### Table of Contents

 

 

 

### **UNITED STATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, DC  20549**

 

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**FORM 10-Q**

 

**QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF**

**THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended July 31, 2008**

 

**Commission File No. 000-1409171**

 

**TITAN MACHINERY INC.**

(Exact name of registrant as specified in itscharter)

 

| **Delaware**                                                      | ** ** | **No. 45-0357838**              |
|-------------------------------------------------------------------|------------|--------------------------------------|
| (State  or Other Jurisdiction of

Incorporation  or Organization) |       | (IRS  Employer

Identification  No.) |

 

**4876Rocking Horse CircleFargo, ND 58104-6049**

(Address ofPrincipal Executive Offices)

 

Registrant’stelephone number**(701) 356-0130**

 

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Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the ExchangeAct of 1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.

YES  x    NO  o

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, a non-accelerated filer or a smaller reportingcompany.  See the definitions of “largeaccelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2of the Exchange Act.

 

| Large accelerated filer  o        |   | Accelerated  filer  o         |
|---------------------------------------------|--------|-----------------------------------------|
|                                        |   |                                    |
| Non-accelerated filer o                     |   | Smaller  reporting company  x |
| (Do not check if smaller reporting company) |   |                                    |

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act).

YES  o    NO  x

 

The number of shares outstanding of the registrant’s common stock as ofSeptember 1, 2008 was: Common Stock, $0.00001 par value, 17,639,722 shares.

 

 

 

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Table ofContents

 

**TITAN MACHINERY INC.**

**QUARTERLY REPORT ON FORM 10-Q**

 

**Table ofContents**

 
| **PART I.**   | **FINANCIAL INFORMATION**                                                                                                                      |   |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|               |                                                                                                                                           |   |
| ITEM  1.           | FINANCIAL STATEMENTS                                                                                                                           |   |
|               |                                                                                                                                           |   |
|               | Consolidated Balance Sheets as of  July 31, 2008 and January 31, 2008                                                                |   |
|               |                                                                                                                                           |   |
|               | Consolidated Statements of  Operations for the three and six months ended July 31, 2008 and 2007                                          |   |
|               |                                                                                                                                           |   |
|               | Consolidated  Statements of Stockholders’ Equity for the fiscal year ended January 31,  2008 and six months ended July 31, 2008 |   |
|               |                                                                                                                                           |   |
|               | Consolidated Statements of  Cash Flows for the six months ended July 31, 2008 and 2007                                                    |   |
|               |                                                                                                                                           |   |
|               | Notes to  Consolidated Financial Statements                                                                                                    |   |
|               |                                                                                                                                           |   |
| ITEM 2.            | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                                    |   |
|               |                                                                                                                                           |   |
| ITEM 3.            | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                                                    |   |
|               |                                                                                                                                           |   |
| ITEM 4.            | CONTROLS AND  PROCEDURES                                                                                                                       |   |
|               |                                                                                                                                           |   |
| **PART II.**  | **OTHER INFORMATION**                                                                                                                          |   |
|               |                                                                                                                                           |   |
| ITEM 1.            | LEGAL PROCEEDINGS                                                                                                                              |   |
|               |                                                                                                                                           |   |
| ITEM 1A.           | RISK FACTORS                                                                                                                                   |   |
|               |                                                                                                                                           |   |
| ITEM 2.            | UNREGISTERED  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                                                                   |   |
|               |                                                                                                                                           |   |
| ITEM 3.            | DEFAULTS  UPON SENIOR SECURITIES                                                                                                               |   |
|               |                                                                                                                                           |   |
| ITEM 4.            | SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                                           |   |
|               |                                                                                                                                           |   |
| ITEM 5.            | OTHER INFORMATION                                                                                                                              |   |
|               |                                                                                                                                           |   |
| ITEM  6.           | EXHIBITS                                                                                                                                       |   |
|               |                                                                                                                                           |   |
| Signatures         |                                                                                                                                           |   |
|               |                                                                                                                                           |   |
| Exhibit Index |                                                                                                                                           |   |
|                    |                                                                                                                                                |        |  |  |  |  |  |

 

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Table of Contents

 

**PART I. – FINANCIAL INFORMATION**

 

**ITEM 1.****                 ****FINANCIALSTATEMENTS**

 

**TITAN MACHINERY INC.**

**CONSOLIDATED BALANCE SHEETS**

 
| ** **                                                                                                                                                            | ** ** | **July 31,** | ** **  | **January 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|-------------|----------------------|------------|
| ** **                                                                                                                                                            | ** ** | **2008**          | ** **  | **2008**             | ** ** |
| ** **                                                                                                                                                            | ** ** | **(Unaudited)**   | ** **  | ** **           | ** ** |
| **ASSETS**                                                                                                                                                            | ** ** | ** **        | ** **  | ** **           | ** ** |
|                                                                                                                                                                  |       |              |        |                 |       |
| CURRENT ASSETS                                                                                                                                                        |       |              |        |                 |       |
| Cash and cash  equivalents                                                                                                                                            |       | $                 | 86,986,230  |                 | $          | 42,802,505 |   |
| Receivables, net                                                                                                                                                      |       | 30,990,211        |        | 22,061,275           |       |
| Inventories                                                                                                                                                           |       | 183,170,750       |        | 145,766,866          |       |
| Prepaid expenses                                                                                                                                                      |       | 377,570           |        | 215,312              |       |
| Income taxes  receivable                                                                                                                                              |       | 649,822           |        | 1,074,216            |       |
| Deferred income  taxes                                                                                                                                                |       | 1,174,000         |        | 1,027,000            |       |
|                                                                                                                                                                  |       |              |        |                 |       |
| Total current  assets                                                                                                                                                 |       | 303,348,583       |        | 212,947,174          |       |
|                                                                                                                                                                  |       |              |        |                 |       |
| INTANGIBLES AND  OTHER ASSETS                                                                                                                                         |       |              |        |                 |       |
| Parts inventory  in excess of amounts expected to be sold currently                                                                                                   |       | 1,899,000         |        | 1,480,000            |       |
| Goodwill                                                                                                                                                              |       | 8,998,264         |        | 8,271,133            |       |
| Intangible  assets, net of accumulated amortization                                                                                                                   |       | 226,051           |        | 337,242              |       |
| Other                                                                                                                                                                 |       | 377,321           |        | 311,581              |       |
|                                                                                                                                                                  |       | 11,500,636        |        | 10,399,956           |       |
|                                                                                                                                                                  |       |              |        |                 |       |
| PROPERTY AND  EQUIPMENT, net of accumulated depreciation                                                                                                              |       | 23,161,056        |        | 16,022,336           |       |
|                                                                                                                                                                  |       |              |        |                 |       |
|                                                                                                                                                                  |       | $                 | 338,010,275 |                 | $          | 239,369,466 |   |
|                                                                                                                                                                  |       |              |        |                 |       |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                        |       |              |        |                 |       |
|                                                                                                                                                                  |       |              |        |                 |       |
| CURRENT  LIABILITIES                                                                                                                                                  |       |              |        |                 |       |
| Accounts payable                                                                                                                                                      |       | $                 | 13,118,133  |                 | $          | 9,244,064 |   |
| Floorplan notes  payable                                                                                                                                              |       | 118,148,218       |        | 105,847,648          |       |
| Current  maturities of long-term debt                                                                                                                                 |       | 1,556,920         |        | 5,653,840            |       |
| Customer  deposits                                                                                                                                                    |       | 29,347,882        |        | 19,309,533           |       |
| Accrued expenses                                                                                                                                                      |       | 6,376,984         |        | 6,137,842            |       |
|                                                                                                                                                                  |       |              |        |                 |       |
| Total current  liabilities                                                                                                                                            |       | 168,548,137       |        | 146,192,927          |       |
|                                                                                                                                                                  |       |              |        |                 |       |
| LONG-TERM  LIABILITIES                                                                                                                                                |       |              |        |                 |       |
| Long-term debt,  less current maturities                                                                                                                              |       | 2,712,474         |        | 13,082,795           |       |
| Deferred income  taxes                                                                                                                                                |       | 2,662,000         |        | 1,865,000            |       |
| Other long term  liabilities                                                                                                                                          |       | 2,045,209         |        | 811,689              |       |
|                                                                                                                                                                  |       | 7,419,683         |        | 15,759,484           |       |
|                                                                                                                                                                  |       |              |        |                 |       |
| SUBORDINATED  DEBENTURES                                                                                                                                              |       | —            |        | 1,300,000            |       |
|                                                                                                                                                                  |       |              |        |                 |       |
| STOCKHOLDERS’  EQUITY                                                                                                                                            |       |              |        |                 |       |
| Common stock,  par value $.00001 per share, authorized - 25,000,000 shares; issued and  outstanding - 17,636,367 at July 31, 2008 and 13,440,654, at January 31, 2008 |       | 176               |        | 134                  |       |
| Additional  paid-in-capital                                                                                                                                           |       | 137,385,435       |        | 58,179,695           |       |
| Retained  earnings                                                                                                                                                    |       | 24,656,844        |        | 17,937,226           |       |
|                                                                                                                                                                  |       | 162,042,455       |        | 76,117,055           |       |
|                                                                                                                                                                  |       |              |        |                 |       |
|                                                                                                                                                                  |       | $                 | 338,010,275 |                 | $          | 239,369,466 |   |

 

See Notes toConsolidated Financial Statements

 

1

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Table of Contents

 

**TITAN MACHINERY INC.**

**CONSOLIDATED STATEMENTS OFOPERATIONS (UNAUDITED)**

 
| ** **                               | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                               | ** ** | **July 31,**                | ** ** | **July 31,**              | ** ** |
| ** **                               | ** ** | **2008**                         | ** ** | **2007**                       | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                     |       |                             |       |                           |       |   |   |   |   |
| REVENUE                                  |       |                             |       |                           |       |   |   |   |   |
| Equipment                                |       | $                                | 97,840,658 |                           | $          | 61,379,738 |   | $ | 218,754,141 |   | $ | 122,482,367 |   |
| Parts                                    |       | 23,612,450                       |       | 14,851,106                     |       | 45,116,466 |   | 27,176,063 |   |
| Service                                  |       | 10,787,741                       |       | 7,647,462                      |       | 19,731,969 |   | 13,040,797 |   |
| Other, including  trucking and rental    |       | 2,664,647                        |       | 1,933,562                      |       | 3,884,832 |   | 2,939,351 |   |
| TOTAL REVENUE                            |       | 134,905,496                      |       | 85,811,868                     |       | 287,487,408 |   | 165,638,578 |   |
|                                     |       |                             |       |                           |       |   |   |   |   |
| COST OF REVENUE                          |       |                             |       |                           |       |   |   |   |   |
| Equipment                                |       | 86,986,321                       |       | 55,643,074                     |       | 194,904,237 |   | 110,532,663 |   |
| Parts                                    |       | 16,689,276                       |       | 10,866,465                     |       | 32,482,985 |   | 20,016,144 |   |
| Service                                  |       | 3,907,049                        |       | 2,669,663                      |       | 7,324,779 |   | 4,887,586 |   |
| Other, including  trucking and rental    |       | 1,894,049                        |       | 1,290,608                      |       | 2,747,256 |   | 2,041,358 |   |
| TOTAL COST OF  REVENUE                   |       | 109,476,695                      |       | 70,469,810                     |       | 237,459,257 |   | 137,477,751 |   |
|                                     |       |                             |       |                           |       |   |   |   |   |
| GROSS PROFIT                             |       | 25,428,801                       |       | 15,342,058                     |       | 50,028,151 |   | 28,160,827 |   |
|                                     |       |                             |       |                           |       |   |   |   |   |
| OPERATING  EXPENSES                      |       | 19,470,026                       |       | 11,405,643                     |       | 37,651,968 |   | 21,452,384 |   |
|                                     |       |                             |       |                           |       |   |   |   |   |
| INCOME FROM  OPERATIONS                  |       | 5,958,775                        |       | 3,936,415                      |       | 12,376,183 |   | 6,708,443 |   |
|                                     |       |                             |       |                           |       |   |   |   |   |
| OTHER INCOME  (EXPENSE)                  |       |                             |       |                           |       |   |   |   |   |
| Interest and  other income               |       | 450,404                          |       | 70,976                         |       | 760,778 |   | 84,634 |   |
| Floorplan  interest expense              |       | (577,877                         | )          | (952,023                       | )          | (1,299,466 | ) | (1,831,354 | ) |
| Subordinated  debt interest expense      |       | —                           |       | (469,874                       | )          | (20,917 | ) | (878,992 | ) |
| Interest expense  other                  |       | (229,811                         | )          | (139,992                       | )          | (521,960 | ) | (386,272 | ) |
|                                     |       |                             |       |                           |       |   |   |   |   |
| INCOME BEFORE  INCOME TAXES              |       | 5,601,491                        |       | 2,445,502                      |       | 11,294,618 |   | 3,696,459 |   |
|                                     |       |                             |       |                           |       |   |   |   |   |
| PROVISION FOR  INCOME TAXES              |       | (2,269,000                       | )          | (989,000                       | )          | (4,575,000 | ) | (1,467,663 | ) |
|                                     |       |                             |       |                           |       |   |   |   |   |
| NET INCOME                               |       | $                                | 3,332,491  |                           | $          | 1,456,502 |   | $ | 6,719,618 |   | $ | 2,228,796 |   |
|                                     |       |                             |       |                           |       |   |   |   |   |
| ADJUSTMENTS TO  INCOME:                  |       |                             |       |                           |       |   |   |   |   |
| Amortization of  syndication fees        |       | —                           |       | (5,296                         | )          | — |   | (10,592 | ) |
| Unpaid  accumulated preferred dividends  |       | —                           |       | (25,594                        | )          | — |   | (51,188 | ) |
|                                     |       |                             |       |                           |       |   |   |   |   |
| INCOME AVAILABLE  TO COMMON STOCKHOLDERS |       | $                                | 3,332,491  |                           | $          | 1,425,612 |   | $ | 6,719,618 |   | $ | 2,167,016 |   |
|                                     |       |                             |       |                           |       |   |   |   |   |
| EARNINGS PER  SHARE - BASIC              |       | $                                | 0.20       |                           | $          | 0.33 |   | $ | 0.45 |   | $ | 0.50 |   |
| EARNINGS PER  SHARE - DILUTED            |       | $                                | 0.19       |                           | $          | 0.22 |   | $ | 0.43 |   | $ | 0.34 |   |
|                                     |       |                             |       |                           |       |   |   |   |   |
| WEIGHTED AVERAGE  SHARES - BASIC         |       | 16,629,671                       |       | 4,344,753                      |       | 15,005,930 |   | 4,344,753 |   |
| WEIGHTED AVERAGE  SHARES - DILUTED       |       | 17,169,719                       |       | 7,049,941                      |       | 15,511,739 |   | 7,022,385 |   |

 

See Notes toConsolidated Financial Statements

 

2

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Table ofContents

 

**TITAN MACHINERY INC.**

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)**

** **
| ** **                                                                                           | ** ** | ** **            | ** ** | ** **  | ** ** | **Additional** | ** ** | ** **   | ** ** | ** ** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-------------|------------|----------------|------------|--------------|------------|------------|------------|
| ** **                                                                                           | ** ** | **Common Stock** | ** ** | **Paid-In** | ** ** | **Retained**   | ** ** | ** **   | ** ** |
| ** **                                                                                           | ** ** | **Shares**            | ** ** | **Amount**  | ** ** | **Capital**    | ** ** | **Earnings** | ** ** | **Total**  | ** ** |
|                                                                                                 |       |                  |       |        |       |           |       |         |       |       |       |
| BALANCE, JANUARY  31, 2007                                                                           |       | 4,344,753             |       | $           | 43         |           | $          | 514,864      |       | $          | 12,863,630 |   | $ | 13,378,537 |   |
| Common stock  issued in initialpublic offering                                                       |       | 5,442,395             |       | 55          |       | 41,793,588     |       | —       |       | 41,793,643 |       |
| Issuance of  shares for stockacquisition                                                             |       | 235,294               |       | 2           |       | 1,999,997      |       | —       |       | 1,999,999  |       |
| Issuance of  shares for conversion of debt/conversion of redeemable securities/exercise of  warrants |       | 3,339,792             |       | 33          |       | 13,729,791     |       | —       |       | 13,729,824 |       |
| Stock based  compensation expense                                                                    |       | 78,420                |       | 1           |       | 141,455        |       | —       |       | 141,456    |       |
| Unpaid  accumulated dividends                                                                        |       | —                |       | —      |       | —         |       | (87,791      | )          | (87,791    | )          |
| Amortization of  syndication fees                                                                    |       | —                |       | —      |       | —         |       | (51,311      | )          | (51,311    | )          |
| Net income                                                                                           |       | —                | ** ** | **—**  |       | —         |       | 5,212,698    |       | 5,212,698  |       |
|                                                                                                 |       |                  |       |        |       |           |       |         |       |       |       |
| BALANCE, JANUARY  31, 2008                                                                           |       | 13,440,654            |       | 134         |       | 58,179,695     |       | 17,937,226   |       | 76,117,055 |       |
| Common stock  issued in follow-onoffering                                                            |       | 4,180,000             |       | 42          |       | 78,856,657     |       | —       |       | 78,856,699 |       |
| Common stock  issued on exerciseof stock options                                                     |       | 15,713                |       | —      |       | 40,004         |       | —       |       | 40,004     |       |
| Stock based  compensation expense                                                                    |       | —                |       | —      |       | 309,079        |       | —       |       | 309,079    |       |
| Net income                                                                                           |       | —                | ** ** | **—**  |       | —         |       | 6,719,618    |       | 6,719,618  |       |
|                                                                                                 |       |                  |       |        |       |           |       |         |       |       |       |
| BALANCE, JULY  31, 2008                                                                              |       | 17,636,367            |       | $           | 176        |           | $          | 137,385,435  |       | $          | 24,656,844 |   | $ | 162,042,455 |   |

** **

See Notes to Consolidated Financial Statements

 

3

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Table ofContents

 

**TITAN MACHINERY INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**

** **
| ** **                                                                                                                       | ** ** | **Six Months Ended July 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                                                                       | ** ** | **2008**                                          | ** ** | **2007** | ** ** |
|                                                                                                                             |       |                                              |       |   |   |
| OPERATING  ACTIVITIES                                                                                                            |       |                                              |       |   |   |
| Net income                                                                                                                       |       | $                                                 | 6,719,618  |   | $ | 2,228,796 |   |
| Adjustments to  reconcile net income to net cash from operations                                                                 |       |                                              |       |   |   |
| Depreciation                                                                                                                     |       | 1,762,282                                         |       | 1,042,241 |   |
| Amortization                                                                                                                     |       | 111,191                                           |       | 52,149 |   |
| Gain on sale of  equipment                                                                                                       |       | (14,450                                           | )          | (21,668 | ) |
| Deferred income  taxes                                                                                                           |       | 80,355                                            |       | — |   |
| Net change in  other assets                                                                                                      |       | (65,740                                           | )          | 4,779 |   |
| Stock based  compensation expense                                                                                                |       | 309,079                                           |       | 108,000 |   |
| Changes in  assets and liabilities, net of purchase of equipment dealerships assets and  assumption of liabilities               |       |                                              |       |   |   |
| Receivables                                                                                                                      |       | (7,674,260                                        | )          | (402,438 | ) |
| Inventories                                                                                                                      |       | (6,953,477                                        | )          | (47,151 | ) |
| Prepaid expenses                                                                                                                 |       | (162,258                                          | )          | (58,276 | ) |
| Floorplan notes  payable                                                                                                         |       | (1,744,716                                        | )          | (673,097 | ) |
| Accounts payable                                                                                                                 |       | 3,528,481                                         |       | 1,016,070 |   |
| Other long-term  liabilities                                                                                                     |       | 1,233,520                                         |       | — |   |
| Customer  deposits                                                                                                               |       | 9,646,917                                         |       | 1,721,548 |   |
| Accrued expenses                                                                                                                 |       | 196,004                                           |       | 98,535 |   |
| Income taxes                                                                                                                     |       | 424,394                                           |       | 8,400 |   |
|                                                                                                                             |       |                                              |       |   |   |
| NET CASH  PROVIDED BY OPERATING ACTIVITIES                                                                                       |       | 7,396,940                                         |       | 5,077,888 |   |
|                                                                                                                             |       |                                              |       |   |   |
| INVESTING  ACTIVITIES                                                                                                            |       |                                              |       |   |   |
| Property and  equipment purchases                                                                                                |       | (3,689,567                                        | )          | (4,087,337 | ) |
| Net proceeds  from sale of equipment                                                                                             |       | 146,631                                           |       | 103,174 |   |
| Purchase of  equipment dealerships, net of cash purchased                                                                        |       | (20,329,409                                       | )          | (5,126,577 | ) |
|                                                                                                                             |       |                                              |       |   |   |
| NET CASH USED  FOR INVESTING ACTIVITIES                                                                                          |       | (23,872,345                                       | )          | (9,110,740 | ) |
|                                                                                                                             |       |                                              |       |   |   |
| FINANCING  ACTIVITIES                                                                                                            |       |                                              |       |   |   |
| Proceeds from  follow-on offering of common stock net of underwriting discount of $4,389,000  and other direct costs of $354,301 |       | 78,856,699                                        |       | — |   |
| Net change in  non-manufacturer floor plan payable                                                                               |       | (1,985,140                                        | )          | (4,606,468 | ) |
| Proceeds from  long-term debt borrowings and subordinated debentures                                                             |       | 564,567                                           |       | 4,062,755 |   |
| Principal  payments on long-term debt and subordinated debentures                                                                |       | (16,817,000                                       | )          | (1,728,045 | ) |
| Other                                                                                                                            |       | 40,004                                            |       | (45,268 | ) |
|                                                                                                                             |       |                                              |       |   |   |
| NET CASH PROVIDED  BY (USED FOR) FINANCING ACTIVITIES                                                                            |       | 60,659,130                                        |       | (2,317,026 | ) |
|                                                                                                                             |       |                                              |       |   |   |
| NET CHANGE IN  CASH AND CASH EQUIVALENTS                                                                                         |       | 44,183,725                                        |       | (6,349,878 | ) |
|                                                                                                                             |       |                                              |       |   |   |
| CASH AND CASH  EQUIVALENTS AT BEGINNING OF PERIOD                                                                                |       | 42,802,505                                        |       | 7,572,000 |   |
|                                                                                                                             |       |                                              |       |   |   |
| CASH AND CASH  EQUIVALENTS AT END OF PERIOD                                                                                      |       | $                                                 | 86,986,230 |   | $ | 1,222,122 |   |

** **

See Notes to Consolidated Financial Statements

** **

**4**

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**Table of Contents**

** **
| ** **                                                                                                                                                      | ** ** | **Six Months Ended July 31,** | ** **  |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------|-------------|
| ** **                                                                                                                                                      | ** ** | **2008**                                          | ** **  | **2007** | ** ** |
|                                                                                                                                                            |       |                                              |        |   |   |
| SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION                                                                                                              | ** ** | ** **                                        | ** **  | ** ** | ** ** |
| Cash paid during  the period                                                                                                                                    |       |                                              |        |   |   |
| Income taxes, net  of refunds                                                                                                                                   |       | $                                                 | 4,070,000   |   | $ | 1,476,063 |   |
| Interest                                                                                                                                                        |       | 1,927,245                                         |        | 3,101,046 |   |
|                                                                                                                                                            |       |                                              |        |   |   |
| SUPPLEMENTAL  DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES                                                                                         |       |                                              |        |   |   |
| Dividends on  preferred redeemable stock charged to retained earnings                                                                                           |       | $                                                 | —      |   | $ | 51,188 |   |
|                                                                                                                                                            |       |                                              |        |   |   |
| Acquisition of  equipment dealership assets in exchange for cash and assumption of  liabilities including purchase accounting adjustments on prior acquisitions |       |                                              |        |   |   |
| Accounts  receivable                                                                                                                                            |       | $                                                 | (1,254,676  | ) | $ | (112,788 | ) |
| Inventories                                                                                                                                                     |       | (18,199,975                                       | )           | (8,107,415 | ) |
| Property and  equipment                                                                                                                                         |       | (5,343,616                                        | )           | (772,685 | ) |
| Goodwill                                                                                                                                                        |       | (727,131                                          | )           | (2,500,000 | ) |
| Accounts payable                                                                                                                                                |       | 345,588                                           |        | 1,385,932 |   |
| Floorplan notes  payable                                                                                                                                        |       | 3,360,994                                         |        | 3,148,704 |   |
| Customer  deposits                                                                                                                                              |       | 391,432                                           |        | — |   |
| Accrued expenses                                                                                                                                                |       | 43,138                                            |        | 831,675 |   |
| Income taxes  payable                                                                                                                                           |       | 241,915                                           |        | — |   |
| Long term debt                                                                                                                                                  |       | 485,192                                           |        | 1,000,000 |   |
| Deferred income  taxes, net                                                                                                                                     |       | 327,730                                           |        | — |   |
|                                                                                                                                                            |       |                                              |        |   |   |
| Cash paid for  dealerships                                                                                                                                      |       | $                                                 | (20,329,409 | ) | $ | (5,126,577 | ) |

** **

See Notes to Consolidated Financial Statements

 

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TITAN MACHINERYINC.

NOTES TOCONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

**NOTE 1 -  ****BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES**

 

*Basisof Presentation*

 

The unaudited financialstatements included herein have been prepared pursuant to the rules andregulations of the Securities and Exchange Commission for interimreporting.  Accordingly, they do notinclude all the information and footnotes required by accounting principlesgenerally accepted in the United States of America for complete financialstatements. In the opinion of management, all adjustments (consisting of normalrecurring accruals) considered necessary for a fair presentation have beenincluded. Operating results for the six month period ended July 31, 2008are not necessarily indicative of the results that may be expected for the yearended January 31, 2009.  Theinformation contained in the balance sheet as of January 31, 2008 wasderived from the Company’s audited financial statements for the year thenended.

 

*Nature of Business*

 

Titan Machinery Inc. (the“Company”) is engaged in the retail sale, service and rental of agriculturaland industrial machinery through stores in North Dakota, South Dakota,Minnesota, Nebraska and Iowa.

 

*Estimates*

 

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenue and expenses during thereporting period. Actual results could differ from those estimates.

 

*Principles of Consolidation*

 

The consolidatedfinancial statements include the accounts of the Company and its wholly-ownedsubsidiary, Transportation Solutions, LLC. All significant accounts,transactions and profits between the consolidated companies have beeneliminated in consolidation.

 

*Recently Issued Accounting Pronouncements*

 

In September 2006, the Financial AccountingStandards Board (“FASB”) issued Statement of Accounting Standards (“SFAS”) No. 157,Fair Value Measurements (“SFAS 157”). This standard defines fair value, establishes a framework for measuringfair value, and expands disclosures about fair value measurements.  This standard applies under other accountingpronouncements that require or permit fair value measurements, but does notrequire any new fair value measurements. SFAS 157 is effective for financial statements issued for fiscal yearsbeginning after November 15, 2007, which is the year beginning February 1,2008 for the Company.  The Company adoptedSFAS 157 effective February 1, 2008. The adoption of SFAS 157 forfinancial assets and liabilities held by the Company did not have a materialeffect on the Company’s financial statements or notes thereto.

 

In February 2008, the FASB issued FSP FAS 157-2,Effective Date of FASB Statement No. 157 (“FSP FAS 157-2”), which permitsa one year deferral of the application of SFAS 157 for all non-financial assetsand non-financial liabilities, except those that are recognized or disclosed atfair value in the financial statements on a recurring basis (at leastannually). The Company will adopt SFAS 157 for non-financial assets andnon-financial liabilities on February 1, 2009 and does not expect theprovisions to have a material effect on its results of operations, financialposition or cash flows.

 

In February 2007,the FASB issued SFAS 159, The Fair Value Option for Financial Assets andFinancial Liabilities (“SFAS 159”).  SFAS159 provides companies with an option to report selected financial assets andliabilities at fair value and establishes presentation and disclosurerequirements designed to facilitate comparisons between companies that choose 

 

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different measurementattributes for similar types of assets and liabilities.  SFAS 159 is effective for fiscal yearsbeginning after November 15, 2007. The Company has elected not to apply the fair value option to the specifiedfinancial assets and liabilities, and accordingly, the adoption of SFAS No. 159had no financial statement impact.

 

In December 2007,the FASB issued SFAS No. 141 (Revised 2007), Business Combinations (“SFAS141R”).  SFAS 141R provides additional guidanceon improving the relevance, representational faithfulness, and comparability ofthe financial information that a reporting entity provides in its financialreports about a business combination and its effects.  SFAS 141R applies prospectively to businesscombinations for which the acquisition date is on or after the beginning of thefirst annual reporting period beginning on or after December 15,2008.  The Company is in the process ofevaluating the effect that the adoption of this standard will have on theCompany’s financial statements.

 

In December 2007,the FASB issued SFAS No. 160, Noncontrolling Interests in ConsolidatedFinancial Statements (“SFAS 160”).  SFAS160 applies to all entities that prepare consolidated financial statements andhave an outstanding noncontrolling interest in one or more subsidiaries.  SFAS 160 amends Accounting Research Bulletin No. 51to establish accounting and reporting standards for the noncontrolling interestin a subsidiary and for the deconsolidation of a subsidiary.  SFAS 160 is effective for fiscal years, andinterim periods within those fiscal years, beginning on or after December 15,2008.   The Company is in the process ofevaluating the effect that the adoption of this standard will have on theCompany’s financial statements.

 

On December 21, 2007the SEC staff issued Staff Accounting Bulletin No. 110 (“SAB 110”), which,effective January 1, 2008, amends and replaces SAB 107, Share-BasedPayment. SAB 110 expresses the views of the SEC staff regarding the use of a “simplified”method in developing the expected life assumption in accordance with FASBStatement No. 123(R), Share-Based Payment. The use of the “simplified”method, was scheduled to expire on December 31, 2007. SAB 110 extends theuse of the “simplified” method in certain situations. The SEC staff does notexpect the “simplified” method to be used when sufficient information regardingexercise behavior, such as historical exercise data or exercise informationfrom external sources, becomes available. The Company plans to track and capture employee exercise behavior in thefuture as a basis for our valuation assumptions.  The Company currently uses simplifiedestimates due to the limited number of options exercised.

 

*EarningsPer Share*

 

Basic earnings per sharewere computed by dividing income available to common stockholders by theweighted average number of shares of common stock outstanding during therespective periods.  Accumulatedpreferred dividends and amortization of syndication fees were subtracted fromnet income to arrive at income available to common stockholders.  Nonvested restricted stock is excluded fromthe calculation of basic weighted-average shares outstanding.

 

Diluted earnings pershare were computed by dividing income available to common stockholders plusassumed conversions by the weighted-average common shares outstanding afteradjusting for potential dilution related to the conversion of all dilutivesecurities into common stock.  All potentiallydilutive securities were included in the computation of diluted earnings pershare.

 

The components of basicearnings per share are as follows:

 
| ** **                                         | ** ** | **Three Months Ended July 31,** | ** ** | **Six Months Ended July 31,** | ** ** |
|----------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| **Basic - Earnings Per Share** | ** ** | **2008**                                            | ** ** | **2007**                                          | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                               |       |                                                |       |                                              |       |   |   |   |   |
| Net Income                                         |       | $                                                   | 3,332,491  |                                              | $          | 1,456,502 |   | $ | 6,719,618 |   | $ | 2,228,796 |   |
| Less:  Amortization of syndication fees            |       | —                                              |       | (5,296                                            | )          | — |   | (10,592 | ) |
| Less: Preferred  stock dividends - unpaid          |       | —                                              |       | (25,594                                           | )          | — |   | (51,188 | ) |
| Income available  to common stockholders           |       | $                                                   | 3,332,491  |                                              | $          | 1,425,612 |   | $ | 6,719,618 |   | $ | 2,167,016 |   |
|                                               |       |                                                |       |                                              |       |   |   |   |   |
| Basic  weighted-average shares outstanding         |       | 16,629,671                                          |       | 4,344,753                                         |       | 15,005,930 |   | 4,344,753 |   |
|                                               |       |                                                |       |                                              |       |   |   |   |   |
| Basic – Earnings  Per Share                   |       | $                                                   | 0.20       |                                              | $          | 0.33 |   | $ | 0.45 |   | $ | 0.50 |   |

 

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The components of dilutedearnings per share are as follows:

 
| ** **                                                        | ** ** | **Three Months Ended July 31,** | ** ** | **Six Months Ended July 31,** | ** ** |
|-------------------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| **Diluted - Earnings Per Share**              | ** ** | **2008**                                            | ** ** | **2007**                                          | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                                              |       |                                                |       |                                              |       |   |   |   |   |
| Income available  to common stockholders                          |       | $                                                   | 3,332,491  |                                              | $          | 1,425,612 |   | $ | 6,719,618 |   | $ | 2,167,016 |   |
| Plus: Income  impact of assumed conversions                       |       |                                                |       |                                              |       |   |   |   |   |
| Amortization of  syndication fees                                 |       | —                                              |       | 5,296                                             |       | — |   | 10,592 |   |
| Preferred stock  dividends - unpaid                               |       | —                                              |       | 25,594                                            |       | — |   | 51,188 |   |
| Interest on  convertible debentures, net of tax effect            |       | —                                              |       | 80,581                                            |       | — |   | 161,162 |   |
| Income available  to common stockholders plus assumed conversions |       | $                                                   | 3,332,491  |                                              | $          | 1,537,083 |   | $ | 6,719,618 |   | $ | 2,389,958 |   |
|                                                              |       |                                                |       |                                              |       |   |   |   |   |
| Diluted weighted-average  shares outstanding:                     |       |                                                |       |                                              |       |   |   |   |   |
| Basic weighted-average  shares outstanding                        |       | 16,629,671                                          |       | 4,344,753                                         |       | 15,005,930 |   | 4,344,753 |   |
| Plus:  Incremental shares from assumed conversions                |       |                                                |       |                                              |       |   |   |   |   |
| Convertible  debentures                                           |       | —                                              |       | 2,006,667                                         |       | — |   | 2,006,667 |   |
| Convertible  preferred shares                                     |       | —                                              |       | 466,673                                           |       | — |   | 466,673 |   |
| Restricted Stock                                                  |       | 85,452                                              |       | 11,487                                            |       | 85,128 |   | 11,487 |   |
| Warrants                                                          |       | 115,699                                             |       | 168,443                                           |       | 113,018 |   | 145,540 |   |
| Options                                                           |       | 338,897                                             |       | 51,918                                            |       | 307,663 |   | 47,265 |   |
| Diluted  weighted-average shares outstanding                      |       | 17,169,719                                          |       | 7,049,941                                         |       | 15,511,739 |   | 7,022,385 |   |
|                                                              |       |                                                |       |                                              |       |   |   |   |   |
| Diluted - EPS                                                     |       | $                                                   | 0.19       |                                              | $          | 0.22 |   | $ | 0.43 |   | $ | 0.34 |   |

 

**NOTE 2 -   INVENTORIES**

 
| ** **                    | ** ** | **July 31,** | ** **  | **January 31,** | ** ** |
|-------------------------------|------------|-------------------|-------------|----------------------|------------|
|                          |       | **2008**          | ** **  | **2008**             |       |
| New equipment                 |       | $                 | 109,940,953 |                 | $          | 78,409,999 |   |
| Used equipment                |       | 42,641,642        |        | 44,478,010           |       |
| Parts, tires and  attachments |       | 27,515,918        |        | 20,462,680           |       |
| Work in process               |       | 3,072,237         |        | 2,416,177            |       |
|                          |       | $                 | 183,170,750 |                 | $          | 145,766,866 |   |

 

In addition to the aboveamounts, the Company has estimated that a portion of its parts inventory willnot be sold in the next operating cycle. Accordingly, these balances have beenclassified as noncurrent assets.

 

**NOTE 3 -   LINE OF CREDIT**

 

The Companyentered into a new line of credit agreement with Bremer Bank NationalAssociation (“Bremer”) on August 28, 2008. The agreement provides for available borrowings of $25,000,000 andcarries a variable interest rate of prime minus .25%, and has a maturity dateof August 1, 2009.  This agreementreplaces the previous line of $12,000,000 which existed on July 31,2008.  Similar to the previous line ofcredit, the new agreement contains certain financial covenants which imposeminimum levels of current ratio, debt service coverage, and inventory turnoverratio and a maximum level of debt to tangible net worth ratio.  The line is secured by substantially allassets of the Company.  The personalguarantee by our Chief 

 

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Executive Officeris no longer required under the new agreement. The Company had no amount outstanding on the Bremer line of credit at July 31,2008 and January 31, 2008.

 

**NOTE 4 -   LONG TERM DEBT**

 
| ** **                                                                                                                                                                                               | ** ** | **July 31,** | ** ** | **January 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|----------------------|------------|
| ** **                                                                                                                                                                                               | ** ** | **2008**          | ** ** | **2008**             | ** ** |
| Variable rate  notes payable to CNH Capital America LLC (CNH), variable rates at prime plus  0.3% - 1.6%, varying monthly installment payments maturing August 2012,  secured by rental fleet equipment. |       | $                 | 1,520,079  |                 | $          | 1,952,440 |   |
|                                                                                                                                                                                                     |       |              |       |                 |       |
| Non-interest  bearing notes to CNH, in varying monthly installments, various maturity dates  through February 2010, secured by parts                                                                     |       | 649,173           |       | 1,162,146            |       |
|                                                                                                                                                                                                     |       |              |       |                 |       |
| Non-interest  bearing note to CNH, monthly payments of $27,147 maturing October 2009,  secured by parts, variable interest rate at prime plus 1.6% rate beginning  November 2008                         |       | 407,200           |       | 570,080              |       |
|                                                                                                                                                                                                     |       |              |       |                 |       |
| Fixed rate notes  payable to Ford Motor Credit and GMAC, (5.99% to 9.85%), due in monthly  installments including interest and various maturity dates through December  2012, secured by vehicles        |       | 472,027           |       | 291,428              |       |
|                                                                                                                                                                                                     |       |              |       |                 |       |
| Fixed rate note  to Avoca Implement and Greenfield Implement 10.0%, monthly payments of  $18,920, matures January 2011, secured by equipment                                                             |       | 681,869           |       | 759,080              |       |
|                                                                                                                                                                                                     |       |              |       |                 |       |
| Fixed rate note  to Textron Financial, 7.09%, monthly payments of $4,969, matures January  2018, secured by a company asset                                                                              |       | 539,046           |       | 549,583              |       |
|                                                                                                                                                                                                     |       |              |       |                 |       |
| Notes paid in  full during six month period ended July 31, 2008                                                                                                                                          |       | —            |       | 13,451,878           |       |
|                                                                                                                                                                                                     |       | 4,269,394         |       | 18,736,635           |       |
| Less current  maturities                                                                                                                                                                                 |       | (1,556,920        | )          | (5,653,840           | )          |
|                                                                                                                                                                                                     |       |              |       |                 |       |
|                                                                                                                                                                                                     |       | $                 | 2,712,474  |                 | $          | 13,082,795 |   |

 

Additionally, undercovenants of the above notes payable with CNH Capital America LLC and a CNHCapital America LLC floorplan agreement, the Company has agreed, among otherthings, to maintain various financial ratio levels and to submit certainfinancial information.

 

As of July 31,2008, the Company was in compliance with all of the above covenants.

 

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Long-term debt maturitiesare as follows:

 
| **12 Months Ending July 31,** | ** ** | **Amount** | ** ** |
|---------------------------------------------------|------------|------------|------------|
|                                              |       |       |       |
| 2009                                              |       | $          | 1,556,920  |   |
| 2010                                              |       | 864,085    |       |
| 2011                                              |       | 737,115    |       |
| 2012                                              |       | 348,773    |       |
| 2013                                              |       | 351,318    |       |
| Thereafter                                        |       | 411,183    |       |
|                                              |       | $          | 4,269,394  |   |

 

**NOTE 5 -   FLOORPLAN NOTES PAYABLE**

 

Floorplan notespayable with a bank and manufacturers carry various interest rates ranging from1.35 to 10.35% and are secured by substantially all assets of the Company.  Repayment terms vary by individual notes, butgenerally payments are made from sales proceeds or rental revenue from therelated inventories.  The Bremerfloorplan note payable, with a balance of $138,849 at July 31, 2008, wassecured by the personal guarantee of the Company’s Chief Executive Officer. Thebalance of the Bremer floorplan note payable was paid off in August 2008,and the floorplan component of the loan facility with Bremer Bank, includingthe personal guarantee, has been terminated.

 

**NOTE 6 -   SUBORDINATED DEBENTURES**

 

During the first quarterof the current fiscal year the Company repaid all $1,300,000 subordinateddebentures that were outstanding as of January 31, 2008.

 

**NOTE 7 -   STOCK WARRANTS, STOCK OPTIONS AND RESTRICTED STOCK**

 

*CommonStock Warrants*

 

In April 2003, theCompany issued stock warrants to Cherry Tree Securities, LLC, whose chairman isa director of the Company, for 11,917 shares of common stock at an exerciseprice of $3.00 per share. The warrants terminate on April 7, 2013.  In August 2004, the Company issued anadditional 6,071 stock warrants to Cherry Tree Securities at an exercise priceof $3.50 per share.  These warrantsterminate on July 1, 2014.

 

In addition, the Companyissued stock warrants in April 2005 to an outside party for 115,650 sharesof common stock at an exercise price of $3.50 per share. These warrants expireon April 7, 2013.

 

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The following is asummary of outstanding stock purchase warrants as of July 31, 2008:

 
| ** **          | ** ** | ** ** | ** ** | **Exercise** | ** ** | **Fair Value** | ** ** | ** **                        | ** ** |
|---------------------|------------|------------|------------|--------------|------------|---------------------|------------|-----------------------------------|------------|
| **Issue Date** | ** ** | **Number** | ** ** | **Price**    | ** ** | **Assigned**        | ** ** | **Purpose of Issuance** | ** ** |
| April 2003          |       | 11,917     |       | $            | 3.00       |                | $          | 11,200                            |       | Facilitate preferred stock issuance |   |
| August 2004         |       | 6,071      |       | $            | 3.50       |                | $          | 6,600                             |       | Facilitate preferred stock issuance |   |
| April 2005          |       | 115,650    |       | $            | 3.50       |                | $          | 126,000                           |       | Subordinated debt financing transaction |   |
|                |       | 133,638    |       |         |       |                |       |                              |       |

 

Outstanding stockwarrants are valued using the Black-Scholes option pricing model. Assumptionsused to value the warrants are similar to those used in valuing the stockoptions as described below. Warrants issued in conjunction with a debt offeringare valued and classified as Additional Paid-In Capital per AccountingPrinciples Board No. 14 *Accounting for ConvertibleDebt and Debt Issued with Stock Purchase Warrants*.

 

*StockAward Plans*

 

TheCompany implemented the 2005 Equity Incentive Plan, a stock-based compensationplan (the “Plan”), during the year ended January 31, 2006.   In August 2007, the Plan was amended toincrease the number of shares available under the Plan from 500,000 to1,000,000 shares.  The purpose of thePlan is to provide incentive compensation to participants for services that havebeen or will be performed for continuing as employees or members of the Boardof Directors of the Company. Under the Plan, the Company may grant incentivestock options, non-qualified stock options and restricted stock for up to1,000,000 shares of common stock under all forms of awards. The Companyaccounts for stock options and restricted stock using the fair value methodunder SFAS 123(R).  Shares issued forstock-based awards may be either authorized but unissued shares, or shares oftreasury stock acquired in the open market.

 

Compensation cost chargedto operations under the equity incentive plan was $309,079 for the six monthsended July 31, 2008 and $108,000 for the six months ended July 31,2007.  The income tax benefit recognizedfrom all stock based compensation arrangements was $123,600 for the six monthsended July 31, 2008 and $42,100 for the six months ended July 31,2007.

 

*StockOptions*

 

The Company grants stockoptions as part of its long-term incentive compensation to employees and members of the Board of Directors of theCompany.  Stock options vest over aperiod of four to six years for employees and immediately for members of theBoard of Directors and have contractual terms of five to ten years.

 

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Thefollowing table summarizes stock option activity for the six months ended July 31,2008:

 
| ** **                            | ** ** | ** **         | ** ** | **Weighted** | ** ** | ** **    | ** ** |
|---------------------------------------|------------|--------------------|------------|--------------|------------|---------------|------------|
| ** **                            | ** ** | ** **         | ** ** | **Average**  | ** ** | **Aggregate** | ** ** |
| ** **                            | ** ** | **Number of** | ** ** | **Exercise** | ** ** | **Intrinsic** | ** ** |
| ** **                            | ** ** | **Options**        | ** ** | **Price**    | ** ** | **Value**     | ** ** |
|                                  |       |               |       |         |       |          |       |
| Outstanding at  January 31, 2008      |       | 483,252            |       | $            | 7.43       |          |       |   |
| Granted                               |       | 85,000             |       | 21.58        |       |          |       |
| Exercised                             |       | (6,667             | )          | 6.00         |       |          |       |
| Forfeited                             |       | (16,665            | )          | 7.50         |       |          |       |
| Outstanding at  July 31, 2008         |       | 544,920            |       | $            | 9.65       |          | $          | 9,682,641 |   |
|                                  |       |               |       |         |       |          |       |
| Options  exercisable at July 31, 2008 |       | 65,753             |       | $            | 4.89       |          | $          | 1,481,681 |   |

 

The aggregate intrinsicvalue of stock options exercised was $151,669 for the six months ended July 31,2008.  There were no options exercisedfor the six months ended July 31, 2007.

 

Thefair value of each stock option granted is estimated using the Black-Scholespricing model.  The following assumptionswere made in estimating fair value:

 
| ** **                | ** ** | **For the Six Months Ended July 31,** | ** ** |
|---------------------------|------------|---------------------------------------------------------------------|------------|
| **Assumption**            | ** ** | **2008**                                                            | ** ** | **2007** | ** ** |
| Dividend Yield            |       | 0                                                                   | %          | 0 | % |
| Risk-free  interest rate  |       | 3.2 - 3.6                                                           | %          | 4.9 | % |
| Expected life of  options |       | 6.75 - 8 years                                                      |       | 10 years |   |
| Expected  volatility      |       | 34 - 37                                                             | %          | 22 | % |

 

Prior to the Company’sinitial public offering the expected volatility was based upon management’sbest estimate of the value of the shares based upon the Company’s internalmarket.  Due to the limited historicalstock price data available since our initial public offering, the Companycurrently estimates its volatility using a blended rate based on quoted marketprices of our stock and other similar companies determined by Companymanagement.  The expected life of optionsis estimated consistent with the “simplified” method identified in SAB 107, theuse of which was extended by SAB 110. The simplified method calculates the expected term as the average of thevesting and contractual terms of the award. The risk-free interest rate assumption is based on observed interestrates appropriate for the term of the options. The Company uses historical data to estimate pre-vesting optionforfeitures and records share-based compensation expense only for those awardsthat are expected to vest.  The Companyrecognizes the fair value of stock options as compensation expense ratably overthe vesting period of the award.

 

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The following is asummary of information related to options outstanding and exercisable at July 31,2008:

 
| ** **        | ** ** | **Options Outstanding** | ** ** | **Options Exercisable** | ** ** |
|-------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **        | ** ** | ** **                   | ** ** | **Weighted**                 | ** ** | ** ** | ** ** | ** ** | ** ** | **Weighted** | ** ** | ** ** | ** ** |
| ** **        | ** ** | ** **                   | ** ** | **Average**                  | ** ** | **Weighted** | ** ** | ** ** | ** ** | **Average** | ** ** | **Weighted** | ** ** |
| **Range of** | ** ** | ** **                   | ** ** | **Remaining**                | ** ** | **Average** | ** ** | ** ** | ** ** | **Remaining** | ** ** | **Average** | ** ** |
| **Exercise**      | ** ** | ** **                   | ** ** | **Contractual**              | ** ** | **Exercise** | ** ** | ** ** | ** ** | **Contractual** | ** ** | **Exercise** | ** ** |
| **Prices**        | ** ** | **Number**                   | ** ** | **Life (Years)**        | ** ** | **Price** | ** ** | **Number** | ** ** | **Life (Years)** | ** ** | **Price** | ** ** |
| $                 | 4.00-4.50  |                         | 124,920    |                         | 7.9        |   | $ | 4.46 |   | 55,752 |   | 7.8 |   | $ | 4.42 |   |
| 7.50-9.35         |       | 335,000                      |       | 7.9                          |       | 8.56 |   | 10,001 |   | 9.0 |   | 7.50 |   |
| 16.40-21.21       |       | 65,000                       |       | 9.7                          |       | 20.47 |   | — |   | — |   | — |   |
| 23.52-26.84       |       | 20,000                       |       | 9.9                          |       | 25.18 |   | — |   | — |   | — |   |
|              |       | 544,920                      |       | 8.2                          |       | 9.65 |   | 65,753 |   | 8.0 |   | 4.89 |   |
|                   |            |                              |            |                              |            |  |  |  |  |  |  |  |  |  |  |  |

 

As of July 31, 2008,there was $1,695,000 of unrecognized compensation cost on non-vested stockoptions that is expected to be recognized over a weighted-average period of 4.4years.

 

*RestrictedStock*

 

The Company grantsrestricted shares of common stock in addition to stock options as part of itslong-term incentive compensation to employees and members of the Board of Directors of the Company.  The fair value of restricted stock awards isdetermined based on the closing market price of our stock on the business dayprior to the date of grant.  Restrictedstock awards vest over a period of three to six years for employees and overone year for members of the Board of Directors.

 

The following tablesummarizes restricted stock activity for the six months ended July 31,2008:

 
| ** **                            | ** ** | ** ** | ** ** | ** **          | ** ** | **Weighted**    | ** ** |
|---------------------------------------|------------|------------|------------|---------------------|------------|-----------------|------------|
| ** **                            | ** ** | ** ** | ** ** | **Weighted**        | ** ** | **Average**     | ** ** |
| ** **                            | ** ** | ** ** | ** ** | **Average**         | ** ** | **Remaining**   | ** ** |
| ** **                            | ** ** | ** ** | ** ** | **Grant Date** | ** ** | **Contractual** | ** ** |
| ** **                            | ** ** | **Shares** | ** ** | **Fair Value** | ** ** | **Term**        | ** ** |
| Outstanding  at January 31, 2008 |       | 76,506     |       | $                   | 7.86       |            | 3.22       |   |
| Granted                               |       | 10,178     |       | 17.53               |       |            |       |
| Forfeited                             |       | (1,132     | )          | 9.76                |       |            |       |
| Issued                                |       | (100       | )          | 8.50                |       |            |       |
| Outstanding  at July 31, 2008    |       | 85,452     |       | 8.98                |       | 2.50            |       |
|                                       |            |            |            |                     |            |                 |            |  |

 

The Company recognizescompensation expense ratably over the vesting period of the restrictedstock.  The weighted average grant datefair value of restricted stock granted was $17.53.  There was no restricted stock granted duringthe six months ended July 31, 2007. As of July 31, 2008, there was $486,000 of unrecognizedcompensation cost on non-vested stock options that is expected to be recognizedover a weighted-average period of 2.5 years.

 

**NOTE 8 - BUSINESS COMBINATIONS**

 

The Company continued toimplement its strategy of consolidating dealerships in desired market areas.Below is a summary of the acquisitions completed for the six months ended July 31,2008. In certain of its business combination transactions the Companyrecognizes goodwill. Factors contributing to the recognition of goodwillinclude an evaluation of enterprise value, 

 

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historical financialperformance, estimated industry potential within the market and the marketterritory relationship to other existing and future planned Companylocations.  Pro forma results are notpresented as the acquisitions are not considered material, individually or inaggregate, to the Company.  The resultsof operations of the acquired entities disclosed below have been included in theCompany’s consolidated results of operations since each of the respective datesof acquisition.

 

*CeresEquipment*

 

On February 1, 2008,the Company acquired certain assets of Ceres Equipment, Inc.  The Dealership is located in Roseau,Minnesota and is contiguous to existing markets.  The acquisition increases the Company’smarket share in the northwest area of Minnesota. The total cash purchase pricefor the dealership was $3,940,380.  TheCompany expects the allocation of the purchase price to be finalized during thefiscal year ending January 31, 2009.

 

*QuadCounty Implement*

 

On May 1, 2008, theCompany acquired 100% of the outstanding stock of Quad County Implement, Inc.  The Dealership is located in Blairstown, Iowaand is contiguous to existing markets. The acquisition increases the Company’s market share in central Iowa.The total cash purchase price for the dealership was $2,000,000.  The Company expects the allocation of thepurchase price to be finalized within one year of the acquisition date.

 

*Mid-LandEquipment Company*

 

On May 28, 2008, theCompany acquired certain assets of Mid-Land Equipment Company, L.C.  The acquired entity consisted of sixconstruction equipment stores located in Des Moines, Davenport, Clear Lake andCedar Rapids, Iowa, and Omaha and Lincoln, Nebraska.  These stores are contiguous to existingmarkets in South Dakota and overlay the existing agricultural locations inIowa. The total cash purchase price for the dealership was $14,389,029.  The Company expects the allocation of thepurchase price to be finalized within one year of the acquisition date.

 

The allocation of thepurchase price in the above business combinations is presented in the followingtable:

 
| ** **               | ** ** | ** **    | ** ** | ** **    | ** ** | ** **    | ** ** | **Prior**       | ** ** | ** ** | ** ** |
|--------------------------|------------|---------------|------------|---------------|------------|---------------|------------|-----------------|------------|------------|------------|
| ** **               | ** ** | ** **    | ** ** | **Quad**      | ** ** | **Mid-Land**  | ** ** | **Acquisition** | ** ** | ** ** | ** ** |
| ** **               | ** ** | **Ceres**     | ** ** | **County**    | ** ** | **Equipment** | ** ** | **Purchase**    | ** ** | ** ** | ** ** |
| ** **               | ** ** | **Equipment** | ** ** | **Implement** | ** ** | **Company**   | ** ** | **Adjustments** | ** ** | **Total**  | ** ** |
| Receivables              |       | $             | —     |          | $          | 336,043       |       | $               | 918,633    |       | $          | — |   | $ | 1,254,676 |   |
| Inventories              |       | 3,407,622     |       | 4,771,936     |       | 10,086,937    |       | (66,520         | )          | 18,199,975 |       |
| Deferred  income taxes   |       | —        |       | —        |       | —        |       | 26,275          |       | 26,275     |       |
| Property  and equipment  |       | 472,600       |       | 516,725       |       | 4,354,291     |       | —          |       | 5,343,616  |       |
| Goodwill                 |       | 233,178       |       | 194,632       |       | 259,076       |       | 40,245          |       | 727,131    |       |
|                     |       |          |       |          |       |          |       |            |       |       |       |
|                     |       | $             | 4,113,400  |          | $          | 5,819,336     |       | $               | 15,618,937 |       | $          | — |   | $ | 25,551,673 |   |
| ** **               | ** ** | ** **    | ** ** | ** **    | ** ** | ** **    | ** ** | ** **      | ** ** | ** ** | ** ** |
| Accounts  payable        |       | $             | —     |          | $          | 263,607       |       | $               | 81,981     |       | $          | — |   | $ | 345,588 |   |
| Floorplan  notes payable |       | —        |       | 2,213,067     |       | 1,147,927     |       | —          |       | 3,360,994  |       |
| Customer  deposits       |       | 173,020       |       | 218,412       |       | —        |       | —          |       | 391,432    |       |
| Accrued  expenses        |       | —        |       | 43,138        |       | —        |       | —          |       | 43,138     |       |
| Income  taxes payable    |       | —        |       | 241,915       |       | —        |       | —          |       | 241,915    |       |
| Long-term  debt          |       | —        |       | 485,192       |       | —        |       | —          |       | 485,192    |       |
| Deferred  income taxes   |       | —        |       | 354,005       |       | —        |       | —          |       | 354,005    |       |
| ** **               | ** ** | ** **    | ** ** | ** **    | ** ** | ** **    | ** ** | ** **      | ** ** | ** ** | ** ** |
|                     |       | $             | 173,020    |          | $          | 3,819,336     |       | $               | 1,229,908  |       | $          | — |   | $ | 5,222,264 |   |
| ** **               | ** ** | ** **    | ** ** | ** **    | ** ** | ** **    | ** ** | ** **      | ** ** | ** ** | ** ** |
| Consideration  given     |       | $             | 3,940,380  |          | $          | 2,000,000     |       | $               | 14,389,029 |       | $          | — |   | $ | 20,329,409 |   |

 

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Of the total goodwill of$727,131 recorded in the acquisition transactions during the six months ended July 31,2008, $492,254 is expected to be deductible for tax purposes.

 

**NOTE 9 - SUBSEQUENT EVENTS**

 

On September 12,2008, the Company acquired the assets of Wolf’s Farm Equipment forapproximately $0.6 million.  The dealership is located in Kintyre, NorthDakota.  The acquisition expands the Company’s presence in central NorthDakota.

 

On September 11,2008, the Company entered into a Purchase Agreement to acquire the assets ofPioneer Garage, Inc., with three agricultural equipment dealerships.  We expect the closing date to be in October 2008. The dealerships are located in Highmore, Pierre, and Miller, SouthDakota.  The acquisition expands the Company’s presence in market areascontiguous to existing dealerships.

 

**ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OFOPERATIONS**

** **

Thefollowing discussion and analysis of our financial condition and results ofoperations should be read in conjunction with our interim consolidatedfinancial statements and related notes included in Item 1 of Part 1 ofthis Quarterly Report, and the audited consolidated financial statements andnotes thereto and Management’s Discussion and Analysis of Financial Conditionand Results of Operations contained in our Annual Report on Form 10-K forthe year ended January 31, 2008.

 

**Critical AccountingPolicies**

** **

Therehave been no material changes in our Critical Accounting Policies, as disclosedin our Annual Report on Form 10-K for the year ended January 31,2008.

 

**Overview**

** **

We own and operate oneof the largest networks of full service agricultural and construction equipmentstores in North America. We are the world’s largest retail dealer of Case IHAgriculture equipment and a major retail dealer of New Holland Agriculture,Case Construction and New Holland Construction equipment in the U.S. We selland rent agricultural and construction equipment, sell parts, and service theequipment operating in the areas surrounding our stores.

 

Our net income was $3.3million, or $0.19 per diluted share, in the quarter ended July 31, 2008,compared to $1.5 million, or $0.22 per diluted share, in the quarter ended July 31,2007.  Significant factors impacting thequarter were:

 

***·***                  Strong revenue growth due to acquisitions andsame-store sales;

*** ***

***·***                  Increase in gross profits primarily due to increasedrevenues;

*** ***

***·***                  Increase in operating expenses primarily due toacquisitions and increased revenues; and

*** ***

***·***                  Significantly higher diluted weighted average sharesresulting from our two offerings, which negatively impacts earnings per sharecomparisons to the prior year.

*** ***

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*** ***

**Results of Operations**

** **

Comparative financialdata for each of our four sources of revenue are expressed below. The resultsfor these periods include the operating results of the acquisitions made duringthese periods. The period-to-period comparisons included below are notnecessarily indicative of future results (dollars in thousands):

 
| ** **                            | ** ** | **Three Months Ended July 31,** | ** ** | **Six Months Ended July 31,** | ** ** |
|---------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                            | ** ** | **2008**                                            | ** ** | **2007**                                          | ** ** | **Percent  Change** | ** ** | **2008** | ** ** | **2007** | ** ** | **Percent  Change** | ** ** |
|                                  |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |
| Equipment                             |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |
| Revenue                               |       | $                                                   | 97,840     |                                              | $          | 61,380 |   | 59.4 |   | $ | 218,754 |   | $ | 122,483 |   | 78.6 |   |
| Cost of revenue                       |       | 86,986                                              |       | 55,643                                            |       | 56.3 |   | 194,904 |   | 110,533 |   | 76.3 |   |
| Gross profit                          |       | $                                                   | 10,854     |                                              | $          | 5,737 |   | 89.2 |   | $ | 23,850 |   | $ | 11,950 |   | 99.6 |   |
|                                  |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |
| Parts                                 |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |
| Revenue                               |       | $                                                   | 23,612     |                                              | $          | 14,851 |   | 59.0 |   | $ | 45,116 |   | $ | 27,176 |   | 66.0 |   |
| Cost of revenue                       |       | 16,689                                              |       | 10,866                                            |       | 53.6 |   | 32,483 |   | 20,016 |   | 62.3 |   |
| Gross profit                          |       | $                                                   | 6,923      |                                              | $          | 3,985 |   | 73.7 |   | $ | 12,633 |   | $ | 7,160 |   | 76.4 |   |
|                                  |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |
| Service                               |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |
| Revenue                               |       | $                                                   | 10,788     |                                              | $          | 7,647 |   | 41.1 |   | $ | 19,732 |   | $ | 13,041 |   | 51.3 |   |
| Cost of revenue                       |       | 3,907                                               |       | 2,670                                             |       | 46.3 |   | 7,325 |   | 4,888 |   | 49.9 |   |
| Gross profit                          |       | $                                                   | 6,881      |                                              | $          | 4,977 |   | 38.2 |   | $ | 12,407 |   | $ | 8,153 |   | 52.2 |   |
|                                  |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |
| Other, including  trucking and rental |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |
| Revenue                               |       | $                                                   | 2,665      |                                              | $          | 1,934 |   | 37.8 |   | $ | 3,885 |   | $ | 2,939 |   | 32.2 |   |
| Cost of revenue                       |       | 1,894                                               |       | 1,291                                             |       | 46.8 |   | 2,747 |   | 2,041 |   | 34.6 |   |
| Gross profit                          |       | $                                                   | 771        |                                              | $          | 643 |   | 19.9 |   | $ | 1,138 |   | $ | 898 |   | 26.7 |   |

 

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The following table setsforth our statements of operations data expressed as a percentage of netrevenue for the periods indicated:

 
| ** **                            | ** ** | **Three Months Ended July 31,** | ** ** | **Six Months Ended July 31,** | ** ** |
|---------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                            | ** ** | **2008**                                            | ** ** | **2007**                                          | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                            | ** ** | **(unaudited)**                                     | ** ** | **(unaudited)**                                   | ** ** |
|                                  |       |                                                |       |                                              |       |   |   |   |   |
| Revenue                               |       |                                                |       |                                              |       |   |   |   |   |
| Equipment                             |       | 72.5                                                | %          | 71.5                                              | %          | 76.1 | % | 73.9 | % |
| Parts                                 |       | 17.5                                                | %          | 17.3                                              | %          | 15.7 | % | 16.4 | % |
| Service                               |       | 8.0                                                 | %          | 8.9                                               | %          | 6.8 | % | 7.9 | % |
| Other, including  trucking and rental |       | 2.0                                                 | %          | 2.3                                               | %          | 1.4 | % | 1.8 | % |
| Total revenue                         |       | 100                                                 | %          | 100                                               | %          | 100 | % | 100 | % |
|                                  |       |                                                |       |                                              |       |   |   |   |   |
| Cost of Revenue                       |       |                                                |       |                                              |       |   |   |   |   |
| Equipment                             |       | 64.5                                                | %          | 64.8                                              | %          | 67.8 | % | 66.7 | % |
| Parts                                 |       | 12.4                                                | %          | 12.7                                              | %          | 11.3 | % | 12.1 | % |
| Service                               |       | 2.9                                                 | %          | 3.1                                               | %          | 2.5 | % | 3.0 | % |
| Other, including  trucking and rental |       | 1.4                                                 | %          | 1.5                                               | %          | 1.0 | % | 1.2 | % |
| Total cost of  revenue                |       | 81.2                                                | %          | 82.1                                              | %          | 82.6 | % | 83.0 | % |
|                                  |       |                                                |       |                                              |       |   |   |   |   |
| Gross profit                          |       | 18.8                                                | %          | 17.9                                              | %          | 17.4 | % | 17.0 | % |
|                                  |       |                                                |       |                                              |       |   |   |   |   |
| Operating  expenses                   |       | 14.4                                                | %          | 13.3                                              | %          | 13.1 | % | 12.9 | % |
|                                  |       |                                                |       |                                              |       |   |   |   |   |
| Income from  operations               |       | 4.4                                                 | %          | 4.6                                               | %          | 4.3 | % | 4.1 | % |

 

*Three Months Ended July 31,2008 Compared to Three Months Ended July 31, 2007*

* *

*Revenue*

 
| ** **                            | ** ** | **Three months ended   July 31, 2008** | ** ** | **Three months ended   July 31, 2007** | ** ** | **Increase** | ** ** | **Percent   change** | ** ** |
|---------------------------------------|------------|-----------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|--------------|------------|---------------------------|------------|
| ** **                            | ** ** | **(dollars in thousands)**                            | ** ** |
| Total revenue                         |       | $                                                               | 134,905    |                                                            | $          | 85,812       |       | $                         | 49,093     |   | 57.2 | % |
| Equipment                             |       | $                                                               | 97,840     |                                                            | $          | 61,380       |       | $                         | 36,460     |   | 59.4 | % |
| Parts                                 |       | $                                                               | 23,612     |                                                            | $          | 14,851       |       | $                         | 8,761      |   | 59.0 | % |
| Service                               |       | $                                                               | 10,788     |                                                            | $          | 7,647        |       | $                         | 3,141      |   | 41.1 | % |
| Other, including  trucking and rental |       | $                                                               | 2,665      |                                                            | $          | 1,934        |       | $                         | 731        |   | 37.8 | % |

 

The increase in revenuefor the three months ended July 31, 2008 was due to acquisitionscontributing to current period revenue and same-store sales growth.  Acquisitions contributed $35.4 million intotal revenue, or 72.1% of the total revenue increase, while same-store salesgrowth contributed $13.7 million, or 27.9% of the increase.  Same-store sales increased 15.9% over thesame period of the prior year, which is indicative of the strong market for ourproducts, particularly in the area of equipment sales.  We believe equipment sales were strong in thethree months ended July 31, 2008 due to the growth in global demand foragricultural commodities and the positive impact this commodity demand has hadon farm income.  We anticipate favorablemarket conditions will continue for fiscal 2009, assuming normal harvestweather conditions.

 

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*Cost of Revenue*

 
| ** **                            | ** ** | **Three months ended   July 31, 2008** | ** ** | **Three months ended   July 31, 2007** | ** ** | **Increase** | ** ** | **Percent   change** | ** ** |
|---------------------------------------|------------|-----------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|--------------|------------|---------------------------|------------|
| ** **                            | ** ** | **(dollars in thousands)**                            | ** ** |
| Total cost of  revenue                |       | $                                                               | 109,476    |                                                            | $          | 70,470       |       | $                         | 39,006     |   | 55.4 | % |
| Equipment                             |       | $                                                               | 86,986     |                                                            | $          | 55,643       |       | $                         | 31,343     |   | 56.3 | % |
| Parts                                 |       | $                                                               | 16,689     |                                                            | $          | 10,866       |       | $                         | 5,823      |   | 53.6 | % |
| Service                               |       | $                                                               | 3,907      |                                                            | $          | 2,670        |       | $                         | 1,237      |   | 46.3 | % |
| Other, including  trucking and rental |       | $                                                               | 1,894      |                                                            | $          | 1,291        |       | $                         | 603        |   | 46.7 | % |

 

The increase in cost ofrevenue for the three months ended July 31, 2008 was primarily due toincreased revenue.  Acquisitionscontributed $28.6 million in total cost of revenue, or 73.3% of the increase,while same-store sales growth contributed $10.4 million, or 26.7% of theincrease.  As a percentage of revenue,cost of revenue was 81.2%, compared to 82.1% for the second quarter of fiscal2008.

 

*Gross Profit*

 
| ** **                            | ** ** | **Three months ended   July 31, 2008** | ** ** | **Three months ended   July 31, 2007** | ** ** | **Increase** | ** ** | **Percent   change** | ** ** |
|---------------------------------------|------------|-----------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|--------------|------------|---------------------------|------------|
| ** **                            | ** ** | **(dollars in thousands)**                            | ** ** |
| Total gross  profit                   |       | $                                                               | 25,429     |                                                            | $          | 15,342       |       | $                         | 10,087     |   | 65.7 | % |
| Equipment                             |       | $                                                               | 10,854     |                                                            | $          | 5,737        |       | $                         | 5,117      |   | 89.2 | % |
| Parts                                 |       | $                                                               | 6,923      |                                                            | $          | 3,985        |       | $                         | 2,938      |   | 73.7 | % |
| Service                               |       | $                                                               | 6,881      |                                                            | $          | 4,977        |       | $                         | 1,904      |   | 38.3 | % |
| Other, including  trucking and rental |       | $                                                               | 771        |                                                            | $          | 643          |       | $                         | 128        |   | 19.9 | % |

 

The $10.1 millionincrease in gross profit for the three months ended July 31, 2008 wasprimarily due to increased revenue. Acquisitions contributed $6.8 million to the gross profit comparison forthe three months ending July 31, 2008, which was 67.3% of the increase intotal gross profit, while increases in same-store sale gross profits providedthe remaining $3.3 million, or 32.7%, of the gross profit improvement.  Gross profit margins were 18.8% for thesecond quarter of fiscal 2009, compared to 17.9% for the second quarter of fiscal2008.  The current strong market for ourproducts, particularly equipment, has resulted in improved margins compared tothe prior year.

 

*Operating Expenses*

 
| ** **         | ** ** | **Three months ended  July 31, 2008** | ** ** | **Three months ended  July 31, 2007** | ** ** | **Increase** | ** ** | **Percent  change** | ** ** |
|--------------------|------------|-----------------------------------------------------------|------------|-----------------------------------------------------------|------------|--------------|------------|---------------------|------------|
| ** **         | ** ** | **(dollars in thousands)**                      | ** ** |
| Operating expenses |       | $                                                         | 19,470     |                                                      | $          | 11,406       |       | $                   | 8,064      |   | 70.7 | % |
|                    |            |                                                           |            |                                                           |            |              |            |                     |            |  |  |  |

 

The $8.1 millionincrease in operating expenses was primarily due to the additional costsassociated with acquisitions such as compensation, rent and depreciation.  Other costs contributing to higher operatingexpenses were increased sales commission expenses (resulting from increasedgross profits), and, to a lesser extent, additional costs associated with beinga public company, such as increased legal and accounting costs related toregulatory compliance, particularly Sarbanes-Oxley compliance.  As a percentage of total revenue, operatingexpenses increased to 14.4% for the second quarter of fiscal 2009 from 13.3%for the second quarter of fiscal 2008.  This increase was partially caused by higher commission expenses, whichare paid based on gross profits.  Sinceour current quarter’s equipment margins were notably stronger than the prioryear, commission expense as a percent of sales increased.  Also contributing to the percentage increaseis current quarter Sarbanes-Oxley compliance costs.

 

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*Other Income (Expense)*

 
| ** **                 | ** ** | **Three months ended   July 31, 2008** | ** ** | **Three months ended   July 31, 2007** | ** ** | **Increase/   (Decrease)** | ** ** | **Percent   change** | ** ** |
|----------------------------|------------|-----------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|---------------------------------|------------|---------------------------|------------|
| ** **                 | ** ** | **(dollars in thousands)**                            | ** ** |
| Interest and  other income |       | $                                                               | 450        |                                                            | $          | 71                              |       | $                         | 379        |   | 533.8 | % |
| Floorplan  interest        |       | $                                                               | (578       | )                                                               | $          | (952                            | )          | $                         | (374       | ) | (39.3 | )% |
| Interest expense           |       | $                                                               | (230       | )                                                               | $          | (610                            | )          | $                         | (380       | ) | (62.3 | )% |

 

Interest and otherincome increased in the current quarter due to the higher level of cash andcash equivalents in the current three month period compared to the prior yearthree month period.  The decrease infloorplan interest of $0.4 million was due to lower borrowing rates compared tothe prior year quarter.  The decrease ininterest expense was primarily due to lower debt levels resulting from theretirement of all subordinated debentures as well as the early extinguishmentof a portion of our long-term debt.  Thisdebt reduction will continue to result in lower interest expense throughoutfiscal 2009 compared to that of fiscal year 2008.

 

*Provision for IncomeTaxes*

 
| ** **                  | ** ** | **Three months ended   July 31, 2008** | ** ** | **Three months ended   July 31, 2007** | ** ** | **Increase** | ** ** | **Percent   change** | ** ** |
|-----------------------------|------------|-----------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|--------------|------------|---------------------------|------------|
| ** **                  | ** ** | **(dollars in thousands)**                            | ** ** |
| Provision for  income taxes |       | $                                                               | 2,269      |                                                            | $          | 989          |       | $                         | 1,280      |   | 129.4 | % |
|                             |            |                                                                 |            |                                                                 |            |              |            |                           |            |  |  |  |

 

The effective tax rateincreased slightly to 40.5% for the three months ended July 31, 2008 from40.4% for the three months ended July 31, 2007.

 

*Six Months Ended July 31,2008 Compared to Six Months Ended July 31, 2007*

* *

*Revenue*

 
| ** **                            | ** ** | **Six months ended   July 31, 2008** | ** ** | **Six months ended   July 31, 2007** | ** ** | **Increase** | ** ** | **Percent   change** | ** ** |
|---------------------------------------|------------|---------------------------------------------------------------|------------|---------------------------------------------------------------|------------|--------------|------------|---------------------------|------------|
| ** **                            | ** ** | **(dollars in thousands)**                          | ** ** |
| Total revenue                         |       | $                                                             | 287,487    |                                                          | $          | 165,639      |       | $                         | 121,848    |   | 73.6 | % |
| Equipment                             |       | $                                                             | 218,754    |                                                          | $          | 122,483      |       | $                         | 96,271     |   | 78.6 | % |
| Parts                                 |       | $                                                             | 45,116     |                                                          | $          | 27,176       |       | $                         | 17,940     |   | 66.0 | % |
| Service                               |       | $                                                             | 19,732     |                                                          | $          | 13,041       |       | $                         | 6,691      |   | 51.3 | % |
| Other, including  trucking and rental |       | $                                                             | 3,885      |                                                          | $          | 2,939        |       | $                         | 946        |   | 32.2 | % |

 

The increase in revenuefor the six months ended July 31, 2008 was due to acquisitionscontributing to current period revenue and same-store sales growth.  Acquisitions contributed $80.3 million intotal revenue, or 65.9% of the increase, while same-store sales growth contributed$41.6 million, or 34.1% of the increase. Same-store sales increased 26.5% over the prior year, which isindicative of the strong market for our products, particularly in the area ofequipment sales.  We believe equipmentsales were strong in the six months ended July 31, 2008 due to the growthin global demand for agricultural commodities and the positive impact thiscommodity demand has had on farm income. We anticipate favorable market conditions will continue for fiscal 2009,assuming normal harvest weather conditions.

 

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*Cost of Revenue*

 
| ** **                            | ** ** | **Six months ended   July 31, 2008** | ** ** | **Six months ended   July 31, 2007** | ** ** | **Increase** | ** ** | **Percent   change** | ** ** |
|---------------------------------------|------------|---------------------------------------------------------------|------------|---------------------------------------------------------------|------------|--------------|------------|---------------------------|------------|
| ** **                            | ** ** | **(dollars in thousands)**                          | ** ** |
| Total cost of  revenue                |       | $                                                             | 237,459    |                                                          | $          | 137,478      |       | $                         | 99,981     |   | 72.7 | % |
| Equipment                             |       | $                                                             | 194,904    |                                                          | $          | 110,533      |       | $                         | 84,371     |   | 76.3 | % |
| Parts                                 |       | $                                                             | 32,483     |                                                          | $          | 20,016       |       | $                         | 12,467     |   | 62.3 | % |
| Service                               |       | $                                                             | 7,324      |                                                          | $          | 4,888        |       | $                         | 2,437      |   | 49.9 | % |
| Other, including  trucking and rental |       | $                                                             | 2,747      |                                                          | $          | 2,041        |       | $                         | 706        |   | 34.6 | % |

 

The increase in cost ofrevenue for the six months ended July 31, 2008 was primarily due toincreased revenue.  Acquisitionscontributed $66.0 million in total cost of revenue, or 66.0% of the increase,while same-store sales growth contributed $34.0 million, or 34.0% of theincrease.  As a percentage of revenue,cost of revenue was 82.6% for the second quarter of fiscal 2009, compared to83.0% for the second quarter of fiscal 2008.

 

*Gross Profit*

 
| ** **                            | ** ** | **Six months ended   July 31, 2008** | ** ** | **Six months ended   July 31, 2007** | ** ** | **Increase** | ** ** | **Percent   change** | ** ** |
|---------------------------------------|------------|---------------------------------------------------------------|------------|---------------------------------------------------------------|------------|--------------|------------|---------------------------|------------|
| ** **                            | ** ** | **(dollars in thousands)**                          | ** ** |
| Total gross  profit                   |       | $                                                             | 50,028     |                                                          | $          | 28,161       |       | $                         | 21,867     |   | 77.6 | % |
| Equipment                             |       | $                                                             | 23,850     |                                                          | $          | 11,950       |       | $                         | 11,900     |   | 99.6 | % |
| Parts                                 |       | $                                                             | 12,633     |                                                          | $          | 7,160        |       | $                         | 5,473      |   | 76.4 | % |
| Service                               |       | $                                                             | 12,407     |                                                          | $          | 8,153        |       | $                         | 4,254      |   | 52.2 | % |
| Other, including  trucking and rental |       | $                                                             | 1,138      |                                                          | $          | 898          |       | $                         | 240        |   | 26.7 | % |

* *

The $21.9 millionincrease in gross profit for the six months ended July 31, 2008 wasprimarily due to increased revenue. Acquisitions contributed $14.4 million to the gross profit comparisonfor the six months ending July 31, 2008, which was 66.2% of the totalincrease in gross profit, while increases in same-store sale gross profitsprovided the remaining $7.5 million, or 33.8%, of the gross profitimprovement.  Gross profit margins were17.4% for the six months ended July 31, 2008, compared to 17.0% in theprior six month period.  The currentstrong market for our products, particularly equipment, has resulted inimproved margins compared to the prior year. The higher equipment margins more than offset the sales mix shift fromhigher margin revenue (parts and service) to lower margin equipment revenue.

 

*Operating Expenses*

 
| ** **          | ** ** | **Six months ended   July 31, 2008** | ** ** | **Six months ended   July 31, 2007** | ** ** | **Increase** | ** ** | **Percent   change** | ** ** |
|---------------------|------------|---------------------------------------------------------------|------------|---------------------------------------------------------------|------------|--------------|------------|---------------------------|------------|
| ** **          | ** ** | **(dollars in thousands)**                          | ** ** |
| Operating  expenses |       | $                                                             | 37,652     |                                                          | $          | 21,452       |       | $                         | 16,200     |   | 75.5 | % |
|                     |            |                                                               |            |                                                               |            |              |            |                           |            |  |  |  |

 

The increase inoperating expenses was primarily due to the additional costs associated withacquisitions such as compensation, rent and depreciation.  Other costs contributing to higher operatingexpenses were increased sales commission expenses (resulting from increasedgross profits), and to a lesser extent additional costs associated with being apublic company, such as increased legal and accounting costs related toregulatory compliance, particularly Sarbanes-Oxley compliance.  As a percentage of total revenue, operatingexpenses remained relatively constant at 13.1% for the first six months offiscal 2009 compared to 12.9% for the first six months of fiscal 2008.

 

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* *

*Other Income (Expense)*

 
| ** **                 | ** ** | **Six months ended  July 31, 2008** | ** ** | **Six months ended  July 31, 2007** | ** ** | **Increase/  (Decrease)** | ** ** | **Percent  change** | ** ** |
|----------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------|------------|---------------------|------------|
| ** **                 | ** ** | **(dollars in thousands)**                    | ** ** |
| Interest and  other income |       | $                                                       | 761        |                                                    | $          | 85                        |       | $                   | 676        |   | 795.3 | % |
| Floorplan  interest        |       | $                                                       | (1,299     | )                                                       | $          | (1,831                    | )          | $                   | (532       | ) | (29.1 | )% |
| Interest expense           |       | $                                                       | (543       | )                                                       | $          | (1,265                    | )          | $                   | (722       | ) | (57.1 | )% |

 

Interestand other income increased $0.7 million for the six months ended July 31,2008 due to the higher level of cash and cash equivalents in the current sixmonth period compared to the prior year six month period.  The decrease in floorplan interest of $0.5million was due to lower borrowing rates compared to the prior year six month period.  The decrease in interest expense of $0.7million was primarily due to lower debt levels resulting from the retirement ofall subordinated debentures as well as the early extinguishment of a portion ofour long-term debt.  This debt reductionwill continue to result in lower interest expense throughout fiscal 2009compared to that of fiscal year 2008.

 

*Provision for IncomeTaxes*

 
| ** **                  | ** ** | **Six months ended  July 31, 2008** | ** ** | **Six months ended  July 31, 2007** | ** ** | **Increase** | ** ** | **Percent  change** | ** ** |
|-----------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------|------------|--------------|------------|---------------------|------------|
| ** **                  | ** ** | **(dollars in thousands)**                    | ** ** |
| Provision for  income taxes |       | $                                                       | 4,575      |                                                    | $          | 1,468        |       | $                   | 3,107      |   | 211.6 | % |
|                             |            |                                                         |            |                                                         |            |              |            |                     |            |  |  |  |

 

The effective tax rateincreased to 40.5% for the six months ended July 31, 2008 from 39.7% forthe six months ended July 31, 2007. The increase in the effective tax rate from the prior year primarilyreflects the changing mix of sales originating in states with higher taxrates.  The mix change is primarilyimpacted by current and prior year acquisitions.

 

**Liquidity and CapitalResources**

** **

*Cash Flow from OperatingActivities*

* *

For the six months ended July 31,2008, our cash flow provided by operating activities was $7.4 million.  Our cash flows from operations were primarilythe result of our reported net income of $6.7 million, an increase in accountspayable of $3.5 million, an increase in customer deposits of $9.6 million andan add-back of non-cash depreciation and amortization of $1.9 million.  This amount was principally offset by anincrease in receivables of $7.7 million and an increase in inventories of $7.0million.  The large increase in customerdeposits and receivables is representative of our growth through acquisitionsand strong fiscal 2009 second quarter sales activity.

 

For the six months endedJuly 31, 2007, our cash flow provided by operating activities was $5.1million.  Our cash flows from operationswere primarily the result of our reported net income of $2.2 million, anincrease in customer deposits of $1.7 million, an increase in accounts payableof $1.0 million and an add back of non-cash depreciation and amortization of$1.1 million.  This amount wasprincipally offset by a receivables increase of $0.4 million and a floorplannotes payable decrease of $0.7 million.

 

*Cash Flow from InvestingActivities*

* *

For the six months endedJuly 31, 2008, cash used for investing activities was $23.9 million.  Our cash used for investing activitiesprimarily consisted of equipment dealership purchases of $20.3 million andpurchases of property and equipment for $3.7 million.  The second quarter $14.4 million purchase ofthe assets of Mid-Land Equipment Company was the most significant cashacquisition for the current year.  Due toour higher cash levels resulting from our public offering proceeds, the Companyhas been assuming fewer liabilities in recent acquisitions, which therefore haverequired higher cash payments at the time of acquisition.

 

For the six months endedJuly 31, 2007, cash used for investing activities was $9.1 million.  Our cash used for investing activitiesrelated to purchases of equipment dealerships (net of cash purchased) was $5.1million and purchases of property and equipment was $4.1 million.

 

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* *

*Cash Flow from FinancingActivities*

* *

For the six months endedJuly 31, 2008, cash provided from financing activities was $60.7million.  Cash provided by financingactivities was primarily the result of $78.9 million in net proceeds from oursecond quarter follow-on offering.  Partially offsetting these proceeds wereprincipal payments on long-term debt and subordinated debentures of $16.8million.

 

For the six months endedJuly 31, 2007, cash used for financing activities was primarily the resultof a decrease in the net change in non-manufacturer floorplan payables of $4.6million, proceeds from long-term debt borrowings and subordinated debentures of$4.1 million and principal payments on long term debt of $1.7 million.

 

**Sources of Liquidity**

** **

Our primary sources ofliquidity are cash reserves, cash flow from operations, proceeds from ourpublic offerings, proceeds from the issuance of debt and borrowings under ourcredit facilities.  We expect thatongoing requirements for debt service and capital expenditures will be funded fromthese sources.

 

**Adequacy of CapitalResources**

** **

Our primary uses of cashhave been to fund our strategic acquisitions, finance the purchase ofinventory, meet debt service requirements and fund operating activities,working capital, payments due under building space operating leases andmanufacturer floorplan payable.

 

Based on our currentoperational performance, we believe our cash flow from operations, the proceedsfrom our public offerings, available cash and available borrowings under theexisting credit facilities will adequately provide our liquidity needs for, ata minimum, the next 12 months.

 

**Certain InformationConcerning Off-Balance Sheet Arrangements**

** **

We do not have anyrelationships with unconsolidated entities or financial partnerships, such asentities often referred to as structured finance or special purpose entities,which would have been established for the purpose of facilitating off-balancesheet arrangements or other contractually narrow or limited purposes. We are,therefore, not exposed to any financing, liquidity, market or credit risk thatcould arise if we had engaged in these relationships. In the normal course ofour business activities, we lease rental equipment under operating leases.

 

# **PRIVATE SECURITIES LITIGATION REFORM ACT**

#  

The Private Securities Litigation Reform Act of 1995provides a “safe harbor” for forward-looking statements. Such “forward-looking”information is included in this Quarterly Report on Form 10-Q, includingthe MD&A section, as well as in our Annual Report on Form 10-K for theyear ended January 31, 2008 that was filed with the Securities andExchange Commission, and in other materials filed or to be filed by the Companywith the Securities and Exchange Commission (as well as information included inoral statements or other written statements made or to be made by the Company).

 

Forward-lookingstatements include all statements based on future expectations and specificallyinclude, among other things, all statements relating to (i) our beliefsthat our market share is growing, (ii) our beliefs with respect to marketconditions, including our belief that favorable market conditions will continuefor fiscal 2009, and (iii) our expectations and beliefs with respect tothe uses and adequacy of our capital resources. Any statements that are not based upon historical facts, including theoutcome of events that have not yet occurred and our expectations for futureperformance, are forward-looking statements. The words “potential,” “believe,” “estimate,” “expect,” “intend,” “may,”“could,”  “will,” “plan,” “anticipate,”and similar words and expressions are intended to identify forward-lookingstatements.  Such statements are basedupon the current beliefs and expectations of our management.  Such forward-looking information involvesimportant risks and uncertainties that could significantly affect anticipatedresults in the future and, accordingly, such results may differ from thoseexpressed in any forward-looking statements made by or on behalf of theCompany.  These risks and uncertaintiesinclude, but are not limited to, adverse market conditions in the agriculturaland equipment industries, and those matters identified and discussed in ourAnnual Report on Form 10-K under the section titled “Risk Factors”.

 

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**ITEM 3.                  QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

 

We are exposed to marketrisk from changes in interest rates. Market risk is the potential loss arisingfrom adverse changes in market rates and prices such as interest rates. Forfixed rate debt, interest rate changes affect the fair value of financialinstruments but do not impact earnings or cash flows. Conversely, for floatingrate debt, interest rate changes generally do not affect the fair market valuebut do impact future earnings and cash flows, assuming other factors are heldconstant.

 

Based upon balances andinterest rates as of July 31, 2008, holding other variables constant, aone percentage point increase in interest rates for the next 12-month periodwould decrease pre-tax earnings and cash flow by approximately $367,000.Conversely, a one percentage point decrease in interest rates for the next12-month period would result in an increase to pre-tax earnings and cash flowof approximately $367,000.  At July 31,2008, we had variable rate floorplan notes payable of $118.1 million, of whichapproximately $35.2 million was interest-bearing, variable notes payable andlong-term debt of $1.5 million, and fixed rate notes payable and long-term debtof $2.7 million.

 

Our policy is not toenter into derivatives or other financial instruments for trading orspeculative purposes.

 

**ITEM 4.*                 *CONTROLS AND PROCEDURES**

 

*(a)*                               *Evaluation ofdisclosure controls and procedures*. After evaluating the effectiveness of the Company’sdisclosure controls and procedures pursuant to Rule 13a-15(b) of theSecurities Exchange Act of 1934 (“the Exchange Act”) as of the end of theperiod covered by this quarterly report, our chief executive officer and chieffinancial officer with the participation of the Company’s management, haveconcluded that the Company’s disclosure controls and procedures are effectiveto ensure that information that is required to be disclosed by the Company inreports that it files under the Exchange Act is recorded, processed, summarizedand reported within the time periods specified in the rules of theSecurities Exchange Commission. Our chief executive officer and chief financialofficer, with the participation of the Company’s management, have alsoconcluded that the Company’s disclosure controls and procedures are effectiveto ensure that information required to be disclosed in reports filed or submittedunder the Exchange Act is accumulated and communicated to management, includingour principal executive officer and principal financial officer, to allowtimely decisions regarding required disclosures.

 

Basedon evaluations occurring prior to the end of the period covered by thisquarterly report, our chief executive officer and chief financial officerconcluded that certain internal control deficiencies existed.  In light of these deficiencies, managementtook the actions, as discussed below, prior to and during the first and secondquarter to address such deficiencies.

 

*                                               **(b)**         **Changes in internal controls*. There has not been any change in theCompany’s internal control over financial reporting (as defined in Rules 13a-15(f) aspromulgated by the Securities and Exchange Commission under the Act) during itsmost recently completed fiscal quarter that has materially affected, or isreasonably likely to materially affect, the Company’s internal control overfinancial reporting.  During the secondquarter of fiscal 2009, the Company continued to implement the actionsidentified in its Form 10-Q for the Company’s third quarter of fiscal 2008relating to remediating past control deficiencies.

 

### **PART II.- OTHER INFORMATION**

###  

**ITEM 1.****                 ****LEGALPROCEEDINGS**

 

We are currently not aparty to any material pending legal proceedings.

 

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**ITEM 1A.****              ****RISKFACTORS**

 

In addition to the other information set forth in thisreport, including the important information in “Private Securities LitigationReform Act,” you should carefully consider the “Risk Factors” discussed in our Form 10-Kfor the year ended January 31, 2008 as filed with the United StatesSecurities and Exchange Commission. Those factors, if they were to occur, could cause our actual results todiffer materially from those expressed in our forward-looking statements inthis report, and materially adversely affect our financial condition or futureresults.  Although we are not aware ofany other factors that we currently anticipate will cause our forward-lookingstatements to differ materially from our future actual results, or materiallyaffect the Company’s financial condition or future results, additional risksand uncertainties not currently known to us or that we currently deem to beimmaterial might materially adversely affect our actual business, financialcondition and/or operating results.

 

There have been no material changes to the riskfactors described in our Form 10-K.

 

**ITEM 2.****                 ****UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

 

On December 11,2007, we closed the initial public offering (“IPO”) of our common stock,pursuant to which we sold 5,442,395 shares of our common stock and sellingstockholders sold 1,457,605 shares.  We filed a Registration Statement on Form S-1in connection with the IPO (SEC File No. 333-145526) that was declaredeffective on December 6, 2007, as well as a Registration Statement on Form S-1relating to an increase in the proposed maximum aggregate offering price (SECFile No. 333-147859).  We received net proceeds, after expenses, fromthe IPO of approximately $41.8 million. Offering expenses related to the IPOincluded an underwriting discount of approximately $3.2 million and otheroffering expenses of approximately $1.2 million.  During the six-monthperiod ended July 31, 2008, we used $1.3 million of the net proceeds fromthe IPO to repay subordinated debt held by former owners of acquireddealerships, $5.5 million to repay term debt held primarily by CNH Capital andformer owners of acquired dealerships, $9.4 million to repay fixed ratelong-term debt from Bremer Bank, $3.9 million to acquire certain assets ofCeres Equipment, Inc., $14.4 million to acquire certain assets of Mid-LandEquipment Company, and $2.0 million to acquire the outstanding stock of QuadCounty Implement.  We intend to use the remaining proceeds from theIPO to fund potential acquisitions of CNH agricultural and constructionequipment dealerships and for general corporate purposes, including workingcapital needs.

 

**ITEM 3.****                 ****DEFAULTSUPON SENIOR SECURITIES**

 

None.

 

**ITEM 4.****                 ****SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

The stockholdersof the Company voted on one item, the election of two Class I directors,at the Annual Meeting of Stockholders held on June 3, 2008:

 

Proxies for theAnnual Meeting were solicited pursuant to Regulation 14A under the SecuritiesExchange Act of 1934.  There was nosolicitation in opposition to management’s nominees, and the stockholderselected the following persons as directors of the Company to serve until the2011 Annual Meeting:

 
| ** **         | ** ** | **Votes**  | ** ** | **Votes**    | ** ** |
|--------------------|------------|------------|------------|--------------|------------|
| **Nominee**        | ** ** | **For**    | ** ** | **Withheld** | ** ** |
| Tony  Christianson |       | 11,906,252 |       | 206,387      |       |
| James Irwin        |       | 11,975,817 |       | 136,822      |       |

 

The followingindividuals will continue to serve as directors of the Company: David Meyer,Peter Christianson, Gordon Paul Anderson, John Bode, and James Williams.

 

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**ITEM 5.                  OTHER INFORMATION**

 

On September 9,2008, our Compensation Committee approved the Titan Machinery Inc. ExecutiveBonus Plan.  Under the Executive BonusPlan, our Chief Executive Officer and President-Chief Financial Officer mayearn a potential bonus of up to 200% of his or her base salary in a fiscal yearand each other executive officer may earn a potential bonus of up to 70% of hisor her base salary depending on such person’s position.  The Plan provides that 40% of the eligiblebonus for our named executive officers is based upon achievement of Titan’sannual pre-tax net income goal, 20% is based on achievement of Titan’s annualtotal sales goal and 20% is based on Titan’s annual return on assets goal.  The remaining 20% of the eligible bonus isbased upon achievement of personal position-specific goals approved by theCompensation Committee after consultation with the named executiveofficers.  The personal position-specificgoals for the named executive officers may relate to share performance,respective department personnel development, execution of strategies related toacquisitions, real estate, financing and investments, internal and externalreporting or implementation of unique position-specific projects that may varyannually.  The annual bonuses will bepaid 100% in cash.

 

A copy of the ExecutiveBonus Plan has been filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q.

 

**ITEM 6.****                 ****EXHIBITS**

 

(a)           Exhibits - See Exhibit Index on page followingsignatures

 

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**SIGNATURES**

 

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the Company has duly caused this Report to be signed on its behalf by theundersigned, thereunto duly authorized.

 

Dated:  September 15, 2008

 
| ** ** | **TITAN MACHINERY INC.** |                           |                       |
|------------|--------------------------|--------------------------------|----------------------------|
|       |                     |                           |                       |
|       |                     |                           |                       |
|       | By                       |                           | /s/ Peter J.  Christianson |
|       |                     | Peter J. Christianson          |                       |   |
|       |                     | Chief Financial Officer        |                       |   |
|       |                     | (Principal Financial  Officer) |                       |   |
|            |                          |                                |                            |  |  |  |

 

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EXHIBIT INDEX

TITAN MACHINERYINC.

FORM 10-Q

 
| **Exhibit No.** | ** ** | **Description**                                                                                           |
|----------------------|------------|-----------------------------------------------------------------------------------------------------------|
| **10.1               |       | Loan Agreement, dated  August 28, 2008, between Bremer Bank, N.A. and the registrant                 |
| **10.2               |       | Titan Machinery Inc.  Executive Bonus Plan                                                                |
| **31.1               |       | Certification of Chief  Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of  2002 |
| **31.2               |       | Certification of Chief Financial Officer Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002  |
| **32.1               |       | Certification of Chief Executive Officer Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002  |
| **32.2               |       | Certification of Chief Financial Officer Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002  |

 

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**Filed herewith

 

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