Table ofContents

 

 

 

**UNITED STATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, DC  20549**

 

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**FORM10-Q**

 

**QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF**

**THESECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended October 31, 2010**

 

**Commission File No. 001-33866**

 

**TITAN MACHINERY INC.**

(Exact name of registrant as specified in itscharter)

 

| **Delaware**                    | ** ** | **No. 45-0357838**  |
|---------------------------------|------------|---------------------|
| (State or Other Jurisdiction of |       | (IRS Employer       |
| Incorporation or Organization)  |       | Identification No.) |

 

**644 East Beaton Drive**

**West Fargo, ND 58078-2648**

(Address of Principal Executive Offices)

 

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

 

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Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filing requirementsfor 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 Rule12b-2 of 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 ofNovember 30, 2010 was: Common Stock, $0.00001 par value, 17,900,491 shares.

 

 

 

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**TITAN MACHINERY INC.**

**QUARTERLY REPORT ON FORM 10-Q**

 

**Table ofContents**

 
| ** **     | ** **                 | ** **                                                                                           | ** ** | **Page No.** |
|----------------|----------------------------|------------------------------------------------------------------------------------------------------|------------|-------------------|
| **PART I.**    | **FINANCIAL  INFORMATION** | ** **                                                                                           | 1          |
|           |                       |                                                                                                 |       |              |
| ITEM 1.        |                       | FINANCIAL  STATEMENTS                                                                                |       | 1                 |
|           |                       |                                                                                                 |       |              |
|           |                       | Consolidated Balance Sheets as of October 31, 2010 and  January 31, 2010                             |       | 1                 |
|           |                       |                                                                                                 |       |              |
|           |                       | Consolidated Statements of Operations for the three  and nine months ended October 31, 2010 and 2009 |       | 2                 |
|           |                       |                                                                                                 |       |              |
|           |                       | Consolidated Statements of Cash Flows for the nine  months ended October 31, 2010 and 2009           |       | 3                 |
|           |                       |                                                                                                 |       |              |
|           |                       | Notes to Consolidated Financial Statements                                                           |       | 5                 |
|           |                       |                                                                                                 |       |              |
| ITEM 2.        |                       | MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS          |       | 11                |
|           |                       |                                                                                                 |       |              |
| ITEM 3.        |                       | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                          |       | 23                |
|           |                       |                                                                                                 |       |              |
| ITEM 4.        |                       | CONTROLS AND  PROCEDURES                                                                             |       | 24                |
|           |                       |                                                                                                 |       |              |
| **PART II.**   | **OTHER INFORMATION**      |                                                                                                 | 24         |
|           |                       |                                                                                                 |       |              |
| ITEM 1.        |                       | LEGAL PROCEEDINGS                                                                                    |       | 24                |
|           |                       |                                                                                                 |       |              |
| ITEM 1A.       | RISK FACTORS               |                                                                                                 | 24         |
|           |                       |                                                                                                 |       |              |
| ITEM 2.        |                       | UNREGISTERED  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                         |       | 24                |
|           |                       |                                                                                                 |       |              |
| ITEM 3.        |                       | DEFAULTS  UPON SENIOR SECURITIES                                                                     |       | 24                |
|           |                       |                                                                                                 |       |              |
| ITEM 4.        |                       | (REMOVED AND  RESERVED)                                                                              |       | 24                |
|           |                       |                                                                                                 |       |              |
| ITEM 5.        |                       | OTHER INFORMATION                                                                                    |       | 24                |
|           |                       |                                                                                                 |       |              |
| ITEM  6.       |                       | EXHIBITS                                                                                             |       | 25                |
|           |                       |                                                                                                 |       |              |
| Signatures     |                       | 26                                                                                                   |
|           |                       |                                                                                                 |
| Exhibit  Index |                       | 27                                                                                                   |

 

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Tableof Contents

 

**PART I. – FINANCIAL INFORMATION**

 

**ITEM 1.          FINANCIAL STATEMENTS**

 

**TITAN MACHINERY INC.**

**CONSOLIDATED BALANCE SHEETS**

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

** **
| ** **                                                                                                                                                            | ** ** | **October 31,** | ** ** | **January 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|----------------------|------------|
| ** **                                                                                                                                                            | ** ** | **2010**             | ** ** | **2010**             |       |
| ** **                                                                                                                                                            | ** ** | **(Unaudited)**      | ** ** | ** **           |       |
| **ASSETS**                                                                                                                                                            |       |                 |       |                 |       |
|                                                                                                                                                                  |       |                 |       |                 |       |
| CURRENT ASSETS                                                                                                                                                        |       |                 |       |                 |       |
| Cash and cash equivalents                                                                                                                                             |       | $                    | 66,002     |                 | $          | 76,185 |   |
| Receivables, net                                                                                                                                                      |       | 34,976               |       | 22,254               |       |
| Inventories                                                                                                                                                           |       | 428,830              |       | 347,580              |       |
| Prepaid expenses                                                                                                                                                      |       | 867                  |       | 1,009                |       |
| Income taxes receivable                                                                                                                                               |       | —               |       | 1,595                |       |
| Deferred income taxes                                                                                                                                                 |       | 2,923                |       | 2,266                |       |
|                                                                                                                                                                  |       |                 |       |                 |       |
| Total current assets                                                                                                                                                  |       | 533,598              |       | 450,889              |       |
|                                                                                                                                                                  |       |                 |       |                 |       |
| INTANGIBLES AND OTHER ASSETS                                                                                                                                          |       |                 |       |                 |       |
| Noncurrent parts inventories                                                                                                                                          |       | 2,344                |       | 1,642                |       |
| Goodwill                                                                                                                                                              |       | 16,247               |       | 14,762               |       |
| Intangible assets, net of accumulated amortization                                                                                                                    |       | 387                  |       | 295                  |       |
| Other                                                                                                                                                                 |       | 869                  |       | 620                  |       |
|                                                                                                                                                                  |       | 19,847               |       | 17,319               |       |
|                                                                                                                                                                  |       |                 |       |                 |       |
| PROPERTY AND EQUIPMENT, net of accumulated  depreciation                                                                                                              |       | 55,915               |       | 46,604               |       |
|                                                                                                                                                                  |       |                 |       |                 |       |
|                                                                                                                                                                  |       | $                    | 609,360    |                 | $          | 514,812 |   |
|                                                                                                                                                                  |       |                 |       |                 |       |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**                                                                                                                        |       |                 |       |                 |       |
|                                                                                                                                                                  |       |                 |       |                 |       |
| CURRENT LIABILITIES                                                                                                                                                   |       |                 |       |                 |       |
| Accounts payable                                                                                                                                                      |       | $                    | 16,307     |                 | $          | 12,352 |   |
| Floorplan notes payable                                                                                                                                               |       | 322,328              |       | 249,872              |       |
| Current maturities of long-term debt and  short-term advances                                                                                                         |       | 9,248                |       | 7,218                |       |
| Customer deposits                                                                                                                                                     |       | 9,280                |       | 12,974               |       |
| Accrued expenses                                                                                                                                                      |       | 13,123               |       | 9,870                |       |
| Income taxes payable                                                                                                                                                  |       | 3,112                |       | —               |       |
|                                                                                                                                                                  |       |                 |       |                 |       |
| Total current liabilities                                                                                                                                             |       | 373,398              |       | 292,286              |       |
|                                                                                                                                                                  |       |                 |       |                 |       |
| LONG-TERM LIABILITIES                                                                                                                                                 |       |                 |       |                 |       |
| Long-term debt, less current maturities                                                                                                                               |       | 22,970               |       | 21,852               |       |
| Deferred income taxes                                                                                                                                                 |       | 6,994                |       | 6,356                |       |
| Other long-term liabilities                                                                                                                                           |       | 2,498                |       | 3,794                |       |
| ** **                                                                                                                                                            |       | 32,462               |       | 32,002               |       |
|                                                                                                                                                                  |       |                 |       |                 |       |
| STOCKHOLDERS’ EQUITY                                                                                                                                             |       |                 |       |                 |       |
| Common stock, par value $.00001 per share,  authorized - 25,000 shares; issued and outstanding - 17,861 at  October 31, 2010 and 17,777 at January 31, 2010 |       | —               |       | —               |       |
| Additional paid-in-capital                                                                                                                                            |       | 139,772              |       | 138,775              |       |
| Retained earnings                                                                                                                                                     |       | 63,728               |       | 51,749               |       |
|                                                                                                                                                                  |       | 203,500              |       | 190,524              |       |
|                                                                                                                                                                  |       |                 |       |                 |       |
|                                                                                                                                                                  |       | $                    | 609,360    |                 | $          | 514,812 |   |

 

See Notes to Consolidated Financial Statements

 

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**TITAN MACHINERY INC.**

**CONSOLIDATED STATEMENTS OFOPERATIONS (UNAUDITED)**

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

** **
| ** **                           | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                           | ** ** | **October 31,**             | ** ** | **October 31,**            | ** ** |
| ** **                           | ** ** | **2010**                         | ** ** | **2009**                        | ** ** | **2010** | ** ** | **2009** | ** ** |
|                                 |       |                             |       |                            |       |   |   |   |   |
| REVENUE                              |       |                             |       |                            |       |   |   |   |   |
| Equipment                            |       | $                                | 241,096    |                            | $          | 173,367 |   | $ | 544,587 |   | $ | 439,374 |   |
| Parts                                |       | 42,028                           |       | 32,961                          |       | 111,038 |   | 91,813 |   |
| Service                              |       | 20,832                           |       | 15,854                          |       | 54,885 |   | 44,036 |   |
| Other, including trucking and rental |       | 7,351                            |       | 4,836                           |       | 15,920 |   | 11,288 |   |
| TOTAL REVENUE                        |       | 311,307                          |       | 227,018                         |       | 726,430 |   | 586,511 |   |
|                                 |       |                             |       |                            |       |   |   |   |   |
| COST OF REVENUE                      |       |                             |       |                            |       |   |   |   |   |
| Equipment                            |       | 221,163                          |       | 155,653                         |       | 496,306 |   | 393,405 |   |
| Parts                                |       | 29,296                           |       | 22,291                          |       | 78,666 |   | 63,767 |   |
| Service                              |       | 7,435                            |       | 5,658                           |       | 20,376 |   | 15,844 |   |
| Other, including trucking and rental |       | 5,435                            |       | 3,833                           |       | 12,613 |   | 9,388 |   |
| TOTAL COST OF REVENUE                |       | 263,329                          |       | 187,435                         |       | 607,961 |   | 482,404 |   |
|                                 |       |                             |       |                            |       |   |   |   |   |
| GROSS PROFIT                         |       | 47,978                           |       | 39,583                          |       | 118,469 |   | 104,107 |   |
|                                 |       |                             |       |                            |       |   |   |   |   |
| OPERATING EXPENSES                   |       | 32,849                           |       | 27,792                          |       | 91,857 |   | 79,159 |   |
|                                 |       |                             |       |                            |       |   |   |   |   |
| INCOME FROM OPERATIONS               |       | 15,129                           |       | 11,791                          |       | 26,612 |   | 24,948 |   |
|                                 |       |                             |       |                            |       |   |   |   |   |
| OTHER INCOME (EXPENSE)               |       |                             |       |                            |       |   |   |   |   |
| Interest and other income            |       | 207                              |       | 180                             |       | 414 |   | 531 |   |
| Floorplan interest expense           |       | (2,138                           | )          | (1,798                          | )          | (5,850 | ) | (3,461 | ) |
| Interest expense other               |       | (394                             | )          | (454                            | )          | (1,129 | ) | (1,045 | ) |
|                                 |       |                             |       |                            |       |   |   |   |   |
| INCOME BEFORE INCOME TAXES           |       | 12,804                           |       | 9,719                           |       | 20,047 |   | 20,973 |   |
|                                 |       |                             |       |                            |       |   |   |   |   |
| PROVISION FOR INCOME TAXES           |       | (5,098                           | )          | (3,986                          | )          | (8,068 | ) | (8,599 | ) |
|                                 |       |                             |       |                            |       |   |   |   |   |
| NET INCOME                           |       | $                                | 7,706      |                            | $          | 5,733 |   | $ | 11,979 |   | $ | 12,374 |   |
|                                 |       |                             |       |                            |       |   |   |   |   |
| EARNINGS PER SHARE - NOTE 1          |       |                             |       |                            |       |   |   |   |   |
|                                 |       |                             |       |                            |       |   |   |   |   |
| EARNINGS PER SHARE - BASIC           |       | $                                | 0.44       |                            | $          | 0.33 |   | $ | 0.68 |   | $ | 0.70 |   |
| EARNINGS PER SHARE - DILUTED         |       | $                                | 0.42       |                            | $          | 0.32 |   | $ | 0.66 |   | $ | 0.69 |   |
|                                 |       |                             |       |                            |       |   |   |   |   |
| WEIGHTED AVERAGE SHARES - BASIC      |       | 17,661                           |       | 17,604                          |       | 17,638 |   | 17,586 |   |
| WEIGHTED AVERAGE SHARES - DILUTED    |       | 18,161                           |       | 18,013                          |       | 18,100 |   | 17,958 |   |

 

See Notes to Consolidated Financial Statements

 

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**TITAN MACHINERY INC.**

**CONSOLIDATED STATEMENTS OFCASH FLOWS (UNAUDITED)**

**(in thousands)**

 
| ** **                                                                                                        | ** ** | **Nine Months Ended October 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                                                                        | ** ** | **2010**                                              | ** ** | **2009** | ** ** |
|                                                                                                              |       |                                                  |       |   |   |
| OPERATING ACTIVITIES                                                                                              |       |                                                  |       |   |   |
| Net income                                                                                                        |       | $                                                     | 11,979     |   | $ | 12,374 |   |
| Adjustments to reconcile net income to net cash  used for operations                                              |       |                                                  |       |   |   |
| Depreciation and amortization                                                                                     |       | 6,443                                                 |       | 5,888 |   |
| Deferred income taxes                                                                                             |       | (19                                                   | )          | 680 |   |
| Stock-based compensation expense                                                                                  |       | 860                                                   |       | 720 |   |
| Other                                                                                                             |       | (199                                                  | )          | (28 | ) |
| Changes in assets and liabilities, net of purchase  of equipment dealerships assets and assumption of liabilities |       |                                                  |       |   |   |
| Receivables, prepaid expenses and other assets                                                                    |       | (12,580                                               | )          | (4,122 | ) |
| Inventories                                                                                                       |       | (57,119                                               | )          | (49,981 | ) |
| Floorplan notes payable                                                                                           |       | 2,893                                                 |       | 5,144 |   |
| Accounts payable, customer  deposits, accrued expenses and other long-term liabilities                            |       | 1,724                                                 |       | (6,764 | ) |
| Income taxes                                                                                                      |       | 4,707                                                 |       | 3,017 |   |
|                                                                                                              |       |                                                  |       |   |   |
| NET CASH USED FOR OPERATING ACTIVITIES                                                                            |       | (41,311                                               | )          | (33,072 | ) |
|                                                                                                              |       |                                                  |       |   |   |
| INVESTING ACTIVITIES                                                                                              |       |                                                  |       |   |   |
| Net change in U.S. treasury bills                                                                                 |       | —                                                |       | 44,994 |   |
| Property and equipment purchases                                                                                  |       | (11,210                                               | )          | (11,066 | ) |
| Net proceeds from sale of equipment                                                                               |       | 719                                                   |       | 338 |   |
| Purchase of equipment dealerships, net of cash  purchased                                                         |       | (2,423                                                | )          | (3,737 | ) |
| Other, net                                                                                                        |       | (293                                                  | )          | — |   |
|                                                                                                              |       |                                                  |       |   |   |
| NET CASH PROVIDED BY (USED FOR) INVESTING  ACTIVITIES                                                             |       | (13,207                                               | )          | 30,529 |   |
|                                                                                                              |       |                                                  |       |   |   |
| FINANCING ACTIVITIES                                                                                              |       |                                                  |       |   |   |
| Net change in non-manufacturer floorplan notes  payable                                                           |       | 45,179                                                |       | 33,664 |   |
| Short-term advances related to customer contracts  in transit, net                                                |       | (104                                                  | )          | 1,329 |   |
| Proceeds from long-term debt borrowings                                                                           |       | 6,441                                                 |       | 20,570 |   |
| Principal payments on long-term debt                                                                              |       | (7,318                                                | )          | (11,734 | ) |
| Other                                                                                                             |       | 137                                                   |       | 43 |   |
|                                                                                                              |       |                                                  |       |   |   |
| NET CASH PROVIDED BY FINANCING ACTIVITIES                                                                         |       | 44,335                                                |       | 43,872 |   |
|                                                                                                              |       |                                                  |       |   |   |
| NET CHANGE IN CASH AND CASH EQUIVALENTS                                                                           |       | (10,183                                               | )          | 41,329 |   |
|                                                                                                              |       |                                                  |       |   |   |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                                  |       | 76,185                                                |       | 41,047 |   |
|                                                                                                              |       |                                                  |       |   |   |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                                        |       | $                                                     | 66,002     |   | $ | 82,376 |   |

 

See Notes to Consolidated Financial Statements

 

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

**(in thousands)**

 
| ** **                                                                                                                                                      | ** ** | **Nine Months Ended October 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                                                                                                                      | ** ** | **2010**                                              | ** ** | **2009** | ** ** |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                                                                                                               |       |                                                  | ** ** | ** ** | ** ** |
| Cash paid during the period                                                                                                                                     |       |                                                  |       |   |   |
| Income taxes, net of refunds                                                                                                                                    |       | $                                                     | 3,388      |   | $ | 5,710 |   |
|                                                                                                                                                            |       |                                                  |       |   |   |
| Interest                                                                                                                                                        |       | $                                                     | 6,965      |   | $ | 3,763 |   |
|                                                                                                                                                            |       |                                                  |       |   |   |
| SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND  FINANCING ACTIVITIES                                                                                         |       |                                                  |       |   |   |
| Property and equipment purchased with long-term  debt                                                                                                           |       | $                                                     | 2,504      |   | $ | 1,772 |   |
|                                                                                                                                                            |       |                                                  |       |   |   |
| Net transfer of equipment from (to) fixed assets  to (from) inventories                                                                                         |       | $                                                     | (2,357     | ) | $ | 7,684 |   |
|                                                                                                                                                            |       |                                                  |       |   |   |
| Net transfer of financing from (to) long-term debt  to (from) floorplan notes payable                                                                           |       | $                                                     | (1,625     | ) | $ | 3,180 |   |
|                                                                                                                                                            |       |                                                  |       |   |   |
| Acquisition of equipment dealership assets in  exchange for cash and assumption of liabilities including purchase accounting  adjustments on prior acquisitions |       |                                                  |       |   |   |
| Receivables                                                                                                                                                     |       | $                                                     | —     |   | $ | (239 | ) |
| Inventories                                                                                                                                                     |       | (2,000                                                | )          | (6,391 | ) |
| Deferred income taxes, net                                                                                                                                      |       | —                                                |       | 133 |   |
| Property and equipment                                                                                                                                          |       | (231                                                  | )          | (851 | ) |
| Goodwill                                                                                                                                                        |       | (1,485                                                | )          | (1,215 | ) |
| Accounts payable, customer deposits and accrued  expenses                                                                                                       |       | 17                                                    |       | 146 |   |
| Floorplan notes payable                                                                                                                                         |       | 819                                                   |       | 2,443 |   |
| Income taxes payable                                                                                                                                            |       | —                                                |       | (127 | ) |
| Long-term debt                                                                                                                                                  |       | —                                                |       | 1,867 |   |
|                                                                                                                                                            |       |                                                  |       |   |   |
| Non-cash consideration: other long-term  liabilities                                                                                                            |       | 457                                                   |       | 497 |   |
| Cash paid for dealerships, net of cash purchased  and adjustments on prior acquisitions                                                                         |       | $                                                     | (2,423     | ) | $ | (3,737 | ) |

 

See Notes to Consolidated Financial Statements

 

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TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

**NOTE 1 -       BUSINESS ACTIVITYAND SIGNIFICANT ACCOUNTING POLICIES**

 

*Basisof Presentation*

 

The unaudited consolidated financial statements included herein havebeen prepared pursuant to the rules and regulations of the Securities andExchange Commission (“SEC”) for interim reporting. 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 nine-month period ended October 31,2010 are not necessarily indicative of the results that may be expected for theyear ending January 31, 2011. The information contained in the balancesheet as of January 31, 2010 was derived from the audited financialstatements for Titan Machinery Inc. (the “Company”) for the year then ended.These consolidated financial statements should be read in conjunction with theaudited consolidated financial statements and notes thereto included in theCompany’s Form 10-K for the fiscal year ended January 31, 2010 asfiled with the SEC.

 

*Natureof Business*

 

Titan Machinery Inc. is engaged in the retail sale, service andrental of agricultural and construction machinery through stores in NorthDakota, South Dakota, Minnesota, Iowa, Nebraska, Montana and Wyoming.

 

*Estimates*

 

The preparation of financial statements in conformity with accountingprinciples generally accepted in the United States of America requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the financial statements and the reported amounts of revenue andexpenses during the reporting period. Actual results could differ from thoseestimates.

 

*Principlesof Consolidation*

 

The consolidated financial statements include the accounts of theCompany and its wholly-owned subsidiary, Transportation Solutions LLC. Allsignificant accounts, transactions and profits between the consolidatedcompanies have been eliminated in consolidation.

 

*Fair Value of FinancialInstruments*

 

The carrying amount of cash, receivables, payables, short-term debt andother current liabilities approximates fair value because of the short maturityand/or frequent repricing of those instruments. Based upon current borrowingrates with similar maturities, the carrying value of the long-term debtapproximates the fair value as of October 31, 2010 and January 31,2010.

 

*Exit and Disposal Costs*

 

The Company accounts for exit or disposal activities, including storeclosures, in accordance with Financial Accounting Standards Board (“FASB”)Accounting Standards Codification (“ASC”) 420, *Exit orDisposal Cost Obligations.*Such costs mainly include leasetermination costs and employee termination costs. The Company records aliability for any remaining lease obligations, net of estimated sublease incomeor estimated loss on disposal if the Company buys and subsequently sells theleased property, as of the date the Company ceases using the property. Anysubsequent adjustments to that liability as a result of changes in estimatesare recorded in the period incurred. The Company records a liability foremployee termination costs at the date the termination benefits werecommunicated to the employees.

 

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As part of the Company’s Construction business action plan, in April 2010,the Company decided to close its Construction store in Columbia Falls, Montana.The primary exit costs relate to estimated lease termination costs of $306,000and employee termination costs of $27,000. These exit costs are included inoperating expenses on the consolidated statements of operations for the ninemonths ended October 31, 2010. The Company transferred the majority of theassets and related floorplan notes payable and long-term debt to other stores.A reconciliation of the beginning and ending liability balance follows:

 
| ** **                                 | ** ** | **(in thousands)** | ** ** |
|--------------------------------------------|------------|-------------------------|------------|
| Balance at January 31, 2010           |       | $                       | —     |   |
| Exit costs incurred and charged to expense |       | 333                     |       |
| Exit costs paid                            |       | (93                     | )          |
| Balance at October 31, 2010           |       | $                       | 240        |   |

 

*Recent Accounting Guidance*

 

In July 2010, the FASBissued authoritative guidance on financing receivables and the allowance forcredit losses, codified in ASC 310, *Receivables*.This guidance amends the current disclosure requirements to provide a greaterlevel of disaggregated information about the credit quality of an entity’sfinancing receivables and its allowance for credit losses. The guidance alsorequires an entity to disclose credit quality indicators, past due information,and modifications of its financing receivables. The guidance is effective forinterim and annual reporting periods ending after December 15, 2010. TheCompany is in the process of determining the impact that this guidance willhave on the Company’s consolidated financial statements.

 

*EarningsPer Share*

 

The following table sets forth the denominator for the computation ofbasic and diluted earnings per share:

 
| ** **                                        | ** ** | **Three Months Ended October 31,** | ** ** | **Nine Months Ended October 31,** | ** ** |
|---------------------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                        | ** ** | **2010**                                               | ** ** | **2009**                                              | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                        | ** ** | **(in thousands)**                                | ** ** | **(in thousands)**                               | ** ** |
|                                              |       |                                                   |       |                                                  |       |   |   |   |   |
| Basic weighted-average shares outstanding         |       | 17,661                                                 |       | 17,604                                                |       | 17,638 |   | 17,586 |   |
| Plus: Incremental shares from assumed conversions |       |                                                   |       |                                                  |       |   |   |   |   |
| Restricted Stock                                  |       | 197                                                    |       | 161                                                   |       | 184 |   | 132 |   |
| Warrants                                          |       | 53                                                     |       | 62                                                    |       | 57 |   | 74 |   |
| Stock Options                                     |       | 250                                                    |       | 186                                                   |       | 221 |   | 166 |   |
| Diluted weighted-average shares outstanding       |       | 18,161                                                 |       | 18,013                                                |       | 18,100 |   | 17,958 |   |

 

There were 139,000 and 149,000 stock options outstanding as of October 31,2010 and 2009, respectively, that were not included in the computation ofdiluted earnings per share because they were anti-dilutive.

 

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**NOTE 2 -       INVENTORIES**

 
| ** **            | ** ** | **October 31,**    | ** ** | **January 31,** | ** ** |
|-----------------------|------------|-------------------------|------------|----------------------|------------|
| ** **            | ** ** | **2010**                | ** ** | **2010**             | ** ** |
| ** **            | ** ** | **(in thousands)** | ** ** |
| New equipment         |       | $                       | 237,681    |                 | $          | 174,193 |   |
| Used equipment        |       | 141,665                 |       | 127,884              |       |
| Parts and attachments |       | 44,650                  |       | 42,611               |       |
| Work in process       |       | 4,834                   |       | 2,892                |       |
|                  |       |                    |       |                 |       |
|                  |       | $                       | 428,830    |                 | $          | 347,580 |   |

 

In addition to the above amounts, the Company has estimated that aportion of its parts inventory will not be sold in the next year. Accordingly,these balances have been classified as noncurrent assets.

 

**NOTE 3 -       LINES OF CREDIT /FLOORPLAN NOTES PAYABLE**

 

*SeniorSecured Credit Facility — Operating and Floorplan Lines of Credit*

 

On October 31, 2010, the Company entered into a Senior SecuredCredit Facility (“Credit Agreement”) with a group of banks led by Wells FargoBank, National Association (“Wells Fargo Bank Syndicate”). The Credit Agreementprovides for a $175.0 million wholesale floorplan line of credit (“FloorplanLine”) and a $50.0 million working capital line of credit (“Working CapitalLine”) which expires October 31, 2014. The Credit Agreement has a variableinterest rate on outstanding balances of LIBOR plus an applicable margin of1.5% to 2.0% per annum, depending upon the Company’s consolidated leverageratio, has a 0.2% to 0.4% non-usage fee on the average monthly unused amountand requires monthly payments of accrued interest. The Credit Agreement issecured by all assets of the Company and contains certain financial covenantswhich impose a minimum level of fixed charge coverage ratio and a maximum levelof debt to tangible net worth ratio and include annual thresholds foracquisitions and capital expenditures. This agreement became effective on November 2,2010.

 

The Floorplan Line will be used to finance equipment inventorypurchases. Amounts outstanding will be recorded as floorplan notes payable,within current liabilities on the consolidated balance sheets as the Companyintends to repay amounts borrowed within one year.

 

The Working Capital Line will be used to finance working capitalrequirements of the Company and will replace the Company’s previous $25.0million operating line and Term Loan (as defined below) with Bremer Bank andcertain notes payable to CNH Capital America LLC (“CNH Capital”) for rentalfleet equipment. Amounts outstanding will be recorded as long-term debt, withinlong-term liabilities on the consolidated balance sheets as the Company doesnot have the intention or obligation to repay amounts borrowed within one year.

 

*OperatingLine of Credit*

 

Prior to November 2010, the Company was party to a Loan Agreement(the “Loan Agreement”) with Bremer Bank National Association (“Bremer Bank”)dated July 15, 2009, as amended on July 13, 2010, which provided fora $25.0 million revolving operating line of credit (“Revolving Loan”) and a$12.9 million term loan (“Term Loan”). The Loan Agreement was terminated in November 2010and replaced with the aforementioned Working Capital Line. The Revolving Loanwas used to fund short term working capital requirements of the Company. TheRevolving Loan had a variable interest rate of 0.25% per annum below a BremerBank reference rate (subject to a minimum interest rate floor of 4.5%) onoutstanding balances, had a 0.5% non-usage fee on the average monthly unusedamount, required monthly payments of accrued interest, and had a maturity dateof July 12, 2011. Advances under the Loan Agreement were secured bysubstantially all of the Company’s assets. See details of the Term Loan in thelong-term debt schedule in the Company’s Form 10-K for the fiscal yearended January 31, 2010 as filed with the SEC.

 

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The Company had no amount outstanding on the Revolving Loan at October 31,2010. The Loan 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. As of October 31,2010, the Company was in compliance with all of these financial covenants.

 

*FloorplanLines of Credit*

 

As of October 31, 2010, the Company had discretionary floorplanlines of credit for equipment purchases totaling approximately $475.0 millionwith various lending institutions, including a $300.0 million WholesaleFloorplan Credit Facility with CNH Capital and $75.0 million credit facilitywith GE Commercial Distribution Finance Corporation (“GE”). The availableborrowings under the CNH Capital credit facility are reduced by outstandingfloorplan notes payable, rental fleet financing and other acquisition-relatedfinancing arrangements with CNH Capital. During fiscal 2010, interest rates fornew borrowings under the CNH Capital floorplan line of credit ranged from theprime rate plus 0.3% to the prime rate plus 6% per annum, subject to anyinterest-free periods offered by CNH Capital. Beginning in February 2010,interest rates are equal to the prime rate plus 4% on new borrowings, subjectto any interest-free periods offered by CNH Capital. The CNH Capital creditfacility automatically renews on August 31 of each year throughAugust 31, 2012, unless earlier terminated by either party. Undercovenants of the CNH Capital credit facility, the Company has agreed, amongother things, to maintain various financial ratio levels and to submit certainfinancial information. It also contains various restrictive covenants that requireprior consent of CNH Capital if the Company desires to engage in anyacquisition of, consolidation or merger with any other business entity in whichthe Company is not the surviving company; create subsidiaries; move anycollateral outside of the U.S.; or sell, rent, lease or otherwise dispose ortransfer any of the collateral, other than in the ordinary course of business.CNH Capital’s consent is also required for the acquisition of any CNHdealership. In addition, the CNH Capital credit facility restricts the Company’sability to incur any liens upon any substantial part of its assets.

 

The GE credit facility was terminated in November 2010 and wasreplaced with the aforementioned Floorplan Line. The GE credit facility hadbeen used to purchase new and used inventory from vendors approved by GE, or tofinance or refinance new or used inventory. The interest rate on borrowingsunder the GE floorplan line of credit was equal to the three-month LIBOR rateplus 4.95%. The GE credit facility allowed for termination by either party on60 days notice. Under covenants of the GE credit facility, the Company hadagreed, among other things, to maintain various financial ratio levels and tosubmit certain financial information. It also contained various restrictive covenantsregarding related party transactions outside of the ordinary course of businessand required GE’s prior consent if the Company desired to engage in anyacquisition meeting certain financial thresholds; made any investments outsideof the ordinary course of business; or had a change in control, as defined bythe agreement.

 

Floorplan notes payable relating to these credit facilities totaledapproximately $305.4 million of the total floorplan notes payable balance of$322.3 million outstanding as of October 31, 2010 and $245.3 million ofthe total floorplan notes payable balance of $249.9 million outstanding as of January 31,2010. As of October 31, 2010, the Company had approximately $155.2 millionin available borrowings remaining under these lines of credit. These floorplannotes carried various interest rates primarily ranging from 3.25 to 7.25% as ofOctober 31, 2010, subject to interest-free periods offered by CNH Capital,and are secured by the related inventory. Repayment terms vary by individualnotes, but generally payments are made from sales proceeds or rental revenuefrom the related inventories. As of October 31, 2010, the Company was incompliance with all floorplan financial covenants. Due to changes in November 2010resulting from entering into the new Credit Agreement, the Company haddiscretionary floorplan lines of credit for equipment purchases totalingapproximately $550.0 million with various lending institutions, including a$300.0 million line with CNH Capital and $175.0 million Floorplan Line with theWells Fargo Bank Syndicate.

 

**NOTE 4 -       BUSINESSCOMBINATIONS**

 

On June 1, 2010, the Company acquired certain assets of HubbardImplement, Inc. The acquired entity consisted of one agriculturalequipment store located in Iowa Falls, Iowa which is contiguous to theCompany’s existing locations in Grundy Center and Waverly, Iowa. Theacquisition-date fair value of the total consideration transferred for thedealership was $1,496,000.

 

During the nine months ended October 31, 2010 adjustments wererecorded for additional consideration of $1,384,000 earned and paid underagreements disclosed in the Company’s Form 10-K for the fiscal year ended January 31,2010 as filed with the SEC. This additional consideration resulted in a netincrease in goodwill of $1,384,000.

 

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The results of operations have been included in the Company’sconsolidated results of operations since the date of the business combination.The fair value of assets acquired and liabilities assumed in the above businesscombinations and adjustments on prior acquisitions are presented in thefollowing table:

 
| ** **                                              | ** ** | **October 31,**    | ** **  |
|---------------------------------------------------------|------------|-------------------------|-------------|
| ** **                                              | ** ** | **2010**                | ** **  |
| ** **                                              | ** ** | **(in thousands)** | ** **  |
| Cash                                                    |       | $                       | 1           |   |
| Inventories                                             |       | 2,000                   |        |
| Property and equipment                                  |       | 231                     |        |
| Goodwill                                                |       | 1,485                   |        |
|                                                    |       |                    |        |
|                                                    |       | $                       |  3,717 |   |
| ** **                                              | ** ** | ** **              | ** **  |
| Floorplan notes payable                                 |       | $                       | 819         |   |
| Customer deposits                                       |       | 17                      |        |
| ** **                                              | ** ** | ** **              | ** **  |
|                                                    |       | $                       |  836   |   |
|                                                    |       |                    |        |
| Cash consideration                                      |       | 2,424                   |        |
| Non-cash consideration: other long-term  liabilities    |       | 457                     |        |
| Total consideration                                     |       | $                       | 2,881       |   |
|                                                    |       |                    |        |
| Goodwill related to the Agriculture operating  segment  |       | $                       | 1,485       |   |
| Goodwill related to the Construction operating  segment |       | $                       | —      |   |

 

Goodwillof $1,485,000 recorded in the acquisition transactions during the nine monthsended October 31, 2010 is expected to be deductible for tax purposes.

 

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**NOTE 5 -       SEGMENT INFORMATIONAND OPERATING RESULTS**

 

Certain financial information for each of the Company’s businesssegments is set forth below. Revenues, income before income tax and totalassets at the segment level are reported before eliminations. The Companyretains various unallocated income/(expense) items and assets at the generalcorporate level, which the Company refers to as “Shared Resources” in the tablebelow. Shared Resource assets primarily consist of cash and property andequipment. Intersegment revenues are immaterial.

** **
| ** **                                | ** ** | **Three Months Ended October 31,** | ** ** | **Nine Months Ended October 31,** | ** ** |
|-------------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                | ** ** | **2010**                                               | ** ** | **2009**                                              | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                | ** ** | **(in thousands)**                                | ** ** | **(in thousands)**                               | ** ** |
| **Revenues**                              |       |                                                   |       |                                                  |       |   |   |   |   |
| Agriculture                               |       | $                                                      | 282,365    |                                                  | $          | 205,635 |   | $ | 645,269 |   | $ | 524,330 |   |
| Construction                              |       | 39,827                                                 |       | 29,276                                                |       | 108,140 |   | 84,425 |   |
| Segment revenues                          |       | 322,192                                                |       | 234,911                                               |       | 753,409 |   | 608,755 |   |
| Eliminations                              |       | (10,885                                                | )          | (7,893                                                | )          | (26,979 | ) | (22,244 | ) |
| Total                                     |       | $                                                      | 311,307    |                                                  | $          | 227,018 |   | $ | 726,430 |   | $ | 586,511 |   |
|                                      |       |                                                   |       |                                                  |       |   |   |   |   |
| **Income (Loss) Before Income Taxes**     |       |                                                   |       |                                                  |       |   |   |   |   |
| Agriculture                               |       | $                                                      | 14,420     |                                                  | $          | 12,224 |   | $ | 25,458 |   | $ | 27,942 |   |
| Construction                              |       | (169                                                   | )          | (1,816                                                | )          | (2,936 | ) | (4,551 | ) |
| Segment income (loss) before income taxes |       | 14,251                                                 |       | 10,408                                                |       | 22,522 |   | 23,391 |   |
| Shared Resources                          |       | (1,343                                                 | )          | (749                                                  | )          | (1,977 | ) | (1,971 | ) |
| Eliminations                              |       | (104                                                   | )          | 60                                                    |       | (498 | ) | (447 | ) |
| Income before income taxes                |       | $                                                      | 12,804     |                                                  | $          | 9,719 |   | $ | 20,047 |   | $ | 20,973 |   |

 
| ** **       | ** ** | **October 31,**    | ** ** | **January 31,** | ** ** |
|------------------|------------|-------------------------|------------|----------------------|------------|
| ** **       | ** ** | **2010**                | ** ** | **2010**             | ** ** |
| ** **       | ** ** | **(in thousands)** | ** ** |
| **Total Assets** |       |                    |       |                 |       |
| Agriculture      |       | $                       | 454,068    |                 | $          | 350,086 |   |
| Construction     |       | 97,164                  |       | 87,910               |       |
| Segment assets   |       | 551,232                 |       | 437,996              |       |
| Shared Resources |       | 59,442                  |       | 77,631               |       |
| Eliminations     |       | (1,314                  | )          | (815                 | )          |
| Total            |       | $                       | 609,360    |                 | $          | 514,812 |   |

 

**NOTE 6 -       SUBSEQUENT EVENTS**

 

On December 6, 2010, the Company entered into a Purchase Agreementto acquire certain assets of Fairbanks International, Inc. (“Fairbanks”),Fairbanks’s wholly-owned subsidiary, Fairbanks Leasing, Inc., and anaffiliated entity of Fairbanks, GuideNet Systems, LLC. The acquisition consistsof six agricultural equipment stores in Grand Island, Kearney, Lexington,Holdrege, Hastings, and North Platte, Nebraska and expands the Company’sagricultural presence in the Midwest. We expect the closing date to be on oraround December 31, 2010.

 

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

 

The following discussion and analysis of our financial condition andresults of operations should be read in conjunction with our interim unauditedconsolidated financial statements and related notes included in Item 1 of Part 1of this 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, 2010.

 

**Critical Accounting Policies**

 

There have been no material changes in our Critical AccountingPolicies, as disclosed in our Annual Report on Form 10-K for the yearended January 31, 2010.

 

**Overview**

 

We own and operate a network of full service agricultural andconstruction equipment stores in the United States. Based upon informationprovided to us by CNH Global N.V. or its U.S. subsidiary CNHAmerica LLC, collectively referred to as CNH, we are the world’s largestretail dealer of Case IH Agriculture equipment and a major retail dealer of NewHolland Agriculture, Case Construction and New Holland Construction equipmentin the U.S. We have two primary business segments, Agriculture andConstruction, within each of which we sell and rent new and used equipment,sell parts, and service the equipment in the markets surrounding our stores.

 

Our net income was $7.7 million, or $0.42 per diluted share, for the threemonths ended October 31, 2010, compared to $5.7 million, or $0.32 perdiluted share, for the three months ended October 31, 2009. Significantfactors impacting the quarterly comparisons were:

 

·                  Increase in revenue primarily due tosame-store sales growth in both our Agriculture and Construction segmentscaused by projected increased farm cash receipts, favorable harvest conditionsand crop yield reports across our Agriculture footprint and execution of ourfiscal 2011 Construction business plan (described in Segment Results), andAgriculture acquisitions;

 

·                  Decrease in equipment gross profit marginscompared to our third quarter of last year, which primarily resulted frommarket pricing pressure and timing of a manufacturer incentive program; and

 

·                  Decrease in operating expenses as apercentage of revenue primarily due to improved fixed operating cost leverageresulting from higher revenues.

 

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**Results of Operations**

 

Comparative financial data for each of our four sources of revenue areexpressed below. The results for these periods include the operating results ofthe acquisitions made during these periods. The period-to-period comparisonsincluded below are not necessarily indicative of future results. Segmentinformation is provided later in this discussion and analysis of our results ofoperations.

 
| ** **                           | ** ** | **Three Months Ended October 31,** | ** ** | **Nine Months Ended October 31,** | ** ** |
|--------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                           | ** ** | ** **                                             | ** ** | ** **                                            | ** ** | **Percent** | ** ** | ** ** | ** ** | ** ** | ** ** | **Percent** | ** ** |
| ** **                           | ** ** | **2010**                                               | ** ** | **2009**                                              | ** ** | **Change** | ** ** | **2010** | ** ** | **2009** | ** ** | **Change** | ** ** |
| ** **                           | ** ** | **(dollars in thousands)**                   | ** ** | ** **                                            | ** ** | **(dollars in thousands)** | ** ** | ** ** | ** ** |
| Equipment                            |       |                                                   |       |                                                  |       |   |   |   |   |   |   |   |   |
| Revenue                              |       | $                                                      | 241,096    |                                                  | $          | 173,367 |   | 39.1 | % | $ | 544,587 |   | $ | 439,374 |   | 23.9 | % |
| Cost of revenue                      |       | 221,163                                                |       | 155,653                                               |       | 42.1 | % | 496,306 |   | 393,405 |   | 26.2 | % |
| Gross profit                         |       | $                                                      | 19,933     |                                                  | $          | 17,714 |   | 12.5 | % | $ | 48,281 |   | $ | 45,969 |   | 5.0 | % |
| Gross profit margin                  |       | 8.3                                                    | %          | 10.2                                                  | %          | (1.9 | )% | 8.9 | % | 10.5 | % | (1.6 | )% |
|                                 |       |                                                   |       |                                                  |       |   |   |   |   |   |   |   |   |
| Parts                                |       |                                                   |       |                                                  |       |   |   |   |   |   |   |   |   |
| Revenue                              |       | $                                                      | 42,028     |                                                  | $          | 32,961 |   | 27.5 | % | $ | 111,038 |   | $ | 91,813 |   | 20.9 | % |
| Cost of revenue                      |       | 29,296                                                 |       | 22,291                                                |       | 31.4 | % | 78,666 |   | 63,767 |   | 23.4 | % |
| Gross profit                         |       | $                                                      | 12,732     |                                                  | $          | 10,670 |   | 19.3 | % | $ | 32,372 |   | $ | 28,046 |   | 15.4 | % |
| Gross profit margin                  |       | 30.3                                                   | %          | 32.4                                                  | %          | (2.1 | )% | 29.2 | % | 30.5 | % | (1.3 | )% |
|                                 |       |                                                   |       |                                                  |       |   |   |   |   |   |   |   |   |
| Service                              |       |                                                   |       |                                                  |       |   |   |   |   |   |   |   |   |
| Revenue                              |       | $                                                      | 20,832     |                                                  | $          | 15,854 |   | 31.4 | % | $ | 54,885 |   | $ | 44,036 |   | 24.6 | % |
| Cost of revenue                      |       | 7,435                                                  |       | 5,658                                                 |       | 31.4 | % | 20,376 |   | 15,844 |   | 28.6 | % |
| Gross profit                         |       | $                                                      | 13,397     |                                                  | $          | 10,196 |   | 31.4 | % | $ | 34,509 |   | $ | 28,192 |   | 22.4 | % |
| Gross profit margin                  |       | 64.3                                                   | %          | 64.3                                                  | %          | 0.0 | % | 62.9 | % | 64.0 | % | (1.1 | )% |
|                                 |       |                                                   |       |                                                  |       |   |   |   |   |   |   |   |   |
| Other, including trucking and rental |       |                                                   |       |                                                  |       |   |   |   |   |   |   |   |   |
| Revenue                              |       | $                                                      | 7,351      |                                                  | $          | 4,836 |   | 52.0 | % | $ | 15,920 |   | $ | 11,288 |   | 41.0 | % |
| Cost of revenue                      |       | 5,435                                                  |       | 3,833                                                 |       | 41.8 | % | 12,613 |   | 9,388 |   | 34.4 | % |
| Gross profit                         |       | $                                                      | 1,916      |                                                  | $          | 1,003 |   | 91.0 | % | $ | 3,307 |   | $ | 1,900 |   | 74.1 | % |
| Gross profit margin                  |       | 26.1                                                   | %          | 20.7                                                  | %          | 5.4 | % | 20.8 | % | 16.8 | % | 4.0 | % |

 

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The following table sets forth our statements of operations dataexpressed as a percentage for each of our four sources of revenue for theperiods indicated:

 
| ** **                           | ** ** | **Three Months Ended October 31,** | ** ** | **Nine Months Ended October 31,** | ** ** |
|--------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                           | ** ** | **2010**                                               | ** ** | **2009**                                              | ** ** | **2010** | ** ** | **2009** | ** ** |
|                                 |       |                                                   |       |                                                  |       |   |   |   |   |
| Revenue                              |       |                                                   |       |                                                  |       |   |   |   |   |
| Equipment                            |       | 77.4                                                   | %          | 76.4                                                  | %          | 75.0 | % | 74.9 | % |
| Parts                                |       | 13.5                                                   | %          | 14.5                                                  | %          | 15.3 | % | 15.7 | % |
| Service                              |       | 6.7                                                    | %          | 7.0                                                   | %          | 7.5 | % | 7.5 | % |
| Other, including trucking and rental |       | 2.4                                                    | %          | 2.1                                                   | %          | 2.2 | % | 1.9 | % |
| Total revenue                        |       | 100.0                                                  | %          | 100.0                                                 | %          | 100.0 | % | 100.0 | % |
|                                 |       |                                                   |       |                                                  |       |   |   |   |   |
| Total cost of revenue                |       | 84.6                                                   | %          | 82.6                                                  | %          | 83.7 | % | 82.2 | % |
|                                 |       |                                                   |       |                                                  |       |   |   |   |   |
| Gross profit                         |       | 15.4                                                   | %          | 17.4                                                  | %          | 16.3 | % | 17.8 | % |
|                                 |       |                                                   |       |                                                  |       |   |   |   |   |
| Operating expenses                   |       | 10.5                                                   | %          | 12.2                                                  | %          | 12.6 | % | 13.5 | % |
|                                 |       |                                                   |       |                                                  |       |   |   |   |   |
| Income from operations               |       | 4.9                                                    | %          | 5.2                                                   | %          | 3.7 | % | 4.3 | % |
|                                 |       |                                                   |       |                                                  |       |   |   |   |   |
| Other income (expense)               |       | (0.8                                                   | )%         | (0.9                                                  | )%         | (0.9 | )% | (0.7 | )% |
|                                 |       |                                                   |       |                                                  |       |   |   |   |   |
| Income before income taxes           |       | 4.1                                                    | %          | 4.3                                                   | %          | 2.8 | % | 3.6 | % |
|                                 |       |                                                   |       |                                                  |       |   |   |   |   |
| Provision for income taxes           |       | (1.6                                                   | )%         | (1.8                                                  | )%         | (1.2 | )% | (1.5 | )% |
|                                 |       |                                                   |       |                                                  |       |   |   |   |   |
| Net income                           |       | 2.5                                                    | %          | 2.5                                                   | %          | 1.6 | % | 2.1 | % |

 

***Three Months Ended October 31,2010 Compared to Three Months Ended October 31, 2009***

 

**Consolidated Results**

 

*Revenue*

* *
| ** **                           | ** ** | **Three months ended October 31,** | ** ** | ** ** | ** ** | **Percent**  | ** ** |
|--------------------------------------|------------|--------------------------------------------------------|------------|------------|------------|--------------|------------|
| ** **                           | ** ** | **2010**                                               | ** ** | **2009**   | ** ** | **Increase** | ** ** | **Change** | ** ** |
| ** **                           | ** ** | **(dollars in thousands)**                   | ** ** | ** ** | ** ** |
| Equipment                            |       | $                                                      | 241,096    |       | $          | 173,367      |       | $ | 67,729 |   | 39.1 | % |
| Parts                                |       | 42,028                                                 |       | 32,961     |       | 9,067        |       | 27.5 | % |
| Service                              |       | 20,832                                                 |       | 15,854     |       | 4,978        |       | 31.4 | % |
| Other, including trucking and rental |       | 7,351                                                  |       | 4,836      |       | 2,515        |       | 52.0 | % |
|                                 |       |                                                   |       |       |       |         |       |   |   |
| Total Revenue                        |       | $                                                      | 311,307    |       | $          | 227,018      |       | $ | 84,289 |   | 37.1 | % |

 

The increase in revenue for the three months ended October 31,2010, as compared to the same period last year, was due to acquisitionscontributing $16.7 million and same-store sales growth contributing $67.6million, representing a same-store sales growth of 29.8% over the prior yearquarter. The revenue growth from acquisitions occurred in our Agriculturesegment while both of our Agriculture and Construction segments contributed tothe same-store sales growth.

 

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*Cost of Revenue*

* *
| ** **                            | ** ** | **Three months ended October 31,** | ** ** | ** ** | ** ** | **Percent**  | ** ** |
|---------------------------------------|------------|--------------------------------------------------------|------------|------------|------------|--------------|------------|
| ** **                            | ** ** | **2010**                                               | ** ** | **2009**   | ** ** | **Increase** | ** ** | **Change** | ** ** |
| ** **                            | ** ** | **(dollars in thousands)**                   | ** ** | ** ** | ** ** |
| Equipment                             |       | $                                                      | 221,163    |       | $          | 155,653      |       | $ | 65,510 |   | 42.1 | % |
| Parts                                 |       | 29,296                                                 |       | 22,291     |       | 7,005        |       | 31.4 | % |
| Service                               |       | 7,435                                                  |       | 5,658      |       | 1,777        |       | 31.4 | % |
| Other, including trucking  and rental |       | 5,435                                                  |       | 3,833      |       | 1,602        |       | 41.8 | % |
|                                  |       |                                                   |       |       |       |         |       |   |   |
| Total cost of revenue                 |       | $                                                      | 263,329    |       | $          | 187,435      |       | $ | 75,894 |   | 40.5 | % |

 

The increase in cost of revenue for the three months ended October 31,2010, as compared to the same period last year, was due to increased salesprimarily in our equipment business. Acquisitions contributed $14.4 million ofthe increase in total cost of revenue, while same-store sales growthcontributed $61.5 million of the increase. As a percentage of revenue, cost ofrevenue was 84.6% compared to 82.6% for the third quarter of fiscal 2010.

 

*Gross Profit*

 
| ** **                           | ** ** | **Three months ended October 31,** | ** ** | **Increase/** | ** ** | **Percent**    | ** ** |
|--------------------------------------|------------|--------------------------------------------------------|------------|---------------|------------|----------------|------------|
| ** **                           | ** ** | **2010**                                               | ** ** | **2009**      | ** ** | **(Decrease)** | ** ** | **Change** | ** ** |
| ** **                           | ** ** | **(dollars in thousands)**                   | ** ** | ** **    | ** ** |
| **Gross Profit**                     |       |                                                   |       |          |       |           |       |   |   |
| Equipment                            |       | $                                                      | 19,933     |          | $          | 17,714         |       | $ | 2,219 |   | 12.5 | % |
| Parts                                |       | 12,732                                                 |       | 10,670        |       | 2,062          |       | 19.3 | % |
| Service                              |       | 13,397                                                 |       | 10,196        |       | 3,201          |       | 31.4 | % |
| Other, including trucking and rental |       | 1,916                                                  |       | 1,003         |       | 913            |       | 91.0 | % |
|                                 |       |                                                   |       |          |       |           |       |   |   |
| Total Gross Profit                   |       | $                                                      | 47,978     |          | $          | 39,583         |       | $ | 8,395 |   | 21.2 | % |
|                                 |       |                                                   |       |          |       |           |       |   |   |
| **Gross Profit Margin**              |       |                                                   |       |          |       |           |       |   |   |
| Equipment                            |       | 8.3                                                    | %          | 10.2          | %          | (1.9           | )%         | (18.6 | )% |
| Parts                                |       | 30.3                                                   | %          | 32.4          | %          | (2.1           | )%         | (6.5 | )% |
| Service                              |       | 64.3                                                   | %          | 64.3          | %          | 0.0            | %          | 0.0 | % |
| Other, including trucking and rental |       | 26.1                                                   | %          | 20.7          | %          | 5.4            | %          | 26.1 | % |
|                                 |       |                                                   |       |          |       |           |       |   |   |
| Total Gross Profit Margin            |       | 15.4                                                   | %          | 17.4          | %          | (2.0           | )%         | (11.5 | )% |
|                                 |       |                                                   |       |          |       |           |       |   |   |
| **Gross Profit Mix**                 |       |                                                   |       |          |       |           |       |   |   |
| Equipment                            |       | 77.4                                                   | %          | 76.4          | %          | 1.0            | %          | 1.3 | % |
| Parts                                |       | 13.5                                                   | %          | 14.5          | %          | (1.0           | )%         | (6.9 | )% |
| Service                              |       | 6.7                                                    | %          | 7.0           | %          | (0.3           | )%         | (4.3 | )% |
| Other, including trucking and rental |       | 2.4                                                    | %          | 2.1           | %          | 0.3            | %          | 14.3 | % |
|                                 |       |                                                   |       |          |       |           |       |   |   |
| Total Gross Profit Mix               |       | 100.0                                                  | %          | 100.0         | %          | 0.0            | %          | 0.0 | % |

 

The $8.4 million increase in gross profit for the three months ended October 31,2010, as compared to the same period last year, was primarily due to increasedrevenue. Acquisitions contributed $2.4 million to the increase in gross profitfor the three months ended October 31, 2010, while same-store grossprofits increased $6.0 million. Offsetting the positive effect to gross profitsof higher revenue were lower margins primarily in the equipment (down 1.9% to8.3%) and parts (down 2.1% to 30.3%) areas of our business. The equipmentmargin compression is due to market pricing pressure and the timing of amanufacturer incentive program which was recognized in the third quarter offiscal 2010 but not recognized in the third quarter of fiscal 2011. Weanticipate the equipment margin compression to moderate in the last quarter ofthe year as a result of increased equipment demand and tightening in the supplyof the equipment to be sold, and timing of annual manufacturer performanceincentive programs. The decrease in parts margins was primarily due to a partsincentive program recognized in the third quarter of last year that did notrecur in the third quarter of fiscal 2011. Although our parts margins were downwe experienced a revenue increase of 27.5% in our parts area resulting in apositive gross profit contribution from parts of $2.1 million over the prioryear quarter.

 

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Total gross profit margins were down 2.0% to 15.4% in the third quarterof fiscal 2011, compared to 17.4% in the third quarter of fiscal 2010. Thedecrease in total gross profit margins was primarily due to the lower equipmentand parts margins discussed above.

 

*Operating Expenses*

* *
| ** **         | ** ** | **Three months ended October 31,** | ** ** | ** ** | ** ** | **Percent**  | ** ** |
|--------------------|------------|--------------------------------------------------------|------------|------------|------------|--------------|------------|
| ** **         | ** ** | **2010**                                               | ** ** | **2009**   | ** ** | **Increase** | ** ** | **Change** | ** ** |
| ** **         | ** ** | **(dollars in thousands)**                   | ** ** | ** ** | ** ** |
| Operating Expenses |       | $                                                      | 32,849     |       | $          | 27,792       |       | $ | 5,057 |   | 18.2 | % |
|                    |            |                                                        |            |            |            |              |            |  |  |  |  |  |

 

The $5.1 million increase in operating expenses, as compared to thesame period last year, was primarily due to the additional costs associatedwith acquisitions such as compensation, rent and depreciation. As a percentageof total revenue, operating expenses decreased to 10.5% for the third quarterof fiscal 2011 compared to 12.2% for the third quarter of fiscal 2010 due toimproved fixed operating cost leverage resulting from higher revenues.

 

*Other Income (Expense)*

* *
| ** **                 | ** ** | **Three months ended October 31,** | ** ** | **Increase/** | ** ** | **Percent**    | ** ** |
|----------------------------|------------|--------------------------------------------------------|------------|---------------|------------|----------------|------------|
| ** **                 | ** ** | **2010**                                               | ** ** | **2009**      | ** ** | **(Decrease)** | ** ** | **Change** | ** ** |
| ** **                 | ** ** | **(dollars in thousands)**                   | ** ** | ** **    | ** ** |
| Interest and other income  |       | $                                                      | 207        |          | $          | 180            |       | $ | 27 |   | 15.0 | % |
| Floorplan interest expense |       | (2,138                                                 | )          | (1,798        | )          | 340            |       | 18.9 | % |
| Interest expense           |       | (394                                                   | )          | (454          | )          | (60            | )          | (13.2 | )% |
|                            |            |                                                        |            |               |            |                |            |  |  |  |  |  |

 

Floorplan interest expense increased $0.3 million for the three monthsended October 31, 2010, as compared to the same period in the prior year.Increases in floorplan notes payable balances, offset by reductions in interestrates, accounted for this increase, as compared to the prior year quarter. Weanticipate our floorplan interest expense to decrease in the fourth quarter offiscal 2011 as a result of lower rates associated with the new Credit Agreemententered into on October 31, 2010.

 

*Provision for Income Taxes*

* *
| ** **                 | ** ** | **Three months ended October 31,** | ** ** | ** ** | ** ** | **Percent**  | ** ** |
|----------------------------|------------|--------------------------------------------------------|------------|------------|------------|--------------|------------|
| ** **                 | ** ** | **2010**                                               | ** ** | **2009**   | ** ** | **Increase** | ** ** | **Change** | ** ** |
| ** **                 | ** ** | **(dollars in thousands)**                   | ** ** | ** ** | ** ** |
| Provision for income taxes |       | $                                                      | 5,098      |       | $          | 3,986        |       | $ | 1,112 |   | 27.9 | % |
|                            |            |                                                        |            |            |            |              |            |  |  |  |  |  |

 

Our effective tax rate decreased to 39.8% for the three months ended October 31,2010, as compared to 41.0% for the three months ended October 31, 2009.The decrease in effective tax rate compared to the prior year quarter primarilyreflects permanent differences between financial and income tax reporting, suchas stock-based compensation.

 

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**Segment Results**

 

Certain financial information for our Agriculture and Constructionbusiness segments is set forth below. Revenues and income (loss) before incometaxes at the segment level are reported before eliminations. “Shared Resources”in the table below refers to the various unallocated income/(expense) itemsthat we have retained at the general corporate level. Intersegment revenues areimmaterial.

 
| ** **                            | ** ** | **Three months ended October 31,** | ** ** | **Increase/** | ** ** | **Percent**    | ** ** |
|---------------------------------------|------------|--------------------------------------------------------|------------|---------------|------------|----------------|------------|
| ** **                            | ** ** | **2010**                                               | ** ** | **2009**      | ** ** | **(Decrease)** | ** ** | **Change** | ** ** |
| ** **                            | ** ** | **(dollars in thousands)**                   | ** ** | ** **    | ** ** |
| **Revenues**                          |       |                                                   |       |          |       |           |       |   |   |
| Agriculture                           |       | $                                                      | 282,365    |          | $          | 205,635        |       | $ | 76,730 |   | 37.3 | % |
| Construction                          |       | 39,827                                                 |       | 29,276        |       | 10,551         |       | 36.0 | % |
| Segment revenues                      |       | 322,192                                                |       | 234,911       |       | 87,281         |       | 37.2 | % |
| Eliminations                          |       | (10,885                                                | )          | (7,893        | )          | (2,992         | )          | (37.9 | )% |
| Total                                 |       | $                                                      | 311,307    |          | $          | 227,018        |       | $ | 84,289 |   | 37.1 | % |
|                                  |       |                                                   |       |          |       |           |       |   |   |
| **Income (Loss) Before Income Taxes** |       |                                                   |       |          |       |           |       |   |   |
| Agriculture                           |       | $                                                      | 14,420     |          | $          | 12,224         |       | $ | 2,196 |   | 18.0 | % |
| Construction                          |       | (169                                                   | )          | (1,816        | )          | 1,647          |       | 90.7 | % |
| Segment income before income taxes    |       | 14,251                                                 |       | 10,408        |       | 3,843          |       | 36.9 | % |
| Shared Resources                      |       | (1,343                                                 | )          | (749          | )          | (594           | )          | (79.3 | )% |
| Eliminations                          |       | (104                                                   | )          | 60            |       | (164           | )          | (273.3 | )% |
| Income before income taxes            |       | $                                                      | 12,804     |          | $          | 9,719          |       | $ | 3,085 |   | 31.7 | % |

 

*Agriculture*

 

Agriculture revenues for the three months ended October 31, 2010increased 37.3% compared to the same period last year. The revenue increase wasprimarily due to an Agriculture same-store sales increase of 29.5% over thethird quarter of fiscal 2010, as well as Agriculture segment acquisitions andnew store opening occurring over the past year, which consisted of nine stores.The same-store sales growth was primarily caused by projected increased farmcash receipts, favorable harvest conditions and crop yield reports across ourfootprint.

 

Income before income taxes increased 18.0% primarily due to increasedrevenues, offset by lower Agriculture gross profit margins on equipmentrevenues and higher floorplan interest expense compared to the same period lastyear. The decreased gross profit margins is reflective of increased marketpricing pressures and a manufacturer incentive program recognized in the thirdquarter of last year but was not recognized in the third quarter of fiscal2011. Floorplan interest expense increased due to increased floorplan notespayable balances in the third quarter of fiscal 2011 compared to the sameperiod last year. We anticipate our floorplan interest expense to decrease inthe fourth quarter of fiscal 2011 as a result of lower rates associated withthe new Credit Agreement entered into on October 31, 2010. We also expectequipment gross profit margins to improve in the fourth quarter of fiscal 2011due to increased equipment demand and tightening in the supply of the equipmentto be sold, and timing of annual manufacturer performance incentive programs.

 

*Construction*

 

Construction revenues for the three months ended October 31, 2010increased 36.0% compared to the same period last year. The revenue increase wasprimarily due to a Construction same-store sales increase of 32.5% over thethird quarter of fiscal 2010 due to the execution of our fiscal 2011Construction business action plan in fiscal 2011, which included right-sizingour rental fleet, changing key Construction personnel and implementing theTitan strong-store operating model into the Construction stores acquired infiscal 2009.

 

Loss before income taxes decreased 90.7% primarily due to higherConstruction segment gross profits resulting from increased revenues, offset bylower Construction gross profit margins on equipment revenues in the thirdquarter of fiscal 2011 compared to the same period last year. Also contributingto the loss was an additional $121,000 in exit costs related to the 

 

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closing of our store in Columbia Falls, Montana. We anticipate ourfloorplan interest expense to decrease in the fourth quarter of fiscal 2011 asa result of lower rates associated with the new Credit Agreement entered intoon October 31, 2010.

 

*Shared Resources/Eliminations*

 

Shared Resources allocations to each of oursegments are set early in the year and therefore unallocated balances mayoccur. The Shared Resource loss amount increased $0.6 million in the thirdquarter of fiscal 2011 compared to the same period in the prior year.

 

Eliminations remove any inter-companyrevenues or income before income taxes residing in our segment results.

 

***Nine Months Ended October 31,2010 Compared to Nine Months Ended October 31, 2009***

 

**Consolidated Results**

 

*Revenue*

* *
| ** **                           | ** ** | **Nine Months Ended October 31,** | ** ** | ** ** | ** ** | **Percent**  | ** ** |
|--------------------------------------|------------|-------------------------------------------------------|------------|------------|------------|--------------|------------|
| ** **                           | ** ** | **2010**                                              | ** ** | **2009**   | ** ** | **Increase** | ** ** | **Change** | ** ** |
| ** **                           | ** ** | **(dollars in thousands)**                  | ** ** | ** ** | ** ** |
| Equipment                            |       | $                                                     | 544,587    |       | $          | 439,374      |       | $ | 105,213 |   | 23.9 | % |
| Parts                                |       | 111,038                                               |       | 91,813     |       | 19,225       |       | 20.9 | % |
| Service                              |       | 54,885                                                |       | 44,036     |       | 10,849       |       | 24.6 | % |
| Other, including trucking and rental |       | 15,920                                                |       | 11,288     |       | 4,632        |       | 41.0 | % |
|                                 |       |                                                  |       |       |       |         |       |   |   |
| Total Revenue                        |       | $                                                     | 726,430    |       | $          | 586,511      |       | $ | 139,919 |   | 23.9 | % |

 

The increase in revenue for the nine months ended October 31,2010, as compared to the same period last year, was due to acquisitionscontributing $46.9 million and same-store sales growth contributing $93.0million, representing same-store sales growth of 16.2% over the prior year ninemonths. This revenue growth was achieved in both our Agriculture andConstruction segments.

 

*Cost of Revenue*

* *
| ** **                           | ** ** | **Nine Months Ended October 31,** | ** ** | ** ** | ** ** | **Percent**  | ** ** |
|--------------------------------------|------------|-------------------------------------------------------|------------|------------|------------|--------------|------------|
| ** **                           | ** ** | **2010**                                              | ** ** | **2009**   | ** ** | **Increase** | ** ** | **Change** | ** ** |
| ** **                           | ** ** | **(dollars in thousands)**                  | ** ** | ** ** | ** ** |
| Equipment                            |       | $                                                     | 496,306    |       | $          | 393,405      |       | $ | 102,901 |   | 26.2 | % |
| Parts                                |       | 78,666                                                |       | 63,767     |       | 14,899       |       | 23.4 | % |
| Service                              |       | 20,376                                                |       | 15,844     |       | 4,532        |       | 28.6 | % |
| Other, including trucking and rental |       | 12,613                                                |       | 9,388      |       | 3,225        |       | 34.4 | % |
|                                 |       |                                                  |       |       |       |         |       |   |   |
| Total cost of revenue                |       | $                                                     | 607,961    |       | $          | 482,404      |       | $ | 125,557 |   | 26.0 | % |

 

The increase in cost of revenue for the nine months ended October 31,2010, as compared to the same period last year, was primarily due to increasedrevenue. Acquisitions contributed $39.6 million of the increase in total costof revenue, while same-store sales growth contributed $86.0 million of theincrease. As a percentage of revenue, cost of revenue was 83.7% compared to82.2% for the first nine months of fiscal 2010.

 

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*Gross Profit*

 
| ** **                           | ** ** | **Nine Months Ended October 31,** | ** ** | **Increase/** | ** ** | **Percent**    | ** ** |
|--------------------------------------|------------|-------------------------------------------------------|------------|---------------|------------|----------------|------------|
| ** **                           | ** ** | **2010**                                              | ** ** | **2009**      | ** ** | **(Decrease)** | ** ** | **Change** | ** ** |
| ** **                           | ** ** | **(dollars in thousands)**                  | ** ** | ** **    | ** ** |
| **Gross Profit**                     |       |                                                  |       |          |       |           |       |   |   |
| Equipment                            |       | $                                                     | 48,281     |          | $          | 45,969         |       | $ | 2,312 |   | 5.0 | % |
| Parts                                |       | 32,372                                                |       | 28,046        |       | 4,326          |       | 15.4 | % |
| Service                              |       | 34,509                                                |       | 28,192        |       | 6,317          |       | 22.4 | % |
| Other, including trucking and rental |       | 3,307                                                 |       | 1,900         |       | 1,407          |       | 74.1 | % |
|                                 |       |                                                  |       |          |       |           |       |   |   |
| Total Gross Profit                   |       | $                                                     | 118,469    |          | $          | 104,107        |       | $ | 14,362 |   | 13.8 | % |
|                                 |       |                                                  |       |          |       |           |       |   |   |
| **Gross Profit Margin**              |       |                                                  |       |          |       |           |       |   |   |
| Equipment                            |       | 8.9                                                   | %          | 10.5          | %          | (1.6           | )%         | (15.2 | )% |
| Parts                                |       | 29.2                                                  | %          | 30.5          | %          | (1.3           | )%         | (4.3 | )% |
| Service                              |       | 62.9                                                  | %          | 64.0          | %          | (1.1           | )%         | (1.7 | )% |
| Other, including trucking and rental |       | 20.8                                                  | %          | 16.8          | %          | 4.0            | %          | 23.8 | % |
|                                 |       |                                                  |       |          |       |           |       |   |   |
| Total Gross Profit Margin            |       | 16.3                                                  | %          | 17.8          | %          | (1.5           | )%         | (8.4 | )% |
|                                 |       |                                                  |       |          |       |           |       |   |   |
| **Gross Profit Mix**                 |       |                                                  |       |          |       |           |       |   |   |
| Equipment                            |       | 75.0                                                  | %          | 74.9          | %          | 0.1            | %          | 0.1 | % |
| Parts                                |       | 15.3                                                  | %          | 15.7          | %          | (0.4           | )%         | (2.5 | )% |
| Service                              |       | 7.5                                                   | %          | 7.5           | %          | 0.0            | %          | 0.0 | % |
| Other, including trucking and rental |       | 2.2                                                   | %          | 1.9           | %          | 0.3            | %          | 15.8 | % |
|                                 |       |                                                  |       |          |       |           |       |   |   |
| Total Gross Profit Mix               |       | 100.0                                                 | %          | 100.0         | %          | 0.0            | %          | 0.0 | % |

 

The $14.4 million increase in gross profit for the nine months ended October 31,2010, as compared to the same period last year, was primarily due to increasedrevenue. Acquisitions contributed $7.3 million to the increase in gross profitfor the nine months ended October 31, 2010, while increases in same-storegross profits contributed the remaining $7.1 million. Offsetting the positiveeffect to gross profits of higher revenue were lower margins primarily onequipment, which decreased 1.6% from 10.5% to 8.9% in the nine months ended October 31,2010 as compared to the prior nine-month period. The equipment margincompression is due to market pricing pressure and the timing of a manufacturerincentive program which was recognized in the nine months ended October 31,2009 but was not recognized in the comparable period in fiscal 2011. Weanticipate the equipment margin compression to moderate in the last quarter ofthe year as a result of increased equipment demand and tightening in the supplyof the equipment to be sold, and timing of annual manufacturer performanceincentive programs. Parts margins were down 1.3% to 29.2% due to a partsincentive program recognized in the third quarter of last year that did notrecur in the third quarter of fiscal 2011. Service margins were down 1.1% to62.9%; however, we are still realizing increased same-store gross profits inboth of these areas. The decrease in equipment and parts margins were theprimary factors in total gross profit margins decreasing to 16.3% for the ninemonths ended October 31, 2010 from 17.8% in the prior year nine monthperiod.

 

*Operating Expenses*

 
| ** **         | ** ** | **Nine Months Ended October 31,** | ** ** | ** ** | ** ** | **Percent**  | ** ** |
|--------------------|------------|-------------------------------------------------------|------------|------------|------------|--------------|------------|
| ** **         | ** ** | **2010**                                              | ** ** | **2009**   | ** ** | **Increase** | ** ** | **Change** | ** ** |
| ** **         | ** ** | **(dollars in thousands)**                  | ** ** | ** ** | ** ** |
| Operating Expenses |       | $                                                     | 91,857     |       | $          | 79,159       |       | $ | 12,698 |   | 16.0 | % |
|                    |            |                                                       |            |            |            |              |            |  |  |  |  |  |

 

The $12.7 million increase in operating expenses for the first ninemonths of fiscal 2011, as compared to the same period last year, was primarilydue to the additional costs associated with acquisitions such as compensation,rent and depreciation. As a percentage of total revenue, operating expensesdecreased to 12.6% for the first nine months of fiscal 2011 compared to 13.5%for the first nine months of fiscal 2010 due to improved fixed operating costleverage resulting from higher revenues.

 

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*Other Income (Expense)*

* *
| ** **                 | ** ** | **Nine Months Ended October 31,** | ** ** | **Increase/** | ** ** | **Percent**    | ** ** |
|----------------------------|------------|-------------------------------------------------------|------------|---------------|------------|----------------|------------|
| ** **                 | ** ** | **2010**                                              | ** ** | **2009**      | ** ** | **(Decrease)** | ** ** | **Change** | ** ** |
| ** **                 | ** ** | **(dollars in thousands)**                  | ** ** | ** **    | ** ** |
| Interest and other income  |       | $                                                     | 414        |          | $          | 531            |       | $ | (117 | ) | (22.0 | )% |
| Floorplan interest expense |       | (5,850                                                | )          | (3,461        | )          | 2,389          |       | 69.0 | % |
| Interest expense           |       | (1,129                                                | )          | (1,045        | )          | 84             |       | 8.0 | % |
|                       |       |                                                  |       |          |       |           |       |   |   |
|                            |            |                                                       |            |               |            |                |            |  |  |  |  |  |

 

Floorplan interest expense increased $2.4 million for the nine monthsended October 31, 2010, as compared to the same period in the prior year.Increases in floorplan notes payable balances accounted for 90% of thisincrease while higher interest rates generated the remaining 10% increase, ascompared to the prior year nine months. We anticipate our floorplan interestexpense to decrease in the fourth quarter of fiscal 2011 as a result of lowerrates associated with the new Credit Agreement entered into on October 31,2010.

 

*Provision for Income Taxes*

* *
| ** **                 | ** ** | **Nine Months Ended October 31,** | ** ** | ** ** | ** ** | **Percent**  | ** ** |
|----------------------------|------------|-------------------------------------------------------|------------|------------|------------|--------------|------------|
| ** **                 | ** ** | **2010**                                              | ** ** | **2009**   | ** ** | **Decrease** | ** ** | **Change** | ** ** |
| ** **                 | ** ** | **(dollars in thousands)**                  | ** ** | ** ** | ** ** |
| Provision for income taxes |       | $                                                     | 8,068      |       | $          | 8,599        |       | $ | (531 | ) | (6.2 | )% |
|                            |            |                                                       |            |            |            |              |            |  |  |  |  |  |

 

Our effective tax rate decreased to 40.2% for the nine months ended October 31,2010, as compared to 41.0% for the nine months ended October 31, 2009. Thedecrease in effective tax rate compared to the prior year nine months primarilyreflects permanent differences between financial and income tax reporting, suchas stock-based compensation.

 

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**Segment Results**

 

Certain financial information for our Agriculture and Constructionbusiness segments is set forth below. Revenues and income (loss) before incometaxes at the segment level are reported before eliminations. “Shared Resources”in the table below refers to the various unallocated income/(expense) itemsthat we have retained at the general corporate level. Intersegment revenues areimmaterial.

 
| ** **                                | ** ** | **Nine Months Ended October 31,** | ** ** | **Increase/** | ** ** | **Percent**    | ** ** |
|-------------------------------------------|------------|-------------------------------------------------------|------------|---------------|------------|----------------|------------|
| ** **                                | ** ** | **2010**                                              | ** ** | **2009**      | ** ** | **(Decrease)** | ** ** | **Change** | ** ** |
| ** **                                | ** ** | **(dollars in thousands)**                  | ** ** | ** **    | ** ** |
| **Revenues**                              |       |                                                  |       |          |       |           |       |   |   |
| Agriculture                               |       | $                                                     | 645,269    |          | $          | 524,330        |       | $ | 120,939 |   | 23.1 | % |
| Construction                              |       | 108,140                                               |       | 84,425        |       | 23,715         |       | 28.1 | % |
| Segment revenues                          |       | 753,409                                               |       | 608,755       |       | 144,654        |       | 23.8 | % |
| Eliminations                              |       | (26,979                                               | )          | (22,244       | )          | (4,735         | )          | (21.3 | )% |
| Total                                     |       | $                                                     | 726,430    |          | $          | 586,511        |       | $ | 139,919 |   | 23.9 | % |
|                                      |       |                                                  |       |          |       |           |       |   |   |
| **Income (Loss) Before Income Taxes**     |       |                                                  |       |          |       |           |       |   |   |
| Agriculture                               |       | $                                                     | 25,458     |          | $          | 27,942         |       | $ | (2,484 | ) | (8.9 | )% |
| Construction                              |       | (2,936                                                | )          | (4,551        | )          | 1,615          |       | 35.5 | % |
| Segment income (loss) before income taxes |       | 22,522                                                |       | 23,391        |       | (869           | )          | (3.7 | )% |
| Shared Resources                          |       | (1,977                                                | )          | (1,971        | )          | (6             | )          | (0.3 | )% |
| Eliminations                              |       | (498                                                  | )          | (447          | )          | (51            | )          | (11.4 | )% |
| Income before income taxes                |       | $                                                     | 20,047     |          | $          | 20,973         |       | $ | (926 | ) | (4.4 | )% |

 

*Agriculture*

 

Agriculture revenues for the nine months ended October 31, 2010increased 23.1% compared to the same period last year. The revenue increase wasprimarily due to acquisitions and an Agriculture same-store sales increase of15.5% over the nine months ended October 31, 2009. The same-store salesgrowth was primarily caused by projected increased farm cash receipts, favorableharvest conditions and crop yield reports across our footprint.

 

Income before income tax decreased 8.9% primarily due to lowerAgriculture gross profit margins on equipment revenues and higher floorplaninterest expense compared to the same period last year. The decreased grossprofit margins on equipment is reflective of increased market pricing pressuresand the timing of a manufacturer incentive program which was recognized in thenine months ended October 31, 2009 but not recognized in the comparableperiod of fiscal 2011. Floorplan interest expense increased due to increasedfloorplan notes payable balances and increased interest rates for the ninemonths ended October 31, 2010 compared to the same period last year. Weanticipate our floorplan interest expense to decrease in the fourth quarter offiscal 2011 as a result of lower rates associated with the new Credit Agreemententered into on October 31, 2010. We also expect equipment gross profitmargins to improve in the fourth quarter of fiscal 2011 due to increasedequipment demand and tightening in the supply of the equipment to be sold, andtiming of annual manufacturer performance incentive programs.

 

*Construction*

 

Construction revenues for the nine months ended October 31, 2010increased 28.1% compared to the same period last year. The revenue increase wasprimarily due to acquisitions and a Construction same-store sales increase of20.6% over the nine months ended October 31, 2009 resulting from theexecution of our fiscal 2011 Construction business action plan, which includedright-sizing our rental fleet, changing key Construction personnel andimplementing the Titan strong-store operating model in the Construction storesacquired in fiscal 2009.

 

Loss before income taxes decreased 35.5% primarily due to higherConstruction segment gross profits resulting from increased revenues, offset bylower Construction gross profit margins on equipment revenues and higherfloorplan interest expense resulting from increased floorplan notes payable balancesand increased interest rates in the nine months ended October 31, 2010compared to the same period last year. Also contributing to the loss was$333,000 in exit costs related to the

 

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closingof our store in Columbia Falls, Montana. We anticipate our floorplan interestexpense to decrease in the fourth quarter of fiscal 2011 as a result of lowerrates associated with the new Credit Agreement entered into on October 31,2010.

 

*Shared Resources/Eliminations*

 

Shared Resources allocations to each of oursegments are set early in the year and therefore unallocated balances mayoccur. The Shared Resource amount in the first nine months of fiscal 2011 wasconsistent with the same period in the prior year.

 

Eliminations remove any inter-companyrevenues or income before income taxes residing in our segment results.

 

**Liquidity and Capital Resources**

 

*Cash Flow from Operating Activities*

 

For the nine months ended October 31, 2010, our cash flow used foroperating activities was $41.3 million. Our cash flow used for operations wasprimarily the result of an increase in net cash used for inventories of $57.1million and a net increase in receivables, prepaid expenses and other assets of$12.6 million. This amount was offset primarily by our reported net income of$12.0 million, an add-back of non-cash depreciation and amortization of $6.4million, an increase in income taxes payable of $4.7 million and an increase inmanufacturer floorplan notes payable of $2.9 million. The increase ininventories primarily reflects new equipment purchases to support future sales.We expect our inventory levels, exclusive of inventories acquired throughfourth quarter business combinations, to decrease from current levels by theend of the fiscal year because of anticipated strong equipment sales in thefourth quarter of our fiscal year due to projected strong farm cash receiptsand execution of our fiscal 2011 Construction business action plan.

 

For the nine months ended October 31, 2009, our cash flow used foroperating activities was $33.1 million. Our cash flow used for operations wasprimarily the result of an increase in inventories of $50.0 million and a netdecrease in accounts payable, customer deposits, accrued expenses and otherlong-term liabilities of $6.8 million. This amount was principally offset byour reported net income of $12.4 million, an increase in floorplan notespayable of $5.1 million and an add-back of non-cash depreciation andamortization of $5.9 million. The increase in inventories reflected historicalstocking levels to support future sales.

 

We evaluate our cash flow from operatingactivities net of all floorplan activity and short-term advances related tocustomer contracts in transit. Taking these adjustments into account, ournon-GAAP cash flow provided by operating activities as of October 31,2010 was $3.8 million. For areconciliation of this non-GAAP financial measure, please see the Non-GAAP CashFlow Reconciliation section below.

 

*Cash Flow from Investing Activities*

 

For the nine months ended October 31, 2010, cash used forinvesting activities was $13.2 million. Our cash flow used for investingactivities primarily consisted of purchases of property and equipment of $11.2million and the purchases of equipment dealerships (net of cash purchased) of$2.4 million.

 

Forthe nine months ended October 31, 2009, cash provided by investingactivities was $30.5 million. Our cash provided by investing activitiesprimarily consisted of the sale of U.S. treasury bills of $45.0 million, offsetby purchases of property and equipment for $11.1 million, and purchases ofequipment dealerships of $3.7 million.

 

*Cash Flow from Financing Activities*

 

For the nine months ended October 31, 2010, cash provided byfinancing activities was $44.3 million. Cash provided by financing activitieswas primarily the result of an increase in non-manufacturer floorplan notespayable of $45.2 million, offset by principal payments on long-term debtexceeding proceeds from long-term debt borrowings by $0.9 million.

 

For the nine months ended October 31, 2009, cash provided byfinancing activities was $43.9 million. Cash provided by financing activitieswas primarily the result of an increase in non-manufacturer floorplan payableof $33.7 million and proceeds from long-term debt and short term advancesexceeding principal payments on long-term debt by $10.2 million.

 

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*Non-GAAP Cash Flow Reconciliation*

 

Non-GAAP cash flow provided by (used for)operating activities is a non-GAAP financial measure which is adjusted for thefollowing:

 

·                  Non-manufacturerfloorplan notes payable: We review our cash flow from operating activities toinclude all floorplan notes payable activity regardless of whether we obtainthe financing from a manufacturer or a non-manufacturer. We consider inventoryfinancing with both manufacturers and non-manufacturers to be part of thenormal operations of our business and use the adjusted cash flow analysis inthe evaluation of our inventory and inventory flooring needs. GAAP categorizesnon-manufacturer floorplan payable as financing activities in the ConsolidatedStatements of Cash Flows.

 

·                  Short-termadvances related to customer contracts in transit: We review our cash flow fromoperating activities to include short-term advances related to customercontracts in transit. These advances are directly related to our contracts intransit and are considered part of our working capital. GAAP categorizesshort-term advances related to customer contracts in transit as financingactivities in the Consolidated Statements of Cash Flows.

 

The following table reconciles net cash provided by (used for) operatingactivities, a GAAP measure, to non-GAAP cash flow provided by (used for)operating activities for the nine months ended October 31, 2010 and 2009and net cash provided by (used for) financing activities, a GAAP measure, tonon-GAAP cash flow provided by (used for) financing activities for the ninemonths ended October 31, 2010 and 2009:

 
| ** **                                            | ** ** | ** **              | ** ** | **Adjustment** | ** ** | **Adjustment** | ** ** | **Non-GAAP** | ** ** |
|-------------------------------------------------------|------------|-------------------------|------------|----------------|------------|----------------|------------|--------------|------------|
| ** **                                            | ** ** | **As Reported**    | ** ** | **(1)**        | ** ** | **(2)**        | ** ** | **Measures** | ** ** |
| ** **                                            | ** ** | **(in thousands)** | ** ** |
| **Nine months ended  October 31, 2010**          |       |                    |       |           |       |           |       |         |       |
| Net cash provided by (used for) operating  activities |       | $                       | (41,311    | )              | $          | 45,179         |       | $            | (104       | ) | $ | 3,764 |   |
| Net cash provided by (used for) financing  activities |       | 44,335                  |       | (45,179        | )          | 104            |       | (740         | )          |
|                                                  |       |                    |       |           |       |           |       |         |       |
| **Nine months ended  October 31, 2009**          |       |                    |       |           |       |           |       |         |       |
| Net cash provided by (used for) operating activities  |       | $                       | (33,072    | )              | $          | 33,664         |       | $            | 1,329      |   | $ | 1,921 |   |
| Net cash provided by (used for) financing  activities |       | 43,872                  |       | (33,664        | )          | (1,329         | )          | 8,879        |       |

 

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(1) -Net change in non-manufacturer floorplan notes payable

(2) -Net change in short-term advances related to customer contracts in transit

 

Non-GAAP cash flow provided by (used for)operating activities should be evaluated in addition to, and not considered asubstitute for, or superior to, other GAAP measures such as net cash providedby (used for) operating activities.

 

**Sources of Liquidity**

 

Our primary sources of liquidity are cash reserves, cash flow fromoperations, proceeds from the issuance of debt and borrowings under our creditfacilities. On October 31, 2010, we entered into a Credit Agreement with agroup of banks led by Wells Fargo Bank, National Association. The CreditAgreement provides for a $175.0 million Floorplan Line and a $50.0 millionWorking Capital Line which expires October 31, 2014. The Credit Agreementhas a variable interest rate on outstanding balances of LIBOR plus anapplicable margin of 1.5% to 2.0% per annum, depending upon our consolidatedleverage ratio, has a 0.2% to 0.4% non-usage fee on the average monthly unusedamount and requires monthly payments of accrued interest. The Credit Agreementis secured by all assets of the Company and contains certain financialcovenants which impose a minimum level of fixed charge coverage ratio and amaximum level of debt to tangible net worth ratio and include annual thresholdsfor acquisitions and capital expenditures. This agreement became effective on November 2,2010.

 

The Floorplan Line will be used to finance equipment inventorypurchases. Amounts outstanding will be recorded as floorplan notes payable,within current liabilities on the consolidated balance sheets as the Companyintends to repay amounts borrowed within one year. The Working Capital Linewill be used to finance our working capital requirements and financing oflong-term debt related to fixed assets. For more information on our creditfacilities, please see Note 3 to the consolidated

 

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financialstatements in this Quarterly Report on Form 10-Q. We expect that ongoingrequirements for debt service and capital expenditures will be funded fromthese sources.

 

**Adequacy of Capital Resources**

 

Our primary uses of cash have been to fund our strategic acquisitions,finance the purchase of inventory, meet debt service requirements and fundoperating activities, working capital, payments due under building spaceoperating leases and manufacturer floorplan notes payable. Based on our currentoperational performance, we believe our cash flow from operations, availablecash and available borrowings under the existing credit facilities willadequately provide our liquidity needs for, at a minimum, the next 12 months.

 

**Certain Information Concerning Off-Balance Sheet Arrangements**

 

We do not have any relationships with unconsolidated entities orfinancial partnerships, such as entities often referred to as structuredfinance, special purpose entities or variable interest entities, which wouldhave been established for the purpose of facilitating off-balance sheetarrangements 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 Private Securities Litigation Reform Act of 1995 provides a “safeharbor” for forward-looking statements. Such “forward-looking” information isincluded in this Quarterly Report on Form 10-Q, including in “Management’sDiscussion And Analysis Of Financial Condition And Results Of Operations,” aswell as in our Annual Report on Form 10-K for the year ended January 31,2010 that was filed with the Securities and Exchange Commission, and in othermaterials filed or to be filed by the Company with the Securities and ExchangeCommission (as well as information included in oral statements or other writtenstatements made or to be made by the Company).

 

Forward-looking statements include all statements based on futureexpectations and specifically include, among other things, all statementsrelating to our expectations regarding the timing and closing of the Fairbanksbusiness combination, our equipment gross profit margins, equipment margincompression, floorplan interest expense, inventory levels, primary liquiditysources and adequacy of our capital resources, as well as our intentionsregarding uses and repayment relating to the Floorplan Line and Working CapitalLine under our Senior Secured Credit Facility. Any statements that are notbased upon 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, the ability to meet closing conditions of the Fairbanks businesscombination, inaccuracies in our assumptions regarding gross margins, margincompression, inventory levels and floorplan interest expense, unanticipatedchanges in our working capital needs, adverse market conditions in theagricultural and construction equipment industries, the continuation ofunfavorable conditions in the credit markets and those matters identified anddiscussed in our Annual Report on Form 10-K under the section titled “RiskFactors.”

 

**ITEM 3. QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

We are exposed to market risk from changes in interest rates. Marketrisk is the potential loss arising from adverse changes in market rates andprices such as interest rates. For fixed rate debt, interest rate changesaffect the fair value of financial instruments but do not impact earnings orcash flows. Conversely, for floating rate debt, interest rate changes generallydo not affect the fair value but do impact future earnings and cash flows,assuming other factors are held constant. We have both fixed and floating ratefinancing.

 

Based upon balances and interest rates as of October 31, 2010,holding other variables constant, a one percentage point increase in interestrates for the next 12-month period would decrease pre-tax earnings and cashflow by approximately $1.5 million. Conversely, a one percentage point decreasein interest rates for the next 12-month period would result in an increase topre-tax earnings and cash flow of approximately $1.5 million. At October 31,2010, we had variable rate floorplan

 

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notespayable of $322.3 million, of which approximately $133.5 million wasinterest-bearing, variable notes payable and long-term debt of $13.9 million,and fixed rate notes payable and long-term debt of $18.3 million.

 

Our policy is not to enter into derivatives or other financialinstruments for trading or speculative purposes.

 

**ITEM 4.**CONTROLS ANDPROCEDURES**

 

(a)                                  *Evaluationof disclosure controls and procedures*. After evaluating theeffectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(b) ofthe Securities 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.

 

(b)                                 *Changesin internal controls*. There has not been any change in the Company’sinternal control over financial reporting (as defined in Exchange Act Rule 13a-15(f))during its most recently completed fiscal quarter that has materially affected,or is reasonably likely to materially affect, the Company’s internal controlover financial reporting.

 

**PART II. - OTHER INFORMATION**

 

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

 

We are currently not a party to any material pending legal proceedings.

 

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

 

In addition to the other information set forth in this report,including the important information in “Private Securities Litigation ReformAct,” you should carefully consider the “Risk Factors” discussed in our Form 10-Kfor the year ended January 31, 2010 as filed with the Securities andExchange Commission. Those factors, if they were to occur, could cause ouractual results to differ materially from those expressed in our forward-lookingstatements in this report, and materially adversely affect our financialcondition or future results. Although we are not aware of any other factorsthat we currently anticipate will cause our forward-looking statements todiffer materially from our future actual results, or materially affect theCompany’s financial condition or future results, additional risks and uncertaintiesnot currently known to us or that we currently deem to be immaterial mightmaterially adversely affect our actual business, financial condition and/oroperating results.

 

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

 

None.

 

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

 

None.

 

**ITEM 4.****                                                    ****(REMOVEDAND RESERVED)**

 

None.

 

**ITEM 5.****                                                    ****OTHERINFORMATION**

 

OnOctober 1, 2010, the Company entered into amended and restated employmentagreements with its Chief Executive Officer, David J. Meyer, and President andChief Financial Officer, Peter J. Christianson (each, an “Officer”). Under theterms of each agreement, each Officer will receive a base salary of $275,000per year, which may be adjusted upward, but not downward, from time to time atthe discretion of the Company’s compensation committee. Each Officer alsoreceives an incentive bonus award opportunity of 0% to 200% of base salary,pursuant to terms and conditions established by the compensation committee andbased upon a target of 100% of base salary. Each Officer is also entitled toreceive a restricted stock award each fiscal year, the share amount of which isdetermined by dividing the Officer’s base salary by the closing price

 

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of the Company’s stock onthe date of grant. The risks of forfeiture on such restricted stock awardslapse three years following the date of grant. Each Officer is also eligible toparticipate in the Company’s employee benefit plans. The term of each Officer’semployment agreement is October 1, 2010 to September 30, 2013, whichend date is automatically extended by one year on each anniversary of theeffective date, October 1, 2010. The employment agreements for Mr. Meyerand Mr. Christianson are attached as exhibits 10.1 and 10.2, respectively,to this Quarterly Report.

 

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

 

Exhibits - See “Exhibit Index”on page following signatures.

 

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this Report to be signed on its behalf by the undersigned,thereunto duly authorized.

 
| Dated:  December 9, 2010 |                      |                                   |
|-------------------------------|---------------------------|----------------------------------------|
|                          | **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 MACHINERY INC.

FORM 10-Q

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                      |
|----------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *10.1                |       | Amended  and Restated Employment Agreement dated October 1, 2010 by and between  the Company and David J. Meyer                                                 |
|                 |       |                                                                                                                                                                 |
| *10.2                |       | Amended  and Restated Employment Agreement dated October 1, 2010 by and between  the Company and Peter J. Christianson                                          |
|                 |       |                                                                                                                                                                 |
| *10.3                |       | Credit  Agreement dated as of October 31, 2010 by and among the Company, Wells  Fargo Bank, National Association, and the Financial Institutions Party  Thereto |
|                 |       |                                                                                                                                                                 |
| *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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*Filedherewith

 

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