### Table of Contents

 

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### **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 THESECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended April 30, 2009**

** **

**Commission File No. 000-33866**

 

**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 has submittedelectronically and posted on its corporate Web site, if any, every InteractiveData File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (orfor such shorter period that the registrant was required to submit and postsuch files).  YES o  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 x         |
|---------------------------------------------|--------|----------------------------------|
|                                        |   |                             |
| Non-accelerated filer o                |   | Smaller reporting company o |
| (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 ofJune 1, 2009 was: Common Stock, $0.00001 par value, 17,729,021 shares.

 

 

 

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** **

**TITAN MACHINERY INC.**

**QUARTERLY REPORT ON FORM 10-Q**

 

**Table of Contents**

 
| ** **         | ** **                                                                                      | **Page No.** |
|--------------------|-------------------------------------------------------------------------------------------------|--------------|
| **PART I.**   | **FINANCIAL INFORMATION**                                                                       | 1            |
|               |                                                                                            |         |
| ITEM  1.           | FINANCIAL STATEMENTS                                                                            | 1            |
|               |                                                                                            |         |
|               | Consolidated Balance Sheets as of  April 30, 2009 and January 31, 2009                | 1            |
|               |                                                                                            |         |
|               | Consolidated  Statements of Operations for the three months ended April 30, 2009 and  2008 | 2            |
|               |                                                                                            |         |
|               | Consolidated  Statements of Cash Flows for the three months ended April 30, 2009 and  2008 | 3            |
|               |                                                                                            |         |
|               | Notes to  Consolidated Financial Statements                                                     | 5            |
|               |                                                                                            |         |
| ITEM 2.            | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS     | 10           |
|               |                                                                                            |         |
| ITEM 3.            | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                     | 15           |
|               |                                                                                            |         |
| ITEM 4.            | CONTROLS AND  PROCEDURES                                                                        | 16           |
|               |                                                                                            |         |
| **PART II.**  | **OTHER INFORMATION**                                                                           | 16           |
|               |                                                                                            |         |
| ITEM 1.            | LEGAL PROCEEDINGS                                                                               | 16           |
|               |                                                                                            |         |
| ITEM 1A.           | RISK FACTORS                                                                                    | 16           |
|               |                                                                                            |         |
| ITEM 2.            | UNREGISTERED  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                    | 16           |
|               |                                                                                            |         |
| ITEM 3.            | DEFAULTS  UPON SENIOR SECURITIES                                                                | 16           |
|               |                                                                                            |         |
| ITEM 4.            | SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS                                            | 17           |
|               |                                                                                            |         |
| ITEM 5.            | OTHER INFORMATION                                                                               | 17           |
|               |                                                                                            |         |
| ITEM  6.           | EXHIBITS                                                                                        | 17           |
|               |                                                                                            |         |
| Signatures         | 18                                                                                              |
|               |                                                                                            |         |
| Exhibit Index | 19                                                                                              |
|                    |                                                                                                 |              |  |

 

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Table of Contents

 

**PART I. — FINANCIAL INFORMATION**

 

**ITEM 1.          FINANCIAL STATEMENTS**

 

**TITAN MACHINERY INC.**

**CONSOLIDATED BALANCE SHEETS**

**(in thousands, except per share data)**

** **
| ** **                                                                                                                                                           | ** ** | **April 30,** | ** ** | **January 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|----------------------|------------|
| ** **                                                                                                                                                           | ** ** | **2009**           | ** ** | **2009**             | ** ** |
| ** **                                                                                                                                                           | ** ** | **(Unaudited)**    | ** ** | ** **           | ** ** |
| **ASSETS**                                                                                                                                                           |       |               |       |                 |       |
| CURRENT ASSETS                                                                                                                                                       |       |               |       |                 |       |
| Cash and cash  equivalents                                                                                                                                           |       | $                  | 78,714     |                 | $          | 41,047 |   |
| U.S. treasury  bills                                                                                                                                                 |       | —             |       | 44,994               |       |
| Total cash, cash  equivalents and U.S. treasury bills                                                                                                                |       | 78,714             |       | 86,041               |       |
|                                                                                                                                                                 |       |               |       |                 |       |
| Receivables, net                                                                                                                                                     |       | 21,695             |       | 19,627               |       |
| Inventories                                                                                                                                                          |       | 290,832            |       | 241,094              |       |
| Prepaid expenses                                                                                                                                                     |       | 485                |       | 532                  |       |
| Income taxes  receivable                                                                                                                                             |       | 900                |       | 1,433                |       |
| Deferred income  taxes                                                                                                                                               |       | 1,753              |       | 1,426                |       |
|                                                                                                                                                                 |       |               |       |                 |       |
| Total current  assets                                                                                                                                                |       | 394,379            |       | 350,153              |       |
|                                                                                                                                                                 |       |               |       |                 |       |
| INTANGIBLES AND  OTHER ASSETS                                                                                                                                        |       |               |       |                 |       |
| Parts inventory  in excess of amounts expected to be sold currently                                                                                                  |       | 1,609              |       | 1,509                |       |
| Goodwill                                                                                                                                                             |       | 12,253             |       | 12,464               |       |
| Intangible  assets, net of accumulated amortization                                                                                                                  |       | 346                |       | 366                  |       |
| Other                                                                                                                                                                |       | 498                |       | 487                  |       |
|                                                                                                                                                                 |       | 14,706             |       | 14,826               |       |
| PROPERTY AND  EQUIPMENT, net of accumulated depreciation                                                                                                             |       | 44,072             |       | 45,269               |       |
|                                                                                                                                                                 |       |               |       |                 |       |
|                                                                                                                                                                 |       | $                  | 453,157    |                 | $          | 410,248 |   |
|                                                                                                                                                                 |       |               |       |                 |       |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                       |       |               |       |                 |       |
|                                                                                                                                                                 |       |               |       |                 |       |
| CURRENT  LIABILITIES                                                                                                                                                 |       |               |       |                 |       |
| Accounts payable                                                                                                                                                     |       | $                  | 15,887     |                 | $          | 18,652 |   |
| Floorplan notes  payable                                                                                                                                             |       | 203,593            |       | 166,481              |       |
| Current  maturities of long-term debt                                                                                                                                |       | 7,620              |       | 7,623                |       |
| Customer deposits                                                                                                                                                    |       | 15,483             |       | 15,158               |       |
| Accrued expenses                                                                                                                                                     |       | 7,397              |       | 8,308                |       |
|                                                                                                                                                                 |       |               |       |                 |       |
| Total current  liabilities                                                                                                                                           |       | 249,980            |       | 216,222              |       |
|                                                                                                                                                                 |       |               |       |                 |       |
| LONG-TERM  LIABILITIES                                                                                                                                               |       |               |       |                 |       |
| Long-term debt,  less current maturities                                                                                                                             |       | 19,403             |       | 14,810               |       |
| Deferred income  taxes                                                                                                                                               |       | 3,837              |       | 3,503                |       |
| Other long-term  liabilities                                                                                                                                         |       | 4,186              |       | 1,946                |       |
| ** **                                                                                                                                                           |       | 27,426             |       | 20,259               |       |
|                                                                                                                                                                 |       |               |       |                 |       |
| STOCKHOLDERS’  EQUITY                                                                                                                                           |       |               |       |                 |       |
| Common stock,  par value $.00001 per share, authorized - 25,000 shares; issued and  outstanding - 17,688 at April 30, 2009 and 17,657 at January 31,  2009 |       | —             |       | —               |       |
| Additional  paid-in-capital                                                                                                                                          |       | 137,949            |       | 137,755              |       |
| Retained  earnings                                                                                                                                                   |       | 37,802             |       | 36,012               |       |
|                                                                                                                                                                 |       | 175,751            |       | 173,767              |       |
|                                                                                                                                                                 |       |               |       |                 |       |
|                                                                                                                                                                 |       | $                  | 453,157    |                 | $          | 410,248 |   |

 

See Notes to ConsolidatedFinancial Statements

 

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**TITAN MACHINERY INC.**

**CONSOLIDATED STATEMENTS OFOPERATIONS (UNAUDITED)**

**(in thousands, except per share data)**

 
| ** **                            | ** ** | **Three Months Ended** | ** ** |
|---------------------------------------|------------|------------------------|------------|
| ** **                            | ** ** | **April 30,**     | ** ** |
| ** **                            | ** ** | **2009**               | ** ** | **2008** | ** ** |
|                                  |       |                   |       |   |   |
| REVENUE                               |       |                   |       |   |   |
| Equipment                             |       | $                      | 124,865    |   | $ |  120,914 |   |
| Parts                                 |       | 26,398                 |       | 21,504 |   |
| Service                               |       | 12,542                 |       | 8,944 |   |
| Other, including  trucking and rental |       | 2,496                  |       | 1,220 |   |
| TOTAL REVENUE                         |       | 166,301                |       | 152,582 |   |
|                                  |       |                   |       |   |   |
| COST OF REVENUE                       |       |                   |       |   |   |
| Equipment                             |       | 112,300                |       | 107,918 |   |
| Parts                                 |       | 18,537                 |       | 15,794 |   |
| Service                               |       | 4,600                  |       | 3,418 |   |
| Other, including  trucking and rental |       | 2,348                  |       | 853 |   |
| TOTAL COST OF  REVENUE                |       | 137,785                |       | 127,983 |   |
|                                  |       |                   |       |   |   |
| GROSS PROFIT                          |       | 28,516                 |       | 24,599 |   |
|                                  |       |                   |       |   |   |
| OPERATING  EXPENSES                   |       | 24,705                 |       | 18,182 |   |
|                                  |       |                   |       |   |   |
| INCOME FROM  OPERATIONS               |       | 3,811                  |       | 6,417 |   |
|                                  |       |                   |       |   |   |
| OTHER INCOME  (EXPENSE)               |       |                   |       |   |   |
| Interest and  other income            |       | 211                    |       | 311 |   |
| Floorplan  interest expense           |       | (731                   | )          | (722 | ) |
| Interest expense  other               |       | (263                   | )          | (313 | ) |
|                                  |       |                   |       |   |   |
| INCOME BEFORE  INCOME TAXES           |       | 3,028                  |       | 5,693 |   |
|                                  |       |                   |       |   |   |
| PROVISION FOR  INCOME TAXES           |       | (1,238                 | )          | (2,306 | ) |
|                                  |       |                   |       |   |   |
| NET INCOME                            |       | $                      | 1,790      |   | $ | 3,387 |   |
|                                  |       |                   |       |   |   |
| EARNINGS PER  SHARE - NOTE 1          |       |                   |       |   |   |
|                                  |       |                   |       |   |   |
| EARNINGS PER  SHARE - BASIC           |       | $                      | 0.10       |   | $ | 0.25 |   |
| EARNINGS PER  SHARE - DILUTED         |       | $                      | 0.10       |   | $ | 0.24 |   |
|                                  |       |                   |       |   |   |
| WEIGHTED AVERAGE  SHARES - BASIC      |       | 17,571                 |       | 13,449 |   |
| WEIGHTED AVERAGE  SHARES - DILUTED    |       | 17,860                 |       | 13,855 |   |

 

See Notes to Consolidated Financial Statements

 

2

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** **

**TITAN MACHINERY INC.**

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

**(in thousands)**

 
| ** **                                                                                                         | ** ** | **Three Months Ended April 30,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                                                         | ** ** | **2009**                              | ** ** | **2008** | ** ** |
|                                                                                                               |       |                                  |       |   |   |
| OPERATING  ACTIVITIES                                                                                              |       |                                  |       |   |   |
| Net income                                                                                                         |       | $                                     | 1,790      |   | $ | 3,387 |   |
| Adjustments to  reconcile net income to net cash from operations                                                   |       |                                  |       |   |   |
| Depreciation and  amortization                                                                                     |       | 1,910                                 |       | 854 |   |
| Deferred income  taxes                                                                                             |       | 55                                    |       | (9 | ) |
| Stock based  compensation expense                                                                                  |       | 194                                   |       | 137 |   |
| Other                                                                                                              |       | (10                                   | )          | (35 | ) |
| Changes in  assets and liabilities, net of purchase of equipment dealerships assets and  assumption of liabilities |       |                                  |       |   |   |
| Receivables and prepaid  expenses                                                                                  |       | (2,079                                | )          | (6,235 | ) |
| Inventories                                                                                                        |       | (24,246                               | )          | (1,532 | ) |
| Floorplan notes  payable                                                                                           |       | 1,330                                 |       | 783 |   |
| Accounts  payable, customer deposits, accrued expenses and other long-term liabilities                             |       | (827                                  | )          | 10,799 |   |
| Income taxes                                                                                                       |       | 533                                   |       | 2,314 |   |
|                                                                                                               |       |                                  |       |   |   |
| NET CASH  PROVIDED BY (USED FOR) OPERATING ACTIVITIES                                                              |       | (21,350                               | )          | 10,463 |   |
|                                                                                                               |       |                                  |       |   |   |
| INVESTING  ACTIVITIES                                                                                              |       |                                  |       |   |   |
| Sales of U.S.  treasury bills, net of purchases                                                                    |       | 44,994                                |       | — |   |
| Property and  equipment purchases                                                                                  |       | (2,880                                | )          | (1,384 | ) |
| Net proceeds  from sale of equipment                                                                               |       | 291                                   |       | 157 |   |
| Purchase of  equipment dealerships, net of cash purchased                                                          |       | —                                |       | (3,940 | ) |
|                                                                                                               |       |                                  |       |   |   |
| NET CASH  PROVIDED BY (USED FOR) INVESTING ACTIVITIES                                                              |       | 42,405                                |       | (5,167 | ) |
|                                                                                                               |       |                                  |       |   |   |
| FINANCING  ACTIVITIES                                                                                              |       |                                  |       |   |   |
| Net change in  non-manufacturer floorplan payable                                                                  |       | 13,447                                |       | (79 | ) |
| Proceeds from  long-term debt borrowings                                                                           |       | 4,629                                 |       | 58 |   |
| Principal  payments on long-term debt and subordinated debentures                                                  |       | (1,464                                | )          | (6,109 | ) |
|                                                                                                               |       |                                  |       |   |   |
| NET CASH  PROVIDED BY (USED FOR) FINANCING ACTIVITIES                                                              |       | 16,612                                |       | (6,130 | ) |
|                                                                                                               |       |                                  |       |   |   |
| NET CHANGE IN  CASH AND CASH EQUIVALENTS                                                                           |       | 37,667                                |       | (834 | ) |
|                                                                                                               |       |                                  |       |   |   |
| CASH AND CASH  EQUIVALENTS AT BEGINNING OF PERIOD                                                                  |       | 41,047                                |       | 42,803 |   |
|                                                                                                               |       |                                  |       |   |   |
| CASH AND CASH  EQUIVALENTS AT END OF PERIOD                                                                        |       | $                                     | 78,714     |   | $ | 41,969 |   |
|                                                                                                               |       |                                  |       |   |   |
| SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION                                                                 | ** ** | ** **                            | ** ** | ** ** | ** ** |
| Cash paid during  the period                                                                                       | ** ** | ** **                            | ** ** | ** ** | ** ** |
| Income taxes,  net of refunds                                                                                      |       | $                                     | 646        |   | $ | — |   |
| Interest                                                                                                           |       | $                                     | 996        |   | $ | 1,054 |   |

 

See Notes to Consolidated Financial Statements

** **

**3**

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**Table of Contents**

** **

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS (UNAUDITED)** – Page 2

**(in thousands)**

 
| ** **                                                                                                                                                      | ** ** | **Three Months Ended April 30,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                                                                                                      | ** ** | **2009**                              | ** ** | **2008** | ** ** |
|                                                                                                                                                            |       |                                  |       |   |   |
| SUPPLEMENTAL  DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES                                                                                         |       |                                  |       |   |   |
| Property and  equipment purchased with long-term debt                                                                                                           |       | $                                     | 1,425      |   | $ | — |   |
| Transfer of  equipment from fixed assets to inventories                                                                                                         |       | $                                     | 3,355      |   | $ | — |   |
| Acquisition of  equipment dealership assets in exchange for cash and assumption of  liabilities including purchase accounting adjustments on prior acquisitions |       |                                  |       |   |   |
| Receivables                                                                                                                                                     |       | $                                     | 58         |   | $ | — |   |
| Inventories                                                                                                                                                     |       | 98                                    |       | (3,433 | ) |
| Property and  equipment                                                                                                                                         |       | —                                |       | (473 | ) |
| Goodwill                                                                                                                                                        |       | 211                                   |       | (207 | ) |
| Accounts  payable, customer deposits and accrued expenses                                                                                                       |       | (319                                  | )          | 173 |   |
| Income taxes  payable                                                                                                                                           |       | (48                                   | )          | — |   |
| Cash paid for  dealerships and adjustments on prior acquisitions                                                                                                |       | $                                     | —     |   | $ | (3,940 | ) |

 

See Notes toConsolidated Financial Statements

 

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TITAN MACHINERYINC.

NOTES TOCONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

**NOTE 1 -      ****BUSINESS ACTIVITY AND SIGNIFICANTACCOUNTING POLICIES**

 

*Basisof Presentation*

 

The unauditedfinancial statements included herein have been prepared pursuant to the rules andregulations of the Securities and Exchange Commission for interim reporting.Accordingly, they do not include all the information and footnotes required byaccounting principles generally accepted in the United States of America forcomplete financial statements. In the opinion of management, all adjustments(consisting of normal recurring accruals) considered necessary for a fairpresentation have been included. Operating results for the three-month periodended April 30, 2009 are not necessarily indicative of the results thatmay be expected for the year ending January 31, 2010. The informationcontained in the balance sheet as of January 31, 2009 was derived from theCompany’s audited financial statements for the year then ended. Theseconsolidated financial statements should be read in conjunction with theaudited consolidated financial statements and notes thereto included in our Form10-K for the fiscal year ended January 31, 2009 as filed with the SEC.

 

*Nature of Business*

 

TitanMachinery Inc. (the “Company”) is engaged in the retail sale, service andrental of agricultural and industrial machinery through stores in North Dakota,South Dakota, Minnesota, Iowa, Nebraska, Montana and Wyoming.

 

*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 May 2009,the Financial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standards (“SFAS”) No. 165, Subsequent Events. SFAS 165establishes general standards of accounting for and disclosure of events thatoccur after the balance sheet date but before financial statements are issuedor are available to be issued. The Company will adopt SFAS 165 for the interimperiod ending July 30, 2009. Its adoption is not expected to have amaterial effect on the Company’s consolidated financial statements.

 

In February 2008,the FASB issued FSP FAS 157-2, Effective Date of FASB Statement No. 157(“FSP FAS 157-2”), which permits a one year deferral of the application ofSFAS 157 for all non-financial assets and non-financial liabilities,except those that are recognized or disclosed at fair value in the financialstatements on a recurring basis (at least annually). The Company adoptedSFAS 157 for non-financial assets and non-financial liabilities on February 1,2009. Its adoption did not have a material effect on the Company’s results ofoperations, financial position or cash flows.

 

In December 2007,the FASB issued SFAS No. 141 (Revised 2007), Business Combinations (“SFAS 141R”).SFAS 141R provides additional guidance on improving the relevance,representational faithfulness, and comparability of the financial informationthat a reporting entity provides in its financial reports about a businesscombination 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. TheCompany adopted SFAS 141R effective February 1, 2009. Its adoptiondid not have a material effect on the Company’s consolidated financialstatements.

 

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In December 2007,the FASB issued SFAS No. 160, Noncontrolling Interests in ConsolidatedFinancial Statements (“SFAS 160”). SFAS 160 applies to all entitiesthat prepare consolidated financial statements and have an outstandingnoncontrolling interest in one or more subsidiaries. SFAS 160 amendsAccounting Research Bulletin No. 51 to establish accounting and reportingstandards for the noncontrolling interest in a subsidiary and for thedeconsolidation of a subsidiary. SFAS 160 is effective for fiscal years,and interim periods within those fiscal years, beginning on or after December 15,2008. The Company adopted SFAS 160 effective as of February 1, 2009.Its adoption did not have a material effect on the Company’s consolidatedfinancial statements.

 

*EarningsPer Share*

 

The followingtable sets forth the denominator for the computation of basic and dilutedearnings per share: 

 
| ** **                                         | ** ** | **Three Months Ended April 30,** | ** ** |
|----------------------------------------------------|------------|---------------------------------------|------------|
| **(in thousands)**                                 | ** ** | **2009**                              | ** ** | **2008** | ** ** |
|                                               |       |                                  |       |   |   |
| Basic  weighted-average shares outstanding         |       | 17,571                                |       | 13,449 |   |
| Plus:  Incremental shares from assumed conversions |       |                                  |       |   |   |
| Restricted Stock                                   |       | 97                                    |       | 85 |   |
| Warrants                                           |       | 80                                    |       | 110 |   |
| Stock Options                                      |       | 112                                   |       | 211 |   |
| Diluted  weighted-average shares outstanding       |       | 17,860                                |       | 13,855 |   |

 

There were 191,000 stock options outstanding as ofApril 30, 2009 that were available to be included in the computation of dilutedearnings per share because they were anti-dilutive. All stock optionsoutstanding as of April 30, 2008 were used in the computation of dilutedearnings per share.

6

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**NOTE 2 -       INVENTORIES**

 
| ** **                    | ** ** | **April 30,** | ** ** | **January 31,** | ** ** |
|-------------------------------|------------|--------------------|------------|----------------------|------------|
| ** **                    | ** ** | **2009**           | ** ** | **2009**             | ** ** |
| ** **                    | ** ** | **(in thousands)** | ** ** |
| New equipment                 |       | $                  | 171,265    |                 | $          | 132,502 |   |
| Used equipment                |       | 77,009             |       | 68,333               |       |
| Parts, tires and  attachments |       | 39,227             |       | 37,314               |       |
| Work in process               |       | 3,331              |       | 2,945                |       |
|                          |       |               |       |                 |       |
|                          |       | $                  | 290,832    |                 | $          | 241,094 |   |

 

In addition to theabove amounts, the Company has estimated that a portion of its parts inventorywill not be sold in the next operating cycle. Accordingly, these balances havebeen classified as noncurrent assets.

 

**NOTE 3 -       LINES OFCREDIT/FLOORPLAN NOTES PAYABLE**

 

*Operating Line of Credit*

 

The Company had noamount outstanding on the line of credit with Bremer Bank National Association(“Bremer Bank”) at April 30, 2009 and January 31, 2009. The agreementprovides for available borrowings of $25,000,000 and carries a variableinterest rate of prime minus .25%, and has a maturity date of August 1,2009. The agreement contains certain financial covenants which impose minimumlevels of current ratio, debt service coverage, and inventory turnover ratioand a maximum level of debt to tangible net worth ratio. As of April 30,2009, the Company was in compliance with all of these financial covenants andhad $24,750,000 in available borrowings under this line of credit. The line issecured by substantially all assets of the Company.

 

On August 1,2008, Bremer Bank issued the Company a standby letter of credit in the amountof $250,000 to our insurance carrier for deductible retention. This reduced theamount of borrowings available on its line of credit by $250,000. Thisagreement expires on August 1, 2009.

 

*Floorplan Lines of Credit*

 

The Company hasfloorplan lines of credit for equipment purchases totaling approximately$321,000,000 with various manufacturers and a bank, including a $300,000,000Wholesale Floorplan Credit Facility with CNH Capital America LLC (“CNH”).The available borrowings under the CNH credit facility are reduced by outstandingfloorplan notes payable, rental fleet financing and other acquisition-relatedfinancing arrangements with CNH. The interest rate for new borrowings under theCNH Capital floorplan line of credit is equal to the prime rate plus 0.3% perannum for most purposes, subject to any interest-free periods offered by CNH.The CNH Capital credit facility automatically renews on August 31 of eachyear through August 31, 2012, unless earlier terminated by either party.Under covenants of the CNH credit facility, the Company has agreed, among otherthings, to maintain various financial ratio levels and to submit certainfinancial information. As of April 30, 2009, the Company was in compliancewith all floorplan financial covenants.

 

Floorplan notespayable relating to these credit facilities totaled approximately $180,207,000of the total floorplan notes payable balance of $203,593,000 outstanding as of April 30,2009 and $153,782,000 of the total floorplan notes payable balance of$166,481,000 outstanding as of January 31, 2009. As of April 30,2009, the Company had approximately $115,320,000 in available borrowingsremaining under these lines of credit. These floorplan notes carried variousinterest rates primarily ranging from 3.25 to 9.25% as of April 30, 2009and January 31, 2009, and are secured by the related inventory. Repaymentterms vary by individual notes, but generally payments are made from salesproceeds or rental revenue from the related inventories.

 

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**NOTE 4 -       STOCK WARRANTS,STOCK OPTIONS AND RESTRICTED STOCK**

 

*CommonStock Warrants*

 

The followingtable summarizes stock warrant activity for the three months ended April 30,2009:

 

*(numberof warrants and aggregate intrinsic value in thousands)*

 
| *** ***                                          | *** *** | *** ***  | ** ** | ** **   | ** ** | ** **    | ** ** | **Weighted**     | ** ** |
|-------------------------------------------------------|--------------|---------------|------------|--------------|------------|---------------|------------|------------------|------------|
| ** **                                            | ** **   | ** **    | ** ** | **Weighted** | ** ** | ** **    | ** ** | **Average**      | ** ** |
| ** **                                            | ** **   | ** **    | ** ** | **Average**  | ** ** | **Aggregate** | ** ** | **Remaining**    | ** ** |
| ** **                                            | ** **   | **Number of** | ** ** | **Exercise** | ** ** | **Intrinsic** | ** ** | **Contractual**  | ** ** |
| ** **                                            | ** **   | **Warrants**  | ** ** | **Price**    | ** ** | **Value**     | ** ** | **Life (Years)** | ** ** |
|                                                  |         |          |       |         |       |          |       |             |       |
| Outstanding and  exercisable at January 31, 2009 |         | 123           |       | $            | 3.45       |          |       |             |       |   |
| Granted                                               |         | —        |       | —       |       |          |       |             |       |
| Exercised                                             |         | —        |       | —       |       |          |       |             |       |
| Forfeited                                             |         | —        |       | —       |       |          |       |             |       |
| Outstanding and  exercisable at April 30, 2009   |         | 123           |       | $            | 3.45       |          | $          | 822              |       | 3.0 |   |
|                                                       |              |               |            |              |            |               |            |                  |            |  |  |

 

*StockOptions*

 

The followingtable summarizes stock option activity for the three months ended April 30,2009:

 

*(numberof options and aggregate intrinsic value in thousands****)***

 
| *** ***                                | *** *** | *** ***       | ** ** | ** **   | ** ** | ** **    | ** ** | **Weighted**     | ** ** |
|---------------------------------------------|--------------|--------------------|------------|--------------|------------|---------------|------------|------------------|------------|
| *** ***                                | *** *** | *** ***       | ** ** | **Weighted** | ** ** | ** **    | ** ** | **Average**      | ** ** |
| ** **                                  | ** **   | ** **         | ** ** | **Average**  | ** ** | **Aggregate** | ** ** | **Remaining**    | ** ** |
| ** **                                  | ** **   | **Number of** | ** ** | **Exercise** | ** ** | **Intrinsic** | ** ** | **Contractual**  | ** ** |
| ** **                                  | ** **   | **Options**        | ** ** | **Price**    | ** ** | **Value**     | ** ** | **Life (Years)** | ** ** |
|                                        |         |               |       |         |       |          |       |             |       |
| Outstanding at  January 31, 2009       |         | 646                |       | $            | 10.91      |          |       |             |       |   |
| Granted                                     |         | 5                  |       | 11.16        |       |          |       |             |       |
| Exercised                                   |         | —             |       | —       |       |          |       |             |       |
| Forfeited                                   |         | —             |       | —       |       |          |       |             |       |
| Outstanding at  April 30, 2009         |         | 651                |       | $            | 10.91      |          | $          | 1,234            |       | 7.8 |   |
|                                        |         |               |       |         |       |          |       |             |       |
| Options exercisable  at April 30, 2009 |         | 146                |       | $            | 6.66       |          | $          | 516              |       | 7.0 |   |

 

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*RestrictedStock*

 

The followingtable summarizes restricted stock activity for the three months ended April 30,2009:

 

*(numberof restricted shares in thousands)*

 
| ** **                          | ** ** | ** ** | ** ** | ** **          | ** ** | **Weighted**    | ** ** |
|-------------------------------------|------------|------------|------------|---------------------|------------|-----------------|------------|
| ** **                          | ** ** | ** ** | ** ** | **Weighted**        | ** ** | **Average**     | ** ** |
| ** **                          | ** ** | ** ** | ** ** | **Average**         | ** ** | **Remaining**   | ** ** |
| ** **                          | ** ** | ** ** | ** ** | **Grant Date** | ** ** | **Contractual** | ** ** |
| ** **                          | ** ** | **Shares** | ** ** | **Fair Value** | ** ** | **Term**        | ** ** |
| Nonvested at  January 31, 2009 |       | 92         |       | $                   | 10.18      |            | 2.1        |   |
| Granted                             |       | 13         |       | 10.05               |       |            |       |
| Forfeited                           |       | (1         | )          | 11.93               |       |            |       |
| Vested                              |       | (7         | )          | 15.99               |       |            |       |
| Nonvested at  April 30, 2009   |       | 97         |       | 9.75                |       | 2.1             |       |
|                                     |            |            |            |                     |            |                 |            |  |

 

The weightedaverage grant date fair value of restricted stock granted was $10.05 and $17.48for the three months ended April 30, 2009 and 2008, respectively. Thetotal fair value of restricted stock vested was $103,434 for the three monthsended April 30, 2009. No restricted stock vested during the three monthsended April 30, 2008. As of April 30, 2009, there was approximately$606,000 of unrecognized compensation cost on non-vested restricted stock thatis expected to be recognized over a weighted-average period of 2.1 years.

 

**NOTE 5 -      SUBSEQUENT EVENTS**

 

On May 1,2009, the Company acquired 100% of the outstanding stock of Winger Implement, Inc.for approximately $1.5 million. The dealership is located in Winger, Minnesota.  The acquisition expands the Company’spresence in the Red River Valley.

 

On May 1,2009, the Company opened a new Case Construction Equipment dealership in Minot,North Dakota. The new location expands the Company’s presence into the BakkenFormation area of North Dakota.

 

On May 28,2009, the Company acquired certain assets of Arthur Mercantile, Co. forapproximately $0.8 million. The dealership is located in Arthur, North Dakota.The acquisition expands the Company’s presence in the Red River Valley. JamesL. Williams, Arthur Mercantile, Co.’s President and Treasurer, is a TitanMachinery director.

 

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**Table of Contents**

** **
| **ITEM 2.** | ** ** | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |
|-------------|------------|-------------------------------------------------------------------------------------------------|

** **

The followingdiscussion and analysis of our financial condition and results of operationsshould be read in conjunction with our interim consolidated financial statementsand related notes included in Item 1 of Part 1 of this Quarterly Report,and the audited consolidated financial statements and notes thereto andManagement’s Discussion and Analysis of Financial Condition and Results ofOperations contained in our Annual Report on Form 10-K for the year ended January 31,2009.

 

**Critical AccountingPolicies**

** **

There have been nomaterial changes in our Critical Accounting Policies, as disclosed in ourAnnual Report on Form 10-K for the year ended January 31, 2009.

 

**Overview**

** **

We own and operateone of the largest networks of full service agricultural and constructionequipment stores in North America. We are the world’s largest retail dealer ofCase IH Agriculture 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$1.8 million, or $0.10 per diluted share, in the quarter ended April 30,2009, compared to $3.4 million, or $0.24 per diluted share, in the quarterended April 30, 2008. Significant factors impacting the quarter were:

 

***·***                  Revenue growth due to acquisitions, offset bydeclines in same-store sales;

*** ***

***·***                  Increase in gross profits primarily due to a changein sales mix to higher-margin parts and service after-product sales support;

*** ***

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

*** ***

***·***                  Significantly higher diluted weighted average sharesresulting from our follow-on offering in May 2008, which negativelyimpacts earnings per share comparisons to the prior year.

*** ***

**Results of Operations**

** **

Comparativefinancial data for each of our four sources of revenue are expressed below. Theresults for these periods include the operating results of the acquisitionsmade during these periods. The period-to-period comparisons included below arenot necessarily indicative of future results:

 

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| ** **                            | ** ** | **Three Months Ended April 30,** | ** ** |
|---------------------------------------|------------|---------------------------------------|------------|
| ** **                            | ** ** | ** **                            | ** ** | ** ** | ** ** | **Percent** | ** ** |
| ** **                            | ** ** | **2009**                              | ** ** | **2008** | ** ** | **Change** | ** ** |
| ** **                            | ** ** | **(dollars in thousands)**  | ** ** | ** ** | ** ** |
| Equipment                             |       |                                  |       |   |   |   |   |
| Revenue                               |       | $                                     | 124,865    |   | $ | 120,914 |   | 3.3 | % |
| Cost of revenue                       |       | 112,300                               |       | 107,918 |   | 4.1 | % |
| Gross profit                          |       | $                                     | 12,565     |   | $ | 12,996 |   | (3.3 | )% |
|                                  |       |                                  |       |   |   |   |   |
| Parts                                 |       |                                  |       |   |   |   |   |
| Revenue                               |       | $                                     | 26,398     |   | $ | 21,504 |   | 22.8 | % |
| Cost of revenue                       |       | 18,537                                |       | 15,794 |   | 17.4 | % |
| Gross profit                          |       | $                                     | 7,861      |   | $ | 5,710 |   | 37.7 | % |
|                                  |       |                                  |       |   |   |   |   |
| Service                               |       |                                  |       |   |   |   |   |
| Revenue                               |       | $                                     | 12,542     |   | $ | 8,944 |   | 40.2 | % |
| Cost of revenue                       |       | 4,600                                 |       | 3,418 |   | 34.6 | % |
| Gross profit                          |       | $                                     | 7,942      |   | $ | 5,526 |   | 43.7 | % |
|                                  |       |                                  |       |   |   |   |   |
| Other, including  trucking and rental |       |                                  |       |   |   |   |   |
| Revenue                               |       | $                                     | 2,496      |   | $ | 1,220 |   | 104.6 | % |
| Cost of revenue                       |       | 2,348                                 |       | 853 |   | 175.3 | % |
| Gross profit                          |       | $                                     | 148        |   | $ | 367 |   | (59.7 | )% |

 

The followingtable sets forth our statements of operations data expressed as a percentage ofnet revenue for the periods indicated:

 
| ** **                            | ** ** | **Three Months Ended April 30,** | ** ** |
|---------------------------------------|------------|---------------------------------------|------------|
| ** **                            | ** ** | **2009**                              | ** ** | **2008** | ** ** |
|                                  |       |                                  |       |   |   |
| Revenue                               |       |                                  |       |   |   |
| Equipment                             |       | 75.1                                  | %          | 79.2 | % |
| Parts                                 |       | 15.9                                  | %          | 14.1 | % |
| Service                               |       | 7.5                                   | %          | 5.9 | % |
| Other, including  trucking and rental |       | 1.5                                   | %          | 0.8 | % |
| Total revenue                         |       | 100.0                                 | %          | 100.0 | % |
|                                  |       |                                  |       |   |   |
| Cost of revenue                       |       |                                  |       |   |   |
| Equipment                             |       | 67.5                                  | %          | 70.7 | % |
| Parts                                 |       | 11.1                                  | %          | 10.4 | % |
| Service                               |       | 2.8                                   | %          | 2.2 | % |
| Other, including  trucking and rental |       | 1.5                                   | %          | 0.6 | % |
| Total cost of  revenue                |       | 82.9                                  | %          | 83.9 | % |
|                                  |       |                                  |       |   |   |
| Gross profit                          |       | 17.1                                  | %          | 16.1 | % |
|                                  |       |                                  |       |   |   |
| Operating  expenses                   |       | 14.8                                  | %          | 11.9 | % |
|                                  |       |                                  |       |   |   |
| Income from  operations               |       | 2.3                                   | %          | 4.2 | % |

 

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*Table of Contents*

*** ***

***Three Months Ended April 30, 2009Compared to Three Months Ended April 30, 2008***

*** ***

*Revenue*

 
| ** **                            | ** ** | **Three Months Ended**               | ** ** | **Three Months Ended** | ** ** | ** **   | ** ** | **Percent** | ** ** |
|---------------------------------------|------------|--------------------------------------|------------|------------------------|------------|--------------|------------|-------------|------------|
| ** **                            | ** ** | **April 30, 2009**                   | ** ** | **April 30, 2008**     | ** ** | **Increase** | ** ** | **Change**  | ** ** |
| ** **                            | ** ** | **(dollars in thousands)** | ** ** | ** **             | ** ** |
| Equipment                             |       | $                                    | 124,865    |                   | $          | 120,914      |       | $           | 3,951      |   | 3.3 | % |
| Parts                                 |       | 26,398                               |       | 21,504                 |       | 4,894        |       | 22.8        | %          |
| Service                               |       | 12,542                               |       | 8,944                  |       | 3,598        |       | 40.2        | %          |
| Other, including  trucking and rental |       | 2,496                                |       | 1,220                  |       | 1,276        |       | 104.6       | %          |
|                                  |       |                                 |       |                   |       |         |       |        |       |
| Total Revenue                         |       | $                                    | 166,301    |                   | $          | 152,582      |       | $           | 13,719     |   | 9.0 | % |

* *

The increase inrevenue for the three months ended April 30, 2009 was due to acquisitionscontributing to current period revenue, offset by a decline in same-storesales. Acquisitions contributed $27.7 million in total revenue, whilesame-store sales declined by $14.0 million. Same-store sales decreased 9.2%over the same period of the prior year, resulting from a particularly strongagricultural market in fiscal 2009 that did not recur in the first quarter offiscal 2010 and the significant flooding that occurred in the Red River Valleyduring the first quarter of fiscal 2010.

 

*Cost of Revenue*

 
| ** **                            | ** ** | **Three Months Ended**               | ** ** | **Three Months Ended** | ** ** | ** **   | ** ** | **Percent** | ** ** |
|---------------------------------------|------------|--------------------------------------|------------|------------------------|------------|--------------|------------|-------------|------------|
| ** **                            | ** ** | **April 30, 2009**                   | ** ** | **April 30, 2008**     | ** ** | **Increase** | ** ** | **Change**  | ** ** |
| ** **                            | ** ** | **(dollars in thousands)** | ** ** | ** **             | ** ** |
| Equipment                             |       | $                                    | 112,300    |                   | $          | 107,918      |       | $           | 4,382      |   | 4.1 | % |
| Parts                                 |       | 18,537                               |       | 15,794                 |       | 2,743        |       | 17.4        | %          |
| Service                               |       | 4,600                                |       | 3,418                  |       | 1,182        |       | 34.6        | %          |
| Other, including  trucking and rental |       | 2,348                                |       | 853                    |       | 1,495        |       | 175.3       | %          |
|                                  |       |                                 |       |                   |       |         |       |        |       |
| Total cost of  revenue                |       | $                                    | 137,785    |                   | $          | 127,983      |       | $           | 9,802      |   | 7.7 | % |

* *

The increase incost of revenue for the three months ended April 30, 2009 was primarily due toincreased revenue. Acquisitions contributed $22.5 million in total cost ofrevenue, while the decline in same-store sales resulted in a decrease in costof revenue of $12.7 million. As a percentage of revenue, cost of revenue was82.9%, compared to 83.9% for the first quarter of fiscal 2009.

 

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*GrossProfit*

 
| ** **                            | ** ** | **Three Months Ended**     | ** ** | **Three Months Ended**  | ** ** | **Increase/**  | ** ** | **Percent** | ** ** |
|---------------------------------------|------------|----------------------------|------------|-------------------------|------------|----------------|------------|-------------|------------|
| ** **                            | ** ** | **April 30, 2009**    | ** ** | **April 30, 2008** | ** ** | **(Decrease)** | ** ** | **Change**  | ** ** |
| ** **                            | ** ** | **(dollars in thousands)** | ** ** | ** **              | ** ** |
|                                  |       |                       |       |                    |       |           |       |        |       |
| Equipment                             |       | $                          | 12,565     |                    | $          | 12,996         |       | $           | (431       | ) | (3.3 | )% |
| Parts                                 |       | 7,861                      |       | 5,710                   |       | 2,151          |       | 37.7        | %          |
| Service                               |       | 7,942                      |       | 5,526                   |       | 2,416          |       | 43.7        | %          |
| Other, including  trucking and rental |       | 148                        |       | 367                     |       | (219           | )          | (59.7       | )%         |
| Total Gross  Profit                   |       | $                          | 28,516     |                    | $          | 24,599         |       | $           | 3,917      |   | 15.9 | % |

* *

The $3.9 millionincrease in gross profit for the three months ended April 30, 2009 wasprimarily due to increased revenue as well as stronger margins on parts andservice revenues. Acquisitions contributed $5.2 million to gross profit for thethree months ended April 30, 2009, offset by a decrease in same-store salegross profits of $1.3 million, or 5.3% from the first quarter of fiscal 2009.Gross profit margins were 17.1% for the first quarter of fiscal 2010, comparedto 16.1% for the first quarter of fiscal 2009. Improvement in gross profitmargins resulted from an increase in parts and service revenues as a percentageof net revenue, which are higher-margin revenue sources. The decrease in grossprofit margins on other, including trucking and rental, was due to an increasein depreciation expense resulting from significant additions to our capitalizedrental fleet since April 30, 2008, and the lower off-season utilization ofrental fleet in the regions in which we operate. We believe that our grossprofit on other, including trucking and rental, will increase as rental fleetutilization increases in the remaining quarters of fiscal 2010.

 

*Operating Expenses*

 
| ** **          | ** ** | **Three Months Ended**     | ** ** | **Three Months Ended**  | ** ** | ** **   | ** ** | **Percent** | ** ** |
|---------------------|------------|----------------------------|------------|-------------------------|------------|--------------|------------|-------------|------------|
| ** **          | ** ** | **April 30, 2009**    | ** ** | **April 30, 2008** | ** ** | **Increase** | ** ** | **Change**  | ** ** |
| ** **          | ** ** | **(dollars in thousands)** | ** ** | ** **              | ** ** |
| Operating  Expenses |       | $                          | 24,705     |                    | $          | 18,182       |       | $           | 6,523      |   | 35.9 | % |
|                     |            |                            |            |                         |            |              |            |             |            |  |  |  |

* *

The $6.5 millionincrease in operating expenses was primarily due to the additional costsassociated with acquisitions such as compensation, rent and depreciation. As apercentage of total revenue, operating expenses increased to 14.8% for thefirst quarter of fiscal 2010 compared to 11.9% for the first quarter of fiscal2009. The strong prior year sales resulted in improved fixed operating expenseutilization as a percentage of sales in the first quarter of fiscal 2009.

 

*Other Income (Expense)*

 
| ** **                  | ** ** | **Three Months Ended**     | ** ** | **Three Months Ended**  | ** ** | **Increase/**  | ** ** | **Percent** | ** ** |
|-----------------------------|------------|----------------------------|------------|-------------------------|------------|----------------|------------|-------------|------------|
| ** **                  | ** ** | **April 30, 2009**    | ** ** | **April 30, 2008** | ** ** | **(Decrease)** | ** ** | **Change**  | ** ** |
| ** **                  | ** ** | **(dollars in thousands)** | ** ** | ** **              | ** ** |
| Interest and other  income  |       | $                          | 211        |                    | $          | 311            |       | $           | (100       | ) | (32.2 | )% |
| Floorplan  interest expense |       | (731                       | )          | (722                    | )          | 9              |       | 1.2         | %          |
| Interest expense            |       | (263                       | )          | (313                    | )          | (50            | )          | (16.0       | )%         |
|                             |            |                            |            |                         |            |                |            |             |            |  |  |  |

* *

While we hadhigher levels of cash and cash equivalents during the first quarter of fiscal2010 compared to the first quarter of fiscal 2009, interest and other incomedecreased in the current quarter as we invested our cash balances in highlysecure investments that carried lower interest rates than those earned in thefirst quarter of fiscal 2009. Floorplan interest expense remained relativelyflat as the higher floorplan notes payable balances were offset by lowerborrowing rates compared 

 

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to the prior yearquarter. The slight decrease in interest expense resulted from higher long-termdebt balances, offset by lower borrowing rates compared to the prior yearquarter.

 

*Provision for IncomeTaxes*

 
| ** **                  | ** ** | **Three Months Ended**     | ** ** | **Three Months Ended**  | ** ** | ** **   | ** ** | **Percent** | ** ** |
|-----------------------------|------------|----------------------------|------------|-------------------------|------------|--------------|------------|-------------|------------|
| ** **                  | ** ** | **April 30, 2009**    | ** ** | **April 30, 2008** | ** ** | **Decrease** | ** ** | **Change**  | ** ** |
| ** **                  | ** ** | **(dollars in thousands)** | ** ** | ** **              | ** ** |
| Provision for  income taxes |       | $                          | 1,238      |                    | $          | 2,306        |       | $           | (1,068     | ) | (46.3 | )% |
|                             |            |                            |            |                         |            |              |            |             |            |  |  |  |

* *

Our effective taxrate increased to 41.0% for the three months ended April 30, 2009 from40.5% for the three months ended April 30, 2008. The increase in oureffective tax rate from the prior year primarily reflects the changing mix ofsales originating in states with higher tax rates. The sales mix change wassignificantly impacted by prior year acquisitions. Increases in permanent taxdifferences, such as those arising from the expensing of stock options, alsocontributed to the increase in effective tax rate.

 

**Liquidity and CapitalResources**

** **

*Cash Flow from OperatingActivities*

* *

For the threemonths ended April 30, 2009, our cash flow used in operating activitieswas $21.4 million. Our cash flow from operations was primarily the result ofour reported net income of $1.8 million, an increase in floorplan notes payableof $1.3 million, and an add-back of non-cash depreciation and amortization of$1.9 million. This amount was principally offset by an increase in inventoriesof $24.2 million, a net increase in receivables and prepaid expenses of $2.1million and a net decrease in accounts payable, customer deposits, accruedexpenses and other long-term liabilities of $0.8 million. The increase ininventories was primarily the result of purchases to meet our expectedequipment sales in fiscal 2010.

 

For the threemonths ended April 30, 2008, our cash flow provided by operatingactivities was $10.5 million.  Our cash flows from operations wereprimarily the result of our reported net income of $3.4 million, an increase infloorplan notes of $0.8 million, a net increase in accounts payable, customerdeposits, accrued expenses and other long-term liabilities of $10.8 million, anincrease in our current income tax payable of $2.3 million, and an add back ofnon-cash depreciation and amortization of $0.9 million.  This amount wasprincipally offset by a net increase in receivables and prepaid expenses of$6.2 million and an increase in inventories of $1.5 million.  The largeincrease in customer deposits and receivables was representative of our growththrough acquisitions and strong fiscal 2009 first quarter sales activity.

 

*Cash Flow from InvestingActivities*

* *

For the threemonths ended April 30, 2009, cash provided by investing activities was$42.4 million. Our cash provided by investing activities primarily consisted ofthe sale of U.S. treasury bills of $45.0 million, offset by purchases ofproperty and equipment for $2.9 million. We are now investing our excess cashbalances in investments that are classified as cash equivalents.

 

For the threemonths ended April 30, 2008, cash used for investing activities was $5.2million.  Our cash used for investing activities primarily consisted ofequipment dealership purchases of $3.9 million and purchases of property andequipment for $1.4 million.

 

*Cash Flow from FinancingActivities*

* *

For the threemonths ended April 30, 2009, cash provided from financing activities was$16.6 million. Cash provided by financing activities was primarily the resultof an increase in non-manufacturer floorplan payable of $13.4 million andproceeds from long-term debt exceeding principal payments on long-term debt by$3.2 million.

 

For the threemonths ended April 30, 2008, cash used for financing activities was $6.1million.  Cash used for financing activities was primarily the result ofprincipal payments on long-term debt of $6.1 million.

 

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**Sources of Liquidity**

** **

Our primarysources of liquidity are cash reserves, cash flow from operations, proceedsfrom the issuance of debt and borrowings under our credit facilities. We expectthat ongoing requirements for debt service and capital expenditures will befunded from these sources.

 

**Adequacy of CapitalResources**

** **

Our primary usesof cash have 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 ourcurrent operational performance, we believe our cash flow from operations,available cash and available borrowings under the existing credit facilitieswill adequately provide our liquidity needs for, at a minimum, the next 12months.

 

**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 and buildings underoperating leases.

 

# **PRIVATE SECURITIES LITIGATION REFORM ACT**

#  

The PrivateSecurities Litigation Reform Act of 1995 provides a “safe harbor” for forward-lookingstatements. Such “forward-looking” information is included in this QuarterlyReport on Form 10-Q, including the MD&A section, as well as in ourAnnual Report on Form 10-K for the year ended January 31, 2009 thatwas filed with the Securities and Exchange Commission, and in other materialsfiled or to be filed by the Company with the Securities and Exchange Commission(as well as information included in oral statements or other written statementsmade or to be made by the Company).

 

Forward-looking statementsinclude all statements based on future expectations and specifically include,among other things, all statements relating to (i) our belief that grossprofits on other revenue, including trucking and rental, will improvethroughout 2010, (ii) our beliefs with respect to market conditions, (iii) ourexpectations with respect to our floorplan borrowing rates, (iv) ourexpectations with respect to funding debt service obligations and capitalexpenditures, (v) our estimates regarding sales of inventory in our nextoperating cycle, and (vi) our expectations and beliefs with respect to theuses and adequacy of our capital resources. Any statements that are not basedupon historical facts, including the outcome of events that have not yetoccurred and our expectations for future performance, are forward-lookingstatements. The words “potential,” “believe,” “estimate,” “expect,” “intend,” “may,”“could,” “will,” “plan,” “anticipate,” and similar words and expressions areintended to identify forward-looking statements. Such statements are based uponthe current beliefs and expectations of our management. Such forward-lookinginformation involves important risks and uncertainties that could significantlyaffect anticipated results in the future and, accordingly, such results maydiffer from those expressed in any forward-looking statements made by or onbehalf of the Company. These risks and uncertainties include, but are notlimited to, adverse market conditions in the agricultural and equipmentindustries, the continuation of unfavorable conditions in the credit marketsand those matters identified and discussed in our Annual Report on Form 10-Kunder the section titled “Risk Factors”.

 

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK**

 

We are exposed tomarket risk from changes in interest rates. Market risk is the potential lossarising from adverse changes in market rates and prices such as interest rates.For fixed 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 value but doimpact future earnings and cash flows, assuming other factors are heldconstant.

 

Based uponbalances and interest rates as of April 30, 2009, holding other variablesconstant, a one percentage point increase in interest rates for the next12-month period would decrease pre-tax earnings and cash flow by approximately$910,000. Conversely, a one percentage point decrease in interest rates for thenext 12-month period would result in an increase to pre-tax earnings and cashflow of approximately $910,000. At April 30, 2009, we had variable ratefloorplan notes payable 

 

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of $203.6 million, ofwhich approximately $68.5 million was interest-bearing, variable notes payableand long-term debt of $22.5 million, and fixed rate notes payable and long-termdebt of $4.5 million.

 

Our policy is notto enter into derivatives or other financial instruments for trading orspeculative purposes.

 

**ITEM 4.**CONTROLS ANDPROCEDURES**

 

(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 (as defined inExchange Act Rule 13a-15(e)) are effective to ensure that information thatis required to be disclosed by the Company in reports that it files under theExchange Act is recorded, processed, summarized and reported within the timeperiods specified in the rules of the Securities Exchange Commission. OurChief Executive Officer and Chief Financial Officer, with the participation ofthe Company’s management, have also concluded that the Company’s disclosurecontrols and procedures are effective to ensure that information required to bedisclosed in reports filed or submitted under the Exchange Act is accumulatedand communicated to management, including our principal executive officer andprincipal financial officer, to allow timely decisions regarding requireddisclosures.

 

(b)           *Changes in internalcontrols*. Therehas not been any change in the Company’s internal control over financialreporting (as defined in Exchange Act Rule 13a-15(f)) during its mostrecently completed fiscal quarter that has materially affected, or isreasonably likely to materially affect, the Company’s internal control over financialreporting.

 

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

###  

**ITEM 1.                  LEGAL PROCEEDINGS**

 

We are currentlynot a party to any material pending legal proceedings.

 

**ITEM 1A.               RISKFACTORS**

 

In addition to theother information set forth in this report, including the important informationin “Private Securities Litigation Reform Act,” you should carefully considerthe “Risk Factors” discussed in our Form 10-K for the year ended January 31,2009 as filed with the United States Securities and Exchange Commission. Thosefactors, if they were to occur, could cause our actual results to differmaterially from those expressed in our forward-looking statements in thisreport, and materially adversely affect our financial condition or futureresults. Although we are not aware of any other factors that we currentlyanticipate will cause our forward-looking statements to differ materially fromour future actual results, or materially affect the Company’s financialcondition or future results, additional risks and uncertainties not currentlyknown to us or that we currently deem to be immaterial might materiallyadversely affect our actual business, financial condition and/or operatingresults.

 

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

 

None.

 

**ITEM 3.                  DEFAULTSUPON SENIOR SECURITIES**

 

None.

 

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**ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS**

 

None.

 

**ITEM 5.  OTHER INFORMATION**

 

None.

 

**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: June 8,  2009 |                     |
|---------------------------|--------------------------|
| ** **                | **TITAN MACHINERY INC.** |
|                      |                     |
|                      |                     |
|                      | By                       | /s/  Peter J. Christianson |
|                      |                     | Peter  J. Christianson |
|                      |                     | President  and Chief Financial Officer |
|                      |                     | (Principal  Financial Officer) |

 

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EXHIBIT INDEX

TITAN MACHINERYINCORPORATED

FORM 10-Q

 
| **Exhibit No.** | ** ** | **Description**                                                                                           |
|----------------------|------------|-----------------------------------------------------------------------------------------------------------|
| **10.1               |       | Non-Employee Director  Compensation 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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*Management contracts orcompensatory plans or arrangements

**Filed herewith

 

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