital expenditures and rental fleet purchases; • our cash needs, sources of liquidity, and the adequacy of our working capital.
The actual amount of our fiscal 2024 capital expenditures will depend upon factors such as general economic conditions, growth prospects for our industry and our decisions regarding financing and leasing options. We currently expect to finance property and equipment purchases with borrowings under our existing credit facilities, financing with long-term debt, with available cash or with cash flow from operations.
The actual amount of our fiscal 2025 capital expenditures will depend upon factors such as general economic conditions, growth prospects for our industry and our decisions regarding financing and leasing options. We currently expect to finance property and equipment purchases with borrowings under our existing credit facilities, financing with long-term debt, with available cash or with cash flow from operations.
Other long-lived assets shared across stores within a segment or shared across segments are reviewed for impairment on a segment or consolidated level as appropriate. During our 2023 fiscal year, we determined that events or circumstances were present that may indicate that the carrying amount of certain of our store long-lived assets might not be recoverable.
Other long-lived assets shared across stores within a segment or shared across segments are reviewed for impairment on a segment or consolidated level as appropriate. During our 2024 fiscal year, we determined that events or circumstances were present that may indicate that the carrying amount of certain of our store long-lived assets might not be recoverable.
BUSINESS DESCRIPTION We own and operate a network of full service agricultural and construction equipment stores in the United States and Europe.
BUSINESS DESCRIPTION We own and operate a network of full service agricultural and construction equipment stores in the United States, Europe, and Australia.
Our acquisition of these entities provides the Company the opportunity for synergies due to overlap of our footprints, which allows us to package deals that will include both commercial application equipment as well as other agricultural and construction equipment to commercial customers within our core footprint.
Our acquisition of these entities provides the Company with the opportunity for synergies due to overlap of our footprints, which allows us to package deals that include both commercial application equipment as well as other agricultural and construction equipment to commercial customers within our core footprint.
We expect these sources of liquidity to be sufficient to fund our working capital requirements, acquisitions, capital expenditures and other investments in our business, service our debt, pay our tax and lease obligations and other commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future, provided, however, that our borrowing capacity under our credit agreements is dependent on compliance with various financial covenants as further described in Note 8 to our consolidated financial statements included in this Form 10-K.
We expect these sources of liquidity to be sufficient to fund our working capital requirements, acquisitions, capital expenditures and other investments in our business, service our debt, pay our tax and lease obligations and other commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future, provided, however, that our borrowing capacity under our credit agreements is dependent on compliance with various financial covenants as further described in Note 8, Floorplan Payable/Lines of Credit , of the Notes to our Consolidated Financial Statements included in this Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing under Item 8 of this Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing under Item 8, Financial Statements and Supplementary Data, of this Form 10-K.
Macroeconomic and industry factors that affect commodity prices and net farm income include changing worldwide demand for agriculture commodities, crop yields and supply disruptions caused by weather patterns and crop diseases, crop stock levels, production costs, and changing U.S. dollar foreig n currency exchange rates. Based on U.S.
Macroeconomic and industry factors that affect commodity prices and net farm income include changing worldwide demand for agriculture commodities, crop yields and supply disruptions caused by weather patterns and crop diseases, crop stock levels, production costs, and changing U.S. dollar foreign currency exchange rates. Based on 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. The agricultural equipment we sell and service includes machinery and attachments for uses ranging from large-scale farming to home and garden use.
We operate our business through four reportable segments: Agriculture, Construction, Europe and Australia. Within each segment, we have four principal sources of revenue: new and used equipment sales, parts sales, service, and equipment rental and other activities. The agricultural equipment we sell and service includes machinery and attachments for uses ranging from large-scale farming to home and garden use.
Our customers generally purchase and rent equipment in preparation for, or in conjunction with, their busy seasons, which for farmers are the spring planting and fall harvesting seasons; and which for Construction customers is typically the second and third quarters of our fiscal year for much of our Construction footprint.
Our customers generally purchase and rent equipment in preparation for, or in conjunction with, their busy seasons, which for farmers are the planting and harvesting seasons; and which for Construction customers are typically the second and third quarters of our fiscal year for much of our Construction footprint.
Agriculture industry factors such as changes in agricultural commodity prices and net farm income, have an effect on customer sentiment and their ability to secure financing for equipment purchases.
Agriculture industry factors such as changes in agricultural commodity prices and net farm income, have an effect on our customers' sentiment and their ability to secure financing for equipment purchases.
In addition, the fourth quarter typically is a significant period for equipment sales in the U.S. because of our 26 Table of Conten ts customers’ year-end tax planning considerations, the timing of dealer incentives and the increase in availability of funds from completed harvests and construction projects.
In addition, the fourth quarter typically is a significant period for equipment sales in the U.S. because of our customers’ year-end tax planning considerations, the timing of dealer incentives and the increase in availability of funds from completed harvests and construction projects.
A discussion of changes in our Financial Results and Cash Flow Comparisons from fiscal year 2021 to fiscal year 2022 has been omitted from this Form 10-K, but may be found in Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended January 31, 2022, filed with the SEC on April 1, 2022.
A discussion of changes in our Financial Results and Cash Flow Comparisons from fiscal year 2022 to fiscal year 2023 has been omitted from this Form 10-K, but may be found in Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended January 31, 2023, filed with the SEC on March 30, 2023.
In addition, numerous external factors such as credit markets, commodity prices, and other circumstances may disrupt normal purchasing practices and buyer sentiment, further contributing to the seasonal fluctuations. Dependence on our Primary Supplier The majority of our business involves the distribution and servicing of equipment manufactured by CNH Industrial.
In addition, numerous external factors such as credit markets, government subsidies, commodity prices, production yields, input costs, and other circumstances may disrupt normal purchasing practices and buyer sentiment, further contributing to the seasonal fluctuations. Dependence on our Primary Supplier The majority of our business involves the distribution and servicing of equipment manufactured by CNH Industrial.
We calculate absorption by dividing our gross profit from 28 Table of Conten ts sales of parts, service and rental fleet by our operating expenses, less commission expense on equipment sales, plus interest expense on floorplan payables and rental fleet debt.
We calculate absorption by dividing our gross profit from sales of parts, service and rental fleet by our operating expenses, less commission expense on equipment sales, plus interest expense on floorplan payables and rental fleet debt.
In light of these circumstances, we performed step one of the impairment analysis for these assets, which have a combined carrying value of $12.6 million, to determine if the asset values are recoverable.
In light of these circumstances, we performed step one of the impairment analysis for these assets, which have a combined carrying value of $11.0 million, to determine if the asset values are recoverable.
The increase in operating expenses was primarily due to variable expenses associated with increased sales as well as acquisitions that have occurred in the last fourteen months. In fiscal 2023, operating expenses as a percentage of revenue decreased to 13.6% from 14.1% in fiscal 2022.
The increase in operating expenses was primarily due to acquisitions that have occurred in the last eighteen months as well as variable expenses associated with increased sales. In fiscal 2024, operating expenses as a percentage of revenue decreased to 13.1% from 13.6% in fiscal 2023.
Since these allocations are set early in the year, and a portion is planned to be unallocated, unallocated balances may occur and cause a difference in reported shared resource expense. Shared Resource loss before income taxes was $6.3 million for fiscal 2023 compared to $1.8 million for fiscal 2022.
Since these allocations are set early in the year, and a portion is planned to be unallocated, unallocated balances may occur and cause a difference in reported shared resource expense. Shared Resource loss before income taxes was $9.0 million for fiscal 2024 compared to $6.3 million for fiscal 2023.
Sales of new CNH Industrial products accounted for approximately 73% of our new equipment revenue in fiscal 2023, with our single largest manufacturer other than CNH Industrial representing approximately 4% of our total new equipment sales in fiscal 2023. We acquire used equipment for resale primarily through trade-ins from our customers and in some cases through selective purchases.
Sales of new CNH Industrial products accounted for approximately 71% of our new equipment revenue in fiscal 2024, with our single largest manufacturer other than CNH Industrial representing approximately 3% of our total new equipment revenue in fiscal 2024. We acquire used equipment for resale primarily through trade-ins from our customers and in some cases through selective purchases.
Certain External Factors Affecting our Business We are subject to a number of factors that affect our business including those factors discussed in the sections in this annual report entitled "Risk Factors" and "Information Regarding Forward-Looking Statements." Certain of these external factors include, but are not limited to, the following: Russia/Ukraine Geopolitical Conflict Since the onset of the active conflict in February 2022, most of Titan Machinery Ukraine's customers have been able to continue their work, although at a reduced capacity and schedule.
Certain External Factors Affecting our Business We are subject to a number of factors that affect our business including those factors discussed in the sections in this Form 10-K entitled Item 1A, "Risk Factors" and "Information Regarding Forward-Looking Statements." Certain of these external factors include, but are not limited to, the following: 29 Table of Contents Russia/Ukraine Geopolitical Conflict Since the onset of the active conflict in February 2022, most of Titan Machinery Ukraine's customers have been able to continue their work, although at a reduced capacity and schedule.
In addition, if we pursue strategic acquisitions, we may require additional equity or debt financing to consummate the transactions, and we cannot assure you that we will succeed in obtaining this financing on favorable terms or at all.
In addition, if we pursue strategic acquisitions, we may require additional equity or debt financing to consummate the transactions, and we cannot give absolute assurance that we will succeed in obtaining this financing on favorable terms or at all.
Any non-compliance by us under the terms 38 Table of Conten ts of our debt agreements could result in an event of default which, if not cured, could result in the acceleration of our debt. We have met all financial covenants under these credit agreements as of January 31, 2023.
Any non-compliance by us under the terms of our debt agreements could result in an event of default which, if not cured, could result in the acceleration of our debt. We have met all financial covenants under these credit agreements as of January 31, 2024.
This includes long-term debt used to finance the purchase of real estate and vehicles. 30 Table of Conten ts Results of Operations Comparative financial data for each of our four sources of revenue for fiscal 2023 and 2022 are presented below. The results include the acquisitions made during these periods.
This includes long-term debt used to finance the purchase of real estate and vehicles. 33 Table of Contents Results of Operations Comparative financial data for each of our four sources of revenue for fiscal 2024 and 2023 are presented below. The results include the acquisitions made during these periods.
Other than as required by law, we undertake no obligation to update these forward-looking statements, even though our situation may change in the future. 42 Table of Conten ts
Other than as required by law, we undertake no obligation to update these forward-looking statements, even though our situation may change in the future. 44 Table of Contents
CNH Industrial regularly offers interest-free periods as well as additional incentives and special offers. As of January 31, 2023, 82.4% of our floorplan payable financing was non-interest bearing. Other Interest Expense Interest expense represents the interest on our debt instruments, other than floorplan payable financing facilities.
CNH Industrial regularly offers interest-free periods as well as additional incentives and special offers. As of January 31, 2024, 47.9% of our floorplan payable financing was non-interest bearing. Other Interest Expense Interest expense represents the interest on our debt instruments, other than floorplan payable financing facilities.
Cash Flow Used For Investing Activities Net cash used for investing activities is primarily comprised of cash used for property and equipment purchases, including rental fleet purchases, and for business acquisitions. Net cash used for investing activities was $134.1 million in fiscal 2023, compared to $55.2 million in fiscal 2022.
Cash Flow Used For Investing Activities Net cash used for investing activities is primarily comprised of cash used for property and equipment purchases, including rental fleet purchases, and for business acquisitions. Net cash used for investing activities was $163.4 million in fiscal 2024, compared to $134.1 million in fiscal 2023.
Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, if at all.
In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, if at all.
The property and equipment purchases in fiscal 2023 primarily related to improvements to, or purchases of, real estate assets and the purchase of vehicles. In fiscal 2022, we used $14.6 million in cash for rental fleet purchases, $23.0 million in cash for property and equipment purchases, and financed $14.6 million in property and equipment purchases with long-term debt.
The property and equipment purchases in fiscal 2024 primarily related to improvements to, or purchases of, real estate assets and the purchase of vehicles. In fiscal 2023, we used $10.0 million in cash for rental fleet purchases, $27.2 million in cash for property and equipment purchases, and financed $6.4 million in property and equipment purchases with long-term debt.
Parts inventories are valued at the lower of average cost or net realizable value. We estimate net realizable value of our parts inventories based on various factors including aging and sales history of each type of parts inventory. Impairment of Long-Lived Assets Our long-lived assets consist primarily of property and equipment and operating lease assets.
We estimate net realizable value of our parts inventories based on various factors including aging and sales history of each type of parts inventory. Impairment of Long-Lived Assets Our long-lived assets consist primarily of property and equipment and operating lease assets.
The property and equipment purchases in fiscal 2022 primarily related to the purchase of vehicles, trucks and real estate. We expect our cash expenditures for property and equipment, exclusive of rental fleet purchases, for fiscal 2024 to be approximately $35.0 million and expect cash expenditures for our rental fleet for fiscal 2024 to be approximately $12.0 million.
The property and equipment purchases in fiscal 2023 primarily related to the purchase of vehicles, trucks and real estate. We expect our cash expenditures for property and equipment, exclusive of rental fleet purchases, for fiscal 2025 to be approximately $50.0 million and expect cash expenditures for our rental fleet for fiscal 2025 to be approximately $10.0 million.
Such factors include, but are not limited to, the following: • the impact of the Russian-Ukraine military conflict on our operations in Ukraine; • assumptions regarding our cash needs and the amount of inventory we need on hand; • general economic conditions and construction activity in the markets where we operate; • our dependence on CNH Industrial, our primary supplier of equipment and parts inventory, and our relationships with other equipment suppliers; • the terms of the CNH dealer agreements that subject us to restrictions that may adversely impact our business and growth; • the risks associated with our international operations; • risks resulting from the implementation or design of our new ERP system; • risks resulting from the impact of the enactment of "right to repair" legislation; • the impact of security breaches and other disruptions to our information system; • our level of indebtedness and ability to comply with the terms of agreements governing our indebtedness; • the risks associated with the expansion of our business; • the risks resulting from outbreaks or other public health crises, including the continuing impact of COVID-19 on our business; • the potential inability to integrate any businesses we acquire; • competitive pressures; • significant fluctuations in the price of our common stock; • risks related to our dependence on our information technology systems and the impact of potential breaches and other disruptions; • compliance with laws and regulations; and • other factors discussed under "Risk Factors" or elsewhere in this Form 10-K.
Such factors include, but are not limited to, the following: • the impact of the Russian-Ukraine military conflict on our operations in Ukraine; • assumptions regarding our cash needs and the amount of inventory we need on hand; • general economic conditions and construction activity in the markets where we operate; • our dependence on CNH Industrial, our primary supplier of equipment and parts inventory, and our relationships with other equipment suppliers; • the terms of the CNH Industrial dealer agreements that subject us to restrictions that may adversely impact our business and growth; • the risks associated with our international operations; • risks resulting from the implementation or design of our new ERP system; • risks resulting from the impact of the enactment of "right to repair" legislation; • the impact of security breaches and other disruptions to our information system; • our level of indebtedness and ability to comply with the terms of agreements governing our indebtedness; • the risks associated with the expansion of our business; • the risks resulting from outbreaks or other public health crises; • risks related to our ability to attract, train, and develop key employees necessary for our success; • the potential inability to integrate any businesses we acquire; • competitive pressures; • significant fluctuations in the price of our common stock; • risks related to our dependence on our information technology systems and the impact of potential breaches and other disruptions; • compliance with laws and regulations; and • other factors discussed under Item 1A, Risk Factors, or elsewhere in this Form 10-K. 43 Table of Contents You should read the risk factors and the other cautionary statements made in this Form 10-K as being applicable to all related forward-looking statements wherever they appear in this Form 10-K.
As of January 31, 2023, we had floorplan payable lines of credit for equipment purchases totaling $781.0 million, which includes a $500.0 million credit facility with CNH Industrial Capital, a $185.0 million floorplan payable line under the Bank Syndicate Agreement, a $50.0 million credit facility with DLL Finance, and additional credit facilities related to our foreign subsidiaries.
As of January 31, 2024, we had floorplan payable lines of credit for equipment purchases totaling $1.4 billion, which includes a $875.0 million credit facility with CNH Industrial Capital, a $275.0 million floorplan payable line under the Bank Syndicate Agreement, a $80.0 million credit facility with DLL Finance, and additional credit facilities related to our foreign subsidiaries.
Other purchase obligations consist primarily of IT related expenses with estimated cash payments of $4.7 million for fiscal 2024, as well as a combined $4.7 million for fiscal years 2025, 2026, and 2027. Cash Flow Cash Flow Provided By Operating Activities Net cash provided by operating activities in fiscal 2023 was $10.8 million compared to $158.9 million in fiscal 2022.
Other purchase obligations consist primarily of IT related expenses with estimated cash payments of $4.1 million for fiscal 2025, as well as a combined $0.7 million for fiscal 2026, 2027, and 2028. 39 Table of Contents Cash Flow Cash Flow (Used For) Provided By Operating Activities Net cash used for operating activities in fiscal 2024 was $32.3 million compared to net cash provided by operating activities of $10.8 million in fiscal 2023.
Throughout our 42-year operating history, we have built an extensive, geographically contiguous network of 86 stores located in the United States and 35 stores in Europe. We have a history of growth through acquisitions, including over 55 acquisitions in 15 U.S. states and four European countries since January 1, 2003.
Throughout our 43-year operating history, we have built an extensive, geographically contiguous network of 94 full service stores located in the United States, 39 in Europe and 15 in Australia. We have a history of growth through acquisitions, including over 60 acquisitions in 15 U.S. states, four European countries and three Australian states since January 1, 2003.
Thus, we believe the following factors have a significant impact on our operating results: • CNH Industrial’s product offerings, reputation and market share; • CNH Industrial’s product prices and incentive and discount programs; • CNH Industrial's supply of inventory and ability to meet delivery timelines; • CNH Industrial's implementation of an equipment allocation methodology for use in determining production slots in calendar year 2023; • CNH Industrial's offering of floorplan payable financing for the purchase of a substantial portion of our inventory; and • CNH Industrial's offering of financing and leasing used by our customers to purchase CNH Industrial equipment from us.
Thus, we believe the following factors have a significant impact on our operating results: • CNH Industrial’s product offerings, reputation and market share; • CNH Industrial’s product prices and incentive and discount programs; 30 Table of Contents • CNH Industrial's supply of inventory and ability to match demand levels and delivery timelines; • CNH Industrial's offering of floorplan payable financing for the purchase of a substantial portion of our inventory; and • CNH Industrial's offering of financing and leasing used by our customers to purchase CNH Industrial equipment from us.
The increase in floorplan interest expense for fiscal 2023, as compared to fiscal 2022, was primarily due to increased interest-bearing borrowings. The increase in other interest expense in fiscal 2023 is the result of an increased amount of long term debt resulting from real estate purchased via acquisition or the buyout of previously leased facilities in fiscal 2022 and 2023.
The increase in other interest expense in fiscal 2024 is the result of an increased amount of long term debt resulting from real estate purchased via acquisition or the buyout of previously leased facilities in fiscal 2023 and 2024.
Cost of Revenue • Equipment: Cost of equipment revenue is the lower of the acquired cost or the net realizable value of the specific piece of equipment sold. • Parts: Cost of parts revenue is the lower of the acquired cost or the market value of the parts sold, based on average costing. • Service: Cost of service revenue represents costs attributable to services provided for the maintenance and repair of customer-owned equipment and equipment then on-rent by customers. • Rental and other: Costs of other revenue represent costs associated with equipment rental, such as depreciation, maintenance and repairs, as well as costs associated providing transportation, hauling, parts freight, GPS subscriptions and damage waivers, including, among other items, drivers' wages, truck depreciation, fuel costs, shipping costs and our costs related to damage waiver policies. 29 Table of Conten ts Operating Expenses Our operating expenses include sales and marketing expenses, sales commissions (which generally are based upon equipment gross profit margins), payroll and related benefit costs, insurance expenses, professional fees, property rental and related costs, property and other taxes, administrative overhead, and depreciation associated with property and equipment (other than rental and trucking equipment).
Cost of Revenue • Equipment: Cost of equipment revenue is the lower of the acquired cost or the net realizable value of the specific piece of equipment sold. • Parts: Cost of parts revenue is the lower of the acquired cost or the market value of the parts sold, based on average costing. • Service: Cost of service revenue represents costs attributable to services provided for the maintenance and repair of customer-owned equipment and equipment then on-rent by customers. 32 Table of Contents • Rental and other: Costs of other revenue represent costs associated with equipment rental, such as depreciation, maintenance and repairs, as well as costs associated with providing transportation, hauling, parts freight, GPS subscriptions and damage waivers, including, among other items, drivers' wages, truck depreciation, fuel costs, shipping costs and our costs related to damage waiver policies.
Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management's beliefs and assumptions, which in turn are based on currently available information.
While we believe that the forward-looking statements in this Form 10-K are reasonable, such statements are only predictions and are not guarantees of performance. These statements are based on our management's beliefs and assumptions, which in turn are based on currently available information.
Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results that differ materially from those contained in any forward-looking statement. Many of these factors are beyond our ability to control or predict.
Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results that differ materially from those contained in any forward-looking statement.
In total, valuation allowances of $6.0 million existed for certain of our international entities as of January 31, 2022. The initial recognition of, and any changes in, a deferred tax asset valuation allowance are recorded to the provision for income taxes and impacts our effective tax rate.
The initial recognition of, and any changes in, a deferred tax asset valuation allowance are recorded to the provision for income taxes and impacts our effective tax rate.
Our estimates of the value of trade-in assets are impacted by changing market values of used equipment and the availability of relevant and reliable third-party data.
Our estimates of the value of trade-in assets are impacted by changing market values of used equipment and the availability of relevant and reliable third-party data. In instances in which relevant third-party information is not available, the value assigned to trade-in equipment is dependent on internal judgments.
The Company may also decide in the future to finance a portion of our rental fleet as well as our capital expenditures using long-term debt from various lenders.
The Company works with various lenders to finance the purchase of real estate we currently lease or are acquiring through an acquisition. The Company may also decide in the future to finance a portion of our rental fleet as well as our capital expenditures using long-term debt from various lenders.
We will continue to work with our manufacturers to source future inventory to fulfill as much customer demand as possible. Macroeconomic and Industry Factors Our Agriculture and International businesses are primarily driven by the demand for agricultural equipment for use in the production of food, fiber, feed grain and renewable energy.
Macroeconomic and Industry Factors Our Agriculture and International businesses are primarily driven by the demand for agricultural equipment for use in the production of food, fiber, feed grain and renewable energy.
Provision for Income Taxes Year Ended January 31, Percent 2023 2022 Increase Change (dollars in thousands) Provision for Income Taxes $ 33,373 $ 20,854 $ 12,519 60.0 % Our effective tax rate increased from 24.0% in fiscal 2022 to 24.7% in fiscal 2023.
Provision for Income Taxes Year Ended January 31, Percent 2024 2023 Increase Change (dollars in thousands) Provision for Income Taxes $ 38,599 $ 33,373 $ 5,226 15.7 % Our effective tax rate increased from 24.7% in fiscal 2023 to 25.6% in fiscal 2024.
Information Regarding Forward-Looking Statements The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements.
Information Regarding Forward-Looking Statements The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act.
(2) Adjustments are net of the impact of amounts allocated to participating securities where applicable Liquidity and Capital Resources Sources of Liquidity Our primary sources of liquidity are cash reserves, cash generated from operations, and borrowings under our floorplan payable and other credit facilities.
Liquidity and Capital Resources Sources of Liquidity Our primary sources of liquidity are cash reserves, cash generated from operations, and borrowings under our floorplan payable and other credit facilities.
In fiscal 2023, we used $10.0 million in cash for rental fleet purchases and $27.2 million in cash for property and equipment purchases and financed $6.4 million in property and equipment purchases with long-term debt and finance leases.
In fiscal 2024, we used $10.8 million in cash for rental fleet purchases and $51.5 million in cash for property and equipment purchases and financed $17.9 million in property and equipment purchases with long-term debt and finance leases.
Generally, used equipment prices are more volatile to changes in market conditions than prices for new equipment due to incentive programs that may be offered by manufacturers to assist in the sale of new equipment. We review our equipment inventory values and adjust them whenever the carrying amount exceeds the estimated net realizable value.
Generally, used equipment prices are more volatile to changes in market conditions than prices for new equipment due to incentive programs that may be offered by manufacturers to assist in the sale of new equipment.
Our equity in equipment inventory, which reflects the portion of our equipment inventory balance that is not financed by floorplan payables, decreased to 51.7% as of January 31, 2023, from 58.2% as of January 31, 2022. The decrease was primarily due to drawing on our floorplan loan with the Bank Syndicate to finance acquisitions in fiscal 2023.
Our equity in equipment inventory, which reflects the portion of our equipment inventory balance that is not financed by floorplan payables, decreased to 18.2% as of January 31, 2024, from 51.7% as of January 31, 2023.
Additional details on each of these credit facilities are disclosed in Note 8 to our consolidated financial statements included in this annual report. 37 Table of Conten ts As of January 31, 2023, the Company was not subject to the fixed charge ratio covenant under the Bank Syndicate Agreement as our adjusted excess availability plus eligible cash collateral (as defined in the Bank Syndicate Agreement) was not less than 15% of the total amount of the credit facility.
As of January 31, 2024, the Company was not subject to the fixed charge ratio covenant under the Bank Syndicate Agreement as our adjusted excess availability plus eligible cash collateral (as defined in the Bank Syndicate Agreement) was not less than 15% of the total amount of the credit facility.
Year Ended January 31, 2023 2022 (dollars in thousands) Equipment Revenue $ 1,711,559 $ 1,291,684 Cost of revenue 1,477,539 1,130,205 Gross profit $ 234,020 $ 161,479 Gross profit margin 13.7 % 12.5 % Parts Revenue $ 327,196 $ 266,916 Cost of revenue 220,418 186,324 Gross profit $ 106,778 $ 80,592 Gross profit margin 32.6 % 30.2 % Service Revenue $ 129,803 $ 115,641 Cost of revenue 46,208 38,771 Gross profit $ 83,595 $ 76,870 Gross profit margin 64.4 % 66.5 % Rental and other Revenue $ 40,748 $ 37,665 Cost of revenue 25,302 23,882 Gross profit $ 15,446 $ 13,783 Gross profit margin 37.9 % 36.6 % 31 Table of Conten ts The following table sets forth our statements of operations data expressed as a percentage of revenue for the fiscal years indicated.
Year Ended January 31, 2024 2023 (dollars in thousands) Equipment Revenue $ 2,145,316 $ 1,711,559 Cost of revenue 1,864,558 1,477,539 Gross profit $ 280,758 $ 234,020 Gross profit margin 13.1 % 13.7 % Parts Revenue $ 410,841 $ 327,196 Cost of revenue 279,921 220,418 Gross profit $ 130,920 $ 106,778 Gross profit margin 31.9 % 32.6 % Service Revenue $ 157,315 $ 129,803 Cost of revenue 53,981 46,208 Gross profit $ 103,334 $ 83,595 Gross profit margin 65.7 % 64.4 % Rental and other Revenue $ 44,973 $ 40,748 Cost of revenue 28,631 25,302 Gross profit $ 16,342 $ 15,446 Gross profit margin 36.3 % 37.9 % The following table sets forth our statements of operations data expressed as a percentage of revenue for the fiscal years indicated.
Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
Inventories New and used equipment inventories are stated at the lower of cost or net realizable value, determined for each piece of equipment (specific identification). Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
Please refer to Note 8 to our consolidated financial statement included in Item 8 for further information regarding the Company's line of credit. Our equipment inventory turnover decreased slightly to 3.3 times for fiscal 2023 compared to 3.4 times for fiscal 2022. Our equipment inventory balance increased 65.1% from January 31, 2022 to January 31, 2023.
Please refer to Note 8, Floorplan Payable/Lines of Credit , of the Notes to our Consolidated Financial Statement included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for further information regarding the Company's line of credit. Our equipment inventory turnover decreased to 2.2 times for fiscal 2024 compared to 3.3 times for fiscal 2023.
Likewise, any decline in federal allocations to public infrastructure spending over the next few years should negatively impact our future results of operations. Seasonality & Weather The agricultural and construction equipment businesses are highly seasonal, which causes our quarterly results and our available cash flow to fluctuate during the year.
Seasonality & Weather The agricultural and construction equipment businesses are highly seasonal, which causes our quarterly results and our available cash flow to fluctuate during the year.
To date, in those instances in which we have experienced cost increases, we have been able to increase selling prices to offset much of the increases and expect to continue to do so in the future. 27 Table of Conten ts Significant Items Impacting Our Financial Position and Results of Operations Heartland Acquisition On August 1, 2022 we acquired all interests of three entities, Heartland Agriculture, LLC, Heartland Solutions, LLC, and Heartland Leveraged Lender, LLC, (collectively referred to as "Heartland Companies").
To date, in those instances in which we have experienced cost increases, we have been able to increase selling prices to offset much of the increases and expect to continue to do so in the future. Significant Items Impacting Our Financial Position and Results of Operations J.J. O’Connor & Sons Pty. Ltd.
Industry reports show that demand for construction equipment in our markets is driven by several factors, one of which is public infrastructure spending, including roads and highways, sewer and water. Any growth in federal allocations to public infrastructure spending over the next few years should positively impact our future results of operations.
Our Construction business is primarily impacted by the demand for construction equipment for use in private and government commercial, residential, and infrastructure construction; demolition; maintenance; energy and forestry operations. Industry reports show that demand for construction equipment in our markets is driven by several factors, one of which is public infrastructure spending, including roads and highways, sewer and water.
Cash Flow Provided By (Used For) Financing Activities Net cash provided by financing activities was $22.0 million in fiscal 2023, compared to net cash used for financing activities of $35.3 million in fiscal 2022. In fiscal 2023, net cash provided by financing activities was the result of increased non-manufacturer floorplan payables, which was used to finance acquisitions in fiscal 2023.
Cash Flow Provided By Financing Activities Net cash provided by financing activities was $188.6 million in fiscal 2024, compared to $22.0 million in fiscal 2023. the increase in net cash provided by financing activities was the result of increased non-manufacturer floorplan payables in fiscal 2024, as the Company drew on its Bank Syndicate Agreement floorplan loan in fiscal 2024, to finance higher inventory levels.
Other Income (Expense) Year Ended January 31, Increase/ Percent 2023 2022 (Decrease) Change (dollars in thousands) Interest and other income (expense) $ 3,862 $ 2,431 $ 1,431 58.9 % Floorplan interest expense (1,875) (1,175) 700 59.6 % Other interest expense (5,069) (4,537) 532 11.7 % The increase in interest and other income (expense) compared to fiscal 2022 is primarily the result of a strengthening U.S. dollar relative to the Euro thus creating foreign currency gains in fiscal 2023.
Other Income (Expense) Year Ended January 31, Increase/ Percent 2024 2023 (Decrease) Change (dollars in thousands) Interest and other income (expense) $ 3,300 $ 3,862 $ (562) (14.6) % Floorplan interest expense (13,802) (1,875) 11,927 636.1 % Other interest expense (7,303) (5,069) 2,234 44.1 % The decrease in interest and other income (expense) compared to fiscal 2023 was primarily the result of changes in foreign currency fluctuations.
The Company's business systems in Ukraine have continued 25 Table of Conten ts to function but have been, and could continue to be, negatively impacted in the future.
The Company's business systems in Ukraine have continued to function but have been, and could continue to be, negatively impacted in the future. To date, the impact of this conflict has not been and is not expected to be material to Titan Machinery’s consolidated business operations and financial performance.
Total cash consideration paid for the business was $94.4 million, which was financed through available cash resources and line of credit availability. The locations of the 12 Heartland Companies are included within our Agriculture segment. Mark's Machinery Acquisition On April 1, 2022, we acquired certain assets of Mark's Machinery, Inc.
Total cash consideration paid for the Heartland Companies was $94.4 million, which was financed through available cash resources and line of credit availability.
The improvement in segment results was primarily the result of higher equipment revenue along with stronger gross profit margin on equipment driven by increased demand. Construction Construction segment revenue for fiscal 2023 decreased 2.7% or $8.7 million compared to fiscal 2022.
The improvement in segment results was primarily the result of higher revenue partially offset by higher operating expenses due to variable expenses associated with increased sales. Construction Construction segment revenue for fiscal 2024 increased 7.8%, or $24.0 million, compared to fiscal 2023.
Year Ended January 31, 2023 2022 Revenue Equipment 77.5 % 75.4 % Parts 14.8 % 15.6 % Service 5.9 % 6.8 % Rental and other 1.8 % 2.2 % Total Revenue 100.0 % 100.0 % Total Cost of Revenue 80.1 % 80.6 % Gross Profit Margin 19.9 % 19.4 % Operating Expenses 13.6 % 14.1 % Impairment of Intangible and Long-Lived Assets — % 0.1 % Income from Operations 6.3 % 5.3 % Other Income (Expense) (0.2) % (0.2) % Income Before Income Taxes 6.1 % 5.1 % Provision for Income Taxes 1.5 % 1.2 % Net Income 4.6 % 3.9 % Fiscal Year Ended January 31, 2023 Compared to Fiscal Year Ended January 31, 2022 Consolidated Results Revenue Year Ended January 31, Increase/ Percent 2023 2022 (Decrease) Change (dollars in thousands) Equipment $ 1,711,559 $ 1,291,684 $ 419,875 32.5 % Parts 327,196 266,916 60,280 22.6 % Service 129,803 115,641 14,162 12.2 % Rental and other 40,748 37,665 3,083 8.2 % Total Revenue $ 2,209,306 $ 1,711,906 $ 497,400 29.1 % The increase in total revenue for fiscal 2023, as compared to fiscal 2022, was primarily the result of Company-wide same-store sales increase of 22.4% over the prior fiscal year and our acquisitions of Jaycox Implement, Mark's Machinery, and the Heartland Companies, completed in December 2021, April 2022, and August 2022, respectively, which was partially offset by the divestitures in Billings, Great Falls, and Missoula, Montana and Gillette, Wyoming, in January 2022, and Fargo, North Dakota in March 2022.
Year Ended January 31, 2024 2023 Revenue Equipment 77.8 % 77.5 % Parts 14.9 % 14.8 % Service 5.7 % 5.9 % Rental and other 1.6 % 1.8 % Total Revenue 100.0 % 100.0 % Total Cost of Revenue 80.7 % 80.1 % Gross Profit Margin 19.3 % 19.9 % Operating Expenses 13.1 % 13.6 % Income from Operations 6.2 % 6.3 % Other Income (Expense) (0.7) % (0.2) % Income Before Income Taxes 5.5 % 6.1 % Provision for Income Taxes 1.4 % 1.5 % Net Income 4.1 % 4.6 % 34 Table of Contents Fiscal Year Ended January 31, 2024 Compared to Fiscal Year Ended January 31, 2023 Consolidated Results Revenue Year Ended January 31, Increase/ Percent 2024 2023 (Decrease) Change (dollars in thousands) Equipment $ 2,145,316 $ 1,711,559 $ 433,757 25.3 % Parts 410,841 327,196 83,645 25.6 % Service 157,315 129,803 27,512 21.2 % Rental and other 44,973 40,748 4,225 10.4 % Total Revenue $ 2,758,445 $ 2,209,306 $ 549,139 24.9 % The increase in total revenue for fiscal 2024, as compared to fiscal 2023, was primarily the result of Company-wide same-store sales increase of 10.1% over the prior fiscal year and our acquisitions of the Heartland Companies, Pioneer Farm Equipment Co.
In fiscal 2023, CNH Industrial supplied approximately 76% of the new equipment sold in our Agriculture segment, 76% of the new equipment sold in our Construction segment, and 60% of the new equipment sold in our International segment, and represented a significant portion of our parts revenue.
In fiscal 2024, CNH Industrial supplied approximately 71% of our new equipment revenue on a consolidated basis and 75%, 81%, 51%, and 58% in our Agriculture, Construction, Europe, and Australia segments, respectively, and represented a significant portion of our parts revenue.
In conjunction with the acquisition, we purchased the real estate for $5.5 million which was financed with available cash and long term debt. The three Jaycox locations are included within our Agriculture segment. Key Financial Metrics In addition to tracking our sales and expenses to evaluate our operational performance, we also monitor the following key financial metrics.
The 12 Heartland Companies store locations are included within our Agriculture segment. 31 Table of Contents Key Financial Metrics In addition to tracking our sales and expenses to evaluate our operational performance, we also monitor the following key financial metrics.
The higher revenue was driven primarily by an increase in same-store sales of 29.3% for fiscal 2023, as compared to fiscal 2022, as well as the acquisitions of Jaycox Implement, Mark's Machinery, and the Heartland Companies in December 2021, April 2022, and August 2022, respectively.
The higher revenue was driven primarily by the acquisitions of the Heartland Companies and Pioneer in August 2022 and February 2023, respectively, as well as an increase in same-store sales of 12.1%. The same-store sales increase was primarily driven by equipment sales, which benefited from improved availability of inventory and the sustained high demand for new and used equipment.
The strong same store sales increase was primarily driven by agriculture equipment sales, which benefited from high demand levels that were supported by higher commodity prices and higher net farm income. 32 Table of Conten ts Gross Profit Year Ended January 31, Increase/ Percent 2023 2022 (Decrease) Change (dollars in thousands) Gross Profit Equipment $ 234,020 $ 161,479 $ 72,541 44.9 % Parts 106,778 80,592 26,186 32.5 % Service 83,595 76,870 6,725 8.7 % Rental and other 15,446 13,783 1,663 12.1 % Total Gross Profit $ 439,839 $ 332,724 $ 107,115 32.2 % Gross Profit Margin Equipment 13.7 % 12.5 % 1.2 % 9.6 % Parts 32.6 % 30.2 % 2.4 % 7.9 % Service 64.4 % 66.5 % (2.1) % (3.2) % Rental and other 37.9 % 36.6 % 1.3 % 3.6 % Total Gross Profit Margin 19.9 % 19.4 % 0.5 % 2.6 % Gross Profit Mix Equipment 53.2 % 48.6 % 4.6 % 9.5 % Parts 24.3 % 24.2 % 0.1 % 0.4 % Service 19.0 % 23.1 % (4.1) % (17.7) % Rental and other 3.5 % 4.1 % (0.6) % (14.6) % Total Gross Profit Mix 100.0 % 100.0 % Gross profit increased 32.2% or $107.1 million from fiscal 2022 to fiscal 2023, primarily due to higher revenue and gross profit from our equipment and parts business.
Gross Profit Year Ended January 31, Increase/ Percent 2024 2023 (Decrease) Change (dollars in thousands) Gross Profit Equipment $ 280,758 $ 234,020 $ 46,738 20.0 % Parts 130,920 106,778 24,142 22.6 % Service 103,334 83,595 19,739 23.6 % Rental and other 16,342 15,446 896 5.8 % Total Gross Profit $ 531,354 $ 439,839 $ 91,515 20.8 % Gross Profit Margin Equipment 13.1 % 13.7 % (0.6) % (4.4) % Parts 31.9 % 32.6 % (0.7) % (2.1) % Service 65.7 % 64.4 % 1.3 % 2.0 % Rental and other 36.3 % 37.9 % (1.6) % (4.2) % Total Gross Profit Margin 19.3 % 19.9 % (0.6) % (3.0) % Gross Profit Mix Equipment 52.8 % 53.2 % (0.4) % (0.8) % Parts 24.6 % 24.3 % 0.3 % 1.2 % Service 19.4 % 19.0 % 0.4 % 2.1 % Rental and other 3.2 % 3.5 % (0.3) % (8.6) % Total Gross Profit Mix 100.0 % 100.0 % Gross profit increased 20.8% or $91.5 million from fiscal 2023 to fiscal 2024, primarily due to higher revenue and gross profit from our equipment, parts, and service business.
There were no fixed or intangible asset impairment charges recognized in fiscal 2023, while $1.5 million of charges were recognized in fiscal 2022 related to the impairment of certain intangible and long-lived assets of our German subsidiary. 35 Table of Conten ts Shared Resources/Eliminations We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments.
Our Australia segment income before income taxes was $4.1 million for fiscal 2024. 37 Table of Contents Shared Resources/Eliminations We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments.
The decrease in operating expenses as a percentage of total revenue was due to the increase in total revenue in fiscal 2023 compared to fiscal 2022, which positively affected our ability to leverage our fixed operating costs. 33 Table of Conten ts Impairment Charges Year Ended January 31, Percent 2023 2022 Decrease Change (dollars in thousands) Impairment of Intangible and Long-Lived Assets — 1,498 (1,498) n/m During fiscal 2023, the Company did not recognize any impairment charges.
The decrease in operating expenses as a percentage of total revenue was due to the increase in total revenue in fiscal 2024 compared to fiscal 2023, which positively affected our ability to leverage our fixed operating costs.
You should read the risk factors and the other cautionary statements made in this Form 10-K as being applicable to all related forward-looking statements wherever they appear in this Form 10-K. We cannot assure you that the forward-looking statements in this Form 10-K will prove to be accurate.
We cannot assure you that the forward-looking statements in this Form 10-K will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material.
The Construction segment income before income taxes was $18.6 million for fiscal 2023 compared to income of $15.5 million for the prior year. The improvement in segment results was primarily due to increased construction activity within our footprint and an increase in rental fleet utilization.
The Construction segment income before income taxes was $18.3 million for fiscal 2024 compared to income of $18.6 million for the prior year.
As of January 31, 2023, the Company was in compliance with the financial covenants under its credit agreements.
As of January 31, 2024, the Company was in compliance with the financial covenants under its credit agreements. Additional details on each of these credit facilities are disclosed in Note 8 to our consolidated financial statements included in this Form 10-K.
The driver was an increase in acquisition activity, as the Company utilized $100.5 million of cash for acquisitions in fiscal 2023, compared to $33.6 million in the prior year.
The primarily driver was due to an increase of $25.2 million in cash used for purchases of property and equipment and increase of $7.1 million in acquisition activity compared to prior year.
As of January 31, 2023, the Company did not have a need to utilize any of the Revolver Loan, as such the outstanding balance was zero. The Company works with various lenders to finance the purchase of real estate we currently lease or are acquiring through an acquisition.
The Revolver Loan is used to finance our working capital requirements and fund certain capital expenditures, as needed. As of January 31, 2024, the Company did not have a need to utilize any of the Revolver Loan, as such the outstanding balance was zero.
Operating Expenses Year Ended January 31, Increase/ Percent 2023 2022 (Decrease) Change (dollars in thousands) Operating Expenses $ 301,516 $ 241,044 $ 60,472 25.1 % Operating Expenses as a Percentage of Revenue 13.6 % 14.1 % (0.5) % (3.5) % Operating expenses for fiscal 2023 increased $60.5 million, as compared to fiscal 2022.
The lower absorption rate in fiscal 2024 compared to fiscal 2023, was primarily impacted by a significant rise in floorplan interest expense in fiscal 2024, the fiscal 2023 absorption rate was also favorably impacted by a gain of $1.4 million recognized on the divestiture of our consumer products store in North Dakota in the first quarter of fiscal 2023. 35 Table of Contents Operating Expenses Year Ended January 31, Increase/ Percent 2024 2023 (Decrease) Change (dollars in thousands) Operating Expenses $ 362,509 $ 301,516 $ 60,993 20.2 % Operating Expenses as a Percentage of Revenue 13.1 % 13.6 % (0.5) % (3.7) % Operating expenses for fiscal 2024 increased $61.0 million, as compared to fiscal 2023.
However, high dollar utilization of our rental fleet has a positive impact on gross profit margin and gross profit dollars. Adjusted EBITDA EBITDA is a non-GAAP financial measure defined as earnings before finance costs, income taxes, depreciation and amortization and is a metric frequently used to assess and evaluate financial performance.
However, high dollar utilization of our rental fleet has a positive impact on gross profit margin and gross profit dollars.
Long-Term Debt Facilities As of January 31, 2023, we had a $65.0 million working capital line of credit under the Bank Syndicate Agreement (the "Revolver Loan"). The Revolver Loan is used to finance our working capital requirements and fund certain capital expenditures, as needed.
The decrease in our equity in equipment inventory is primarily due to the stocking of new equipment inventories as availability has improved, as well as drawing on our floorplan loan with the Bank Syndicate in conjunction with the O'Connors acquisition. 38 Table of Contents Long-Term Debt Facilities As of January 31, 2024, we had a $75.0 million working capital line of credit under the Bank Syndicate Agreement (the "Revolver Loan").

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeConversely, a one percentage point decrease in interest rates for the next 12-month period would result in an increase to pre-tax earnings and cash flow of approximately $0.5 million. At January 31, 2023, we had total floorplan payables outstanding of $258.4 million, of which $45.4 million was interest-bearing at variable interest rates and $213.0 million was non-interest bearing.
Biggest changeConversely, a one percentage point decrease in interest rates for the next 12-month period would result in an increase to pre-tax earnings and cash flow of approximately $3.9 million. At January 31, 2024, we had total floorplan payables outstanding of $893.8 million, of which $386.0 million was interest-bearing at variable interest rates and $507.7 million was non-interest bearing.
Based upon balances and exchange rates as of January 31, 2023, holding other variables constant, we believe that a hypothetical 10% increase or decrease in all applicable foreign exchange rates would not have a material impact on our results of operations or cash flows.
Based upon balances and exchange rates as of January 31, 2024, holding other variables constant, we believe that a hypothetical 10% increase or decrease in all applicable foreign exchange rates would not have a material impact on our results of operations or cash flows.
As of January 31, 2023, our Ukrainian subsidiary had $(0.2) million of net monetary assets denominated in Ukrainian hryvnia (UAH). We have attempted to minimize our net monetary asset position through reducing overall asset levels in Ukraine and through borrowing in UAH which serves as a natural hedging instrument offsetting our net UAH denominated assets.
As of January 31, 2024, our Ukrainian subsidiary had $1.0 million of net monetary liabilities denominated in Ukrainian hryvnia (UAH). We have attempted to minimize our net monetary asset position through reducing overall asset levels in Ukraine and through borrowing in UAH which serves as a natural hedging instrument offsetting our net UAH denominated assets.
We believe that a hypothetical 10% increase or decrease in all applicable foreign exchange rates, holding all other variables constant, would not have a material impact on our results of operations or cash flows. 43 Table of Conten ts
We believe that a hypothetical 10% increase or decrease in all applicable foreign exchange rates, holding all other variables constant, would not have a material impact on our results of operations or cash flows. 45 Table of Contents
Based upon our interest-bearing balances and interest rates as of January 31, 2023, holding other variables constant, a one percentage point increase in interest rates for the next 12-month period would decrease pre-tax earnings and cash flow by approximately $0.5 million.
Based upon our interest-bearing balances and interest rates as of January 31, 2024, holding other variables constant, a one percentage point increase in interest rates for the next 12-month period would decrease pre-tax earnings and cash flow by approximately $3.9 million.
In addition, at January 31, 2023, we had total long-term debt outstanding and finance lease liabilities of $99.6 million, primarily all of which is fixed rate debt. Foreign Currency Exchange Rate Risk Our foreign currency exposures arise as the result of our foreign operations.
In addition, at January 31, 2024, we had total long-term debt outstanding and finance lease liabilities of $122.1 million, primarily all of which is fixed rate debt. Foreign Currency Exchange Rate Risk Our foreign currency exposures arise as the result of our foreign operations.

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