ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our interim unaudited condensed consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report, and the audited consolidated financial statements and related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021.
Overview
We own and operate a network of full service agricultural and construction equipment stores in the United States and Europe. Based upon information provided to us by CNH Industrial N.V. or its U.S. subsidiary CNH Industrial America, LLC, we are the largest retail dealer of Case IH Agriculture equipment in the world, one of the largest retail dealers of Case Construction equipment in North America and one of the largest retail dealers of New Holland Agriculture and New Holland Construction equipment in the U.S. We operate our business through three reportable segments: Agriculture, Construction and International. Within each segment, we have four principal sources of revenue: new and used equipment sales, parts sales, service, and equipment rental and other activities.
Demand for agricultural equipment and, to a lesser extent, parts and service support, are impacted by agricultural commodity prices and net farm income. Based on February 2021 U.S. Department of Agriculture publications, the estimate of net farm income for calendar year 2021 indicated an approximate 8.1% decrease as compared to calendar year 2020, and an approximate 45.7% increase in net farm income for calendar year 2020 as compared to calendar year 2019. Certain areas of our North American Agriculture footprint have been impacted by a drought in recent months and this may reduce demand for parts and service support in upcoming quarters.
For the second quarter of fiscal 2022, our net income was $11.2 million, or $0.50 per diluted share, compared to a fiscal 2021 second quarter net income of $6.4 million, or $0.28 per diluted share. Our adjusted diluted earnings per share was $0.57 for the second quarter of fiscal 2022, compared to $0.29 for the second quarter of fiscal 2021. See the Non-GAAP Financial Measures section below for a reconciliation of adjusted diluted earnings per share to diluted earnings per share, the most comparable GAAP financial measure. Significant factors impacting the quarterly comparisons were:
•Revenue in the second quarter of fiscal 2022 increased compared to the second quarter of fiscal 2021. All three segments recognized an increase in revenue from the prior year. Total same store sales increased 27.0% compared to the prior year second quarter.
•Gross profit in the second quarter of fiscal 2022 increased 19.7% compared to the second quarter of fiscal 2021. The increase in gross profit was primarily the result of strong equipment sales and equipment gross profit margins that increased to 11.9% in the second quarter of fiscal 2022 from 11.1% in the second quarter of fiscal 2021.
•Intangible and long-lived asset impairments in the second quarter of fiscal 2022 were $1.5 million compared to no impairment in the second quarter of fiscal 2021. The increase was attributable to the impairment of certain intangible and long-lived assets in one of our International reporting units.
•Floorplan and other interest expense decreased a combined 21.9% in the second quarter of fiscal 2022, as compared to the second quarter last year, due to lower borrowings.
Impact of the COVID-19 Pandemic on the Company
As discussed in note 1 to our condensed consolidated financial statements, the COVID-19 pandemic has significantly disrupted supply chains and business around the world. Uncertainty remains regarding the emerging variant strains of COVID-19 and regarding the length of time it will take for the COVID-19 pandemic to subside, including the time it will take for vaccines to be broadly distributed and accepted in the United States and the rest of the world, and the effectiveness of those vaccines in slowing or stopping the spread of COVID-19 and mitigating the economic effects of the pandemic.
The Company continues to effectively execute its strategy while managing the ongoing effects of the COVID-19 pandemic. The Company's products and services were determined to be essential in the markets we serve and accordingly operations have been allowed to continue throughout the pandemic. Since the beginning of the COVID-19 pandemic, the safety of our employees and customers has been, and continues to be, our top concern. At the onset of the pandemic, we organized a COVID Task Force to implement safety protocols and to quickly respond to matters related to the pandemic at our locations.
Some of the Company's supply vendors are facing production, supply chain and staffing challenges as they work to achieve production capacity and lead times consistent with pre-pandemic levels. As a result, the Company has experienced some disruptions and delays on delivery of certain materials.
Although there have been logistical and other challenges as a result of COVID-19, there were no material adverse impacts on the Company's results of operations for the three and six months ended July 31, 2021 and 2020. However, due to the uncertainty of the economic outlook resulting from the COVID-19 pandemic, the Company continues to monitor the situation closely.
Acquisitions
Fiscal 2021
On May 4, 2020, the Company acquired certain assets of HorizonWest Inc. This acquired Case IH agriculture dealership complex consisted of three agriculture equipment stores in Scottsbluff and Sidney, Nebraska and Torrington, Wyoming, which expanded the Company's agriculture presence in Nebraska and into Wyoming. The total consideration paid for the acquired business was $6.8 million in cash, which the Company financed through available cash resources and capacity under our existing floorplan payable and other credit facilities. The three HorizonWest dealerships are included within our Agriculture segment.
ERP Transition
The Company is in the process of converting to a new Enterprise Resource Planning ("ERP") application. The new ERP application is expected to provide data-driven and mobile-enabled sales and support tools to improve employee efficiency and deliver an enhanced customer experience. The Company integrated one pilot store on the new ERP system in the second quarter of fiscal 2021; we anticipate the remaining domestic stores to be converted to the ERP within the next 12 months.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are included in the Management's Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the fiscal year ended January 31, 2021. There have been no changes in our critical accounting policies since January 31, 2021.
Results of Operations
The results presented below include the operating results of any acquisition made during these periods as well as the operating results of any stores closed or divested during these periods, up to the date of the store closure. The period-to-period comparisons included below are not necessarily indicative of future results. Segment information is provided later in the discussion and analysis of our results of operations.
Same-store sales for any period represent sales by stores that were part of the Company for the entire comparable period in the current and preceding fiscal years. We do not distinguish between relocated or recently expanded stores in this same-store analysis. Closed stores are excluded from the same-store analysis. Stores that do not meet the criteria for same-store classification are described as excluded stores throughout this Results of Operations section.
Comparative financial data for each of our four sources of revenue are expressed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Six Months Ended July 31,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
(dollars in thousands)
|
|
(dollars in thousands)
|
Equipment
|
|
|
|
|
|
|
|
Revenue
|
$
|
272,733
|
|
|
$
|
202,654
|
|
|
$
|
548,713
|
|
|
$
|
421,159
|
|
Cost of revenue
|
240,332
|
|
|
180,231
|
|
|
484,008
|
|
|
377,278
|
|
Gross profit
|
$
|
32,401
|
|
|
$
|
22,423
|
|
|
$
|
64,705
|
|
|
$
|
43,881
|
|
Gross profit margin
|
11.9
|
%
|
|
11.1
|
%
|
|
11.8
|
%
|
|
10.4
|
%
|
Parts
|
|
|
|
|
|
|
|
Revenue
|
$
|
65,317
|
|
|
$
|
61,454
|
|
|
$
|
127,942
|
|
|
$
|
118,068
|
|
Cost of revenue
|
46,089
|
|
|
43,032
|
|
|
90,529
|
|
|
82,649
|
|
Gross profit
|
$
|
19,228
|
|
|
$
|
18,422
|
|
|
$
|
37,413
|
|
|
$
|
35,419
|
|
Gross profit margin
|
29.4
|
%
|
|
30.0
|
%
|
|
29.2
|
%
|
|
30.0
|
%
|
Service
|
|
|
|
|
|
|
|
Revenue
|
$
|
29,676
|
|
|
$
|
27,986
|
|
|
$
|
57,379
|
|
|
$
|
53,586
|
|
Cost of revenue
|
9,771
|
|
|
9,665
|
|
|
19,065
|
|
|
18,010
|
|
Gross profit
|
$
|
19,905
|
|
|
$
|
18,321
|
|
|
$
|
38,314
|
|
|
$
|
35,576
|
|
Gross profit margin
|
67.1
|
%
|
|
65.5
|
%
|
|
66.8
|
%
|
|
66.4
|
%
|
Rental and other
|
|
|
|
|
|
|
|
Revenue
|
$
|
9,904
|
|
|
$
|
11,371
|
|
|
$
|
16,300
|
|
|
$
|
20,860
|
|
Cost of revenue
|
6,420
|
|
|
7,849
|
|
|
10,737
|
|
|
14,636
|
|
Gross profit
|
$
|
3,484
|
|
|
$
|
3,522
|
|
|
$
|
5,563
|
|
|
$
|
6,224
|
|
Gross profit margin
|
35.2
|
%
|
|
31.0
|
%
|
|
34.1
|
%
|
|
29.8
|
%
|
The following table sets forth our statements of operations data expressed as a percentage of total revenue for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Six Months Ended July 31,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Revenue
|
|
|
|
|
|
|
|
Equipment
|
72.2
|
%
|
|
66.8
|
%
|
|
73.1
|
%
|
|
68.6
|
%
|
Parts
|
17.3
|
%
|
|
20.3
|
%
|
|
17.1
|
%
|
|
19.2
|
%
|
Service
|
7.9
|
%
|
|
9.2
|
%
|
|
7.6
|
%
|
|
8.7
|
%
|
Rental and other
|
2.6
|
%
|
|
3.7
|
%
|
|
2.2
|
%
|
|
3.4
|
%
|
Total Revenue
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Total Cost of Revenue
|
80.1
|
%
|
|
79.3
|
%
|
|
80.5
|
%
|
|
80.3
|
%
|
Gross Profit Margin
|
19.9
|
%
|
|
20.7
|
%
|
|
19.5
|
%
|
|
19.7
|
%
|
Operating Expenses
|
15.1
|
%
|
|
17.5
|
%
|
|
15.1
|
%
|
|
17.3
|
%
|
|
|
|
|
|
|
|
|
Impairment of Intangible and Long-Lived Assets
|
0.4
|
%
|
|
—
|
%
|
|
0.2
|
%
|
|
—
|
%
|
Income from Operations
|
4.4
|
%
|
|
3.2
|
%
|
|
4.1
|
%
|
|
2.4
|
%
|
Other Income (Expense)
|
(0.2)
|
%
|
|
(0.4)
|
%
|
|
(0.2)
|
%
|
|
(0.5)
|
%
|
Income Before Income Taxes
|
4.1
|
%
|
|
2.7
|
%
|
|
3.9
|
%
|
|
1.9
|
%
|
Provision for Income Taxes
|
1.2
|
%
|
|
0.6
|
%
|
|
1.0
|
%
|
|
0.5
|
%
|
Net Income
|
3.0
|
%
|
|
2.1
|
%
|
|
2.9
|
%
|
|
1.4
|
%
|
Three Months Ended July 31, 2021 Compared to Three Months Ended July 31, 2020
Consolidated Results
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2021
|
|
2020
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
Equipment
|
$
|
272,733
|
|
|
$
|
202,654
|
|
|
$
|
70,079
|
|
|
34.6
|
%
|
Parts
|
65,317
|
|
|
61,454
|
|
|
3,863
|
|
|
6.3
|
%
|
Service
|
29,676
|
|
|
27,986
|
|
|
1,690
|
|
|
6.0
|
%
|
Rental and other
|
9,904
|
|
|
11,371
|
|
|
(1,467)
|
|
|
(12.9)
|
%
|
Total Revenue
|
$
|
377,630
|
|
|
$
|
303,465
|
|
|
$
|
74,165
|
|
|
24.4
|
%
|
Total revenue for the second quarter of fiscal 2022 was 24.4% or $74.2 million higher than the second quarter of fiscal 2021 driven primarily by increased demand for equipment, which increased equipment sales 34.6% from the prior year period. The increased equipment demand was due to higher commodity prices, higher recent net farm income, and good growing conditions in our international footprint. Company-wide same-store sales in the second quarter of fiscal 2022 increased 27.0% versus the comparable period in fiscal 2021.
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2021
|
|
2020
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
Gross Profit
|
|
|
|
|
|
|
|
Equipment
|
$
|
32,401
|
|
|
$
|
22,423
|
|
|
$
|
9,978
|
|
|
44.5
|
%
|
Parts
|
19,228
|
|
|
18,422
|
|
|
806
|
|
|
4.4
|
%
|
Service
|
19,905
|
|
|
18,321
|
|
|
1,584
|
|
|
8.6
|
%
|
Rental and other
|
3,484
|
|
|
3,522
|
|
|
(38)
|
|
|
(1.1)
|
%
|
Total Gross Profit
|
$
|
75,018
|
|
|
$
|
62,688
|
|
|
$
|
12,330
|
|
|
19.7
|
%
|
Gross Profit Margin
|
|
|
|
|
|
|
|
Equipment
|
11.9
|
%
|
|
11.1
|
%
|
|
0.8
|
%
|
|
7.2
|
%
|
Parts
|
29.4
|
%
|
|
30.0
|
%
|
|
(0.6)
|
%
|
|
(2.0)
|
%
|
Service
|
67.1
|
%
|
|
65.5
|
%
|
|
1.6
|
%
|
|
2.4
|
%
|
Rental and other
|
35.2
|
%
|
|
31.0
|
%
|
|
4.2
|
%
|
|
13.5
|
%
|
Total Gross Profit Margin
|
19.9
|
%
|
|
20.7
|
%
|
|
(0.8)
|
%
|
|
(3.9)
|
%
|
Gross Profit Mix
|
|
|
|
|
|
|
|
Equipment
|
43.2
|
%
|
|
35.8
|
%
|
|
7.4
|
%
|
|
20.7
|
%
|
Parts
|
25.6
|
%
|
|
29.4
|
%
|
|
(3.8)
|
%
|
|
(12.9)
|
%
|
Service
|
26.5
|
%
|
|
29.2
|
%
|
|
(2.7)
|
%
|
|
(9.2)
|
%
|
Rental and other
|
4.7
|
%
|
|
5.6
|
%
|
|
(0.9)
|
%
|
|
(16.1)
|
%
|
Total Gross Profit Mix
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
Gross profit for the second quarter of fiscal 2022 increased 19.7% or $12.3 million, as compared to the same period last year. The increase in gross profit was driven by equipment sales and equipment margin which increased from 11.1% in the prior year quarter to 11.9% in the current year quarter. The decline in total gross profit margin to 19.9% in the current quarter from 20.7% in the prior year quarter was primarily due to the shift of the gross profit mix to lower margin equipment sales relative to parts, service, and rental sales.
Our Company-wide absorption rate — which is calculated by dividing our gross profit from sales of parts, service and rental fleet by our operating expenses, less commission expense on equipment sales, plus interest expense on floorplan payables and rental fleet debt — increased to 86.2% for the second quarter of fiscal 2022 compared to 80.9% during the same period last year as the increase in gross profit from parts and service in the second quarter of fiscal 2022 combined with lower floorplan interest expenses more than offset the increase in operating expenses during the period.
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2021
|
|
2020
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
Operating Expenses
|
$
|
57,074
|
|
|
$
|
53,079
|
|
|
$
|
3,995
|
|
|
7.5
|
%
|
Operating Expenses as a Percentage of Revenue
|
15.1
|
%
|
|
17.5
|
%
|
|
(2.4)
|
%
|
|
(13.7)
|
%
|
Our operating expenses in the second quarter of fiscal 2022 increased 7.5% as compared to the second quarter of fiscal 2021. The increase in operating expenses was primarily due to variable expenses associated with increased sales. Operating expenses as a percentage of revenue decreased to 15.1% in the second quarter of fiscal 2022 from 17.5% in the second quarter of fiscal 2021. The decrease in operating expenses as a percentage of revenue was due to the increase in total revenue in the second quarter of fiscal 2022, as compared to the second quarter of fiscal 2021, which positively affected our ability to leverage our fixed operating costs.
Impairment Charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2021
|
|
2020
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
Impairment of Intangible and Long-Lived Assets
|
$
|
1,498
|
|
|
$
|
—
|
|
|
$
|
1,498
|
|
|
100.0
|
%
|
The Company recognized impairment expense of $1.5 million related to certain intangible assets and and long-lived assets in its International segment in the second quarter of fiscal 2022. The Company did not recognize any impairment expense in the second quarter of fiscal 2021.
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2021
|
|
2020
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
Interest and other income
|
$
|
654
|
|
|
$
|
562
|
|
|
$
|
92
|
|
|
16.4
|
%
|
Floorplan interest expense
|
(350)
|
|
|
(901)
|
|
|
(551)
|
|
|
(61.2)
|
%
|
Other interest expense
|
(1,118)
|
|
|
(978)
|
|
|
140
|
|
|
14.3
|
%
|
Floorplan interest expense decreased 61.2% in the second quarter of fiscal 2022, as compared to the second quarter of fiscal 2021, due to lower borrowings. The increase in other interest expense was primarily due to increased fixed rate long term debt from real estate purchases throughout the year.
Provision for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2021
|
|
2020
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
Provision for Income Taxes
|
$
|
4,383
|
|
|
$
|
1,892
|
|
|
$
|
2,491
|
|
|
131.7
|
%
|
Our effective tax rate was 28.0% and 22.8% for the three months ended July 31, 2021 and July 31, 2020. The effective tax rate for the three months ended July 31, 2021 benefited from vesting of share-based compensation but was offset by the recognition of a valuation allowance on certain of our foreign deferred tax assets including recording a valuation allowance on the remaining deferred tax assets of our Germany entity. For the three months ending July 31, 2020, the effective tax rate benefited from a weakening Ukrainian currency but was offset by increased tax expense on the vesting of share-based compensation.
Segment Results
Certain financial information for our Agriculture, Construction and International business segments is presented below. “Shared Resources” in the table below refers to the various unallocated income/(expense) items that we have retained at the general corporate level. Revenue between segments is immaterial.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2021
|
|
2020
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
Revenue
|
|
|
|
|
|
|
|
Agriculture
|
$
|
219,364
|
|
|
$
|
169,072
|
|
|
$
|
50,292
|
|
|
29.8
|
%
|
Construction
|
80,943
|
|
|
77,719
|
|
|
3,224
|
|
|
4.1
|
%
|
International
|
77,323
|
|
|
56,674
|
|
|
20,649
|
|
|
36.4
|
%
|
Total
|
$
|
377,630
|
|
|
$
|
303,465
|
|
|
$
|
74,165
|
|
|
24.4
|
%
|
|
|
|
|
|
|
|
|
Income (Loss) Before Income Taxes
|
|
|
|
|
|
|
|
Agriculture
|
$
|
12,067
|
|
|
$
|
6,752
|
|
|
$
|
5,315
|
|
|
78.7
|
%
|
Construction
|
2,815
|
|
|
1,375
|
|
|
1,440
|
|
|
104.7
|
%
|
International
|
430
|
|
|
(432)
|
|
|
862
|
|
|
n/m
|
Segment income before income taxes
|
15,312
|
|
|
7,695
|
|
|
7,617
|
|
|
99.0
|
%
|
Shared Resources
|
320
|
|
|
597
|
|
|
(277)
|
|
|
(46.4)
|
%
|
Total
|
$
|
15,632
|
|
|
$
|
8,292
|
|
|
$
|
7,340
|
|
|
88.5
|
%
|
Agriculture
Agriculture segment revenue for the second quarter of fiscal 2022 increased 29.8% compared to the second quarter of fiscal 2021. The higher revenue was driven primarily by increased equipment demand due to higher commodity prices, higher recent net farm income. Same-store sales in our Agriculture segment increased 29.3% for the second quarter of fiscal 2022 as compared to the second quarter of fiscal 2021, primarily driven by an increase in equipment sales.
Agriculture segment income before income taxes was $12.1 million for the second quarter of fiscal 2022 compared to $6.8 million for the second quarter of fiscal 2021. Higher equipment revenue along with increased gross profit margin on equipment drove the increase in gross profit. Decreased inventory levels resulted in lower floorplan and other interest expense for the second quarter of fiscal 2022, as compared to the second quarter of fiscal 2021, which also contributed to the improvement in segment results.
Construction
Construction segment revenue for the second quarter of fiscal 2022 increased 4.1% compared to the second quarter of fiscal 2021. The higher revenue was driven by increases in our equipment sales, as compared to the prior year’s second quarter. This increase was partially offset by the divestiture of our Phoenix and Tucson, Arizona stores in the fourth quarter of fiscal 2021 as well as lower rental and other revenue due to a smaller rental fleet. Same-store sales in our Construction segment increased 14.1% for the second quarter of fiscal 2022, as compared to the second quarter of fiscal 2021.
Our Construction segment income before taxes was $2.8 million for the second quarter of fiscal 2022 compared to $1.4 million in the second quarter of fiscal 2021. The improvement in segment results was primarily due to increased construction activity as well as operational improvements within the segment. Decreased inventory levels resulted in lower floorplan and other interest expense for the second quarter of fiscal 2022, as compared to the second quarter of fiscal 2021, which also contributed to the improvement in segment results. The dollar utilization — which is calculated by dividing the rental revenue earned on our rental fleet by the average gross carrying value of our rental fleet (comprised of original equipment costs plus additional capitalized costs) for that period — of our rental fleet increased from 22.2% in the second quarter of fiscal 2021 to 26.6% in the second quarter of fiscal 2022.
International
International segment revenue, for the second quarter of fiscal 2022 increased 36.4% compared to the second quarter of fiscal 2021. Higher segment revenue was driven by many of the same macroeconomic factors as the Agriculture segment, as well as favorable growing condition throughout most of the farming footprint we serve, which has improved customer sentiment and has had a positive impact on equipment sales.
Our International segment income before income taxes was $0.4 million for the second quarter of fiscal 2022 compared to segment loss of $0.4 million for the same period last year. The increase in segment pre-tax income was primarily the result of increased equipment sales and equipment gross profit margin and was partially offset by an impairment of certain intangible and fixed assets in our German reporting unit.
Shared Resources/Eliminations
We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments. Since these allocations are set early in the year, and a portion is planned to be unallocated, unallocated balances may occur. Shared Resources income before income taxes was $0.3 million for the second quarter of fiscal 2022 compared to income before income taxes of $0.6 million for the same period last year.
Six Months Ended July 31, 2021 Compared to Six Months Ended July 31, 2020
Consolidated Results
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2021
|
|
2020
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
Equipment
|
$
|
548,713
|
|
|
$
|
421,159
|
|
|
$
|
127,554
|
|
|
30.3
|
%
|
Parts
|
127,942
|
|
|
118,068
|
|
|
9,874
|
|
|
8.4
|
%
|
Service
|
57,379
|
|
|
53,586
|
|
|
3,793
|
|
|
7.1
|
%
|
Rental and other
|
16,300
|
|
|
20,860
|
|
|
(4,560)
|
|
|
(21.9)
|
%
|
Total Revenue
|
$
|
750,334
|
|
|
$
|
613,673
|
|
|
$
|
136,661
|
|
|
22.3
|
%
|
Total revenue for the first six months of fiscal 2022 was up 22.3% or $136.7 million compared to the first six months of fiscal 2021, and was driven by increases in revenue from our equipment, parts and service businesses. The 30.3% increase in equipment sales was the driving factor in the total sales increase from prior year and all three segments saw increases, compared to the prior year period, in equipment sales. Company-wide same-store sales increased 23.6% over the comparable prior year period.
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2021
|
|
2020
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
Gross Profit
|
|
|
|
|
|
|
|
Equipment
|
$
|
64,705
|
|
|
$
|
43,881
|
|
|
$
|
20,824
|
|
|
47.5
|
%
|
Parts
|
37,413
|
|
|
35,419
|
|
|
1,994
|
|
|
5.6
|
%
|
Service
|
38,314
|
|
|
35,576
|
|
|
2,738
|
|
|
7.7
|
%
|
Rental and other
|
5,563
|
|
|
6,224
|
|
|
(661)
|
|
|
(10.6)
|
%
|
Total Gross Profit
|
$
|
145,995
|
|
|
$
|
121,100
|
|
|
$
|
24,895
|
|
|
20.6
|
%
|
Gross Profit Margin
|
|
|
|
|
|
|
|
Equipment
|
11.8
|
%
|
|
10.4
|
%
|
|
1.4
|
%
|
|
13.5
|
%
|
Parts
|
29.2
|
%
|
|
30.0
|
%
|
|
(0.8)
|
%
|
|
(2.7)
|
%
|
Service
|
66.8
|
%
|
|
66.4
|
%
|
|
0.4
|
%
|
|
0.6
|
%
|
Rental and other
|
34.1
|
%
|
|
29.8
|
%
|
|
4.3
|
%
|
|
14.4
|
%
|
Total Gross Profit Margin
|
19.5
|
%
|
|
19.7
|
%
|
|
(0.2)
|
%
|
|
(1.0)
|
%
|
Gross Profit Mix
|
|
|
|
|
|
|
|
Equipment
|
44.3
|
%
|
|
36.2
|
%
|
|
8.1
|
%
|
|
22.4
|
%
|
Parts
|
25.6
|
%
|
|
29.2
|
%
|
|
(3.6)
|
%
|
|
(12.3)
|
%
|
Service
|
26.2
|
%
|
|
29.4
|
%
|
|
(3.2)
|
%
|
|
(10.9)
|
%
|
Rental and other
|
3.9
|
%
|
|
5.2
|
%
|
|
(1.3)
|
%
|
|
(25.0)
|
%
|
Total Gross Profit Mix
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
Gross profit increased 20.6% or $24.9 million for the first six months of fiscal 2022, as compared to the same period last year. The increase in gross profit was primarily the result of increased equipment sales on stronger equipment margins for the first six months of fiscal 2022, These higher sales and margins are driven by current industry conditions of lower supply and higher demand. The overall gross profit margin decreased from 19.7% to 19.5% was primarily due to a shift in gross profit mix to lower margin equipment sales relative to parts, service, and rental sales.
Our Company-wide absorption rate for the first six months of fiscal 2022 increased to 81.0% as compared to 77.0% during the same period last year as the increase in gross profit from parts and service combined with lower floorplan interest expense more than offset the increase in operating expenses during the six month period compared to that of the prior year six month period.
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2021
|
|
2020
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
Operating Expenses
|
$
|
113,516
|
|
|
$
|
106,137
|
|
|
$
|
7,379
|
|
|
7.0
|
%
|
Operating Expenses as a Percentage of Revenue
|
15.1
|
%
|
|
17.3
|
%
|
|
(2.2)
|
%
|
|
(12.7)
|
%
|
Our operating expenses for the first six months of fiscal 2022 increased $7.4 million as compared to the first six months of fiscal 2021. The increase in operating expenses was primarily due to variable expenses associated with increased sales. Operating expenses as a percentage of revenue decreased to 15.1% in the first six months of fiscal 2022 from 17.3% in the first six months of fiscal 2021. The decrease in operating expenses as a percentage of total revenue was due to the increase in total revenue in the first six months of fiscal 2022, as compared to the first six months of fiscal 2021, which positively affected our ability to leverage our fixed operating costs.
Impairment Charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2021
|
|
2020
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
Impairment of Intangible and Long-Lived Assets
|
1,498
|
|
|
216
|
|
|
1,282
|
|
|
n/m
|
We recognized $1.5 million in impairment charges in our International segment related to certain intangible and long-lived assets and $0.2 million of impairment charges on certain long-lived assets in our Construction segment during the first six months of fiscal 2022 and 2021, respectively.
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2021
|
|
2020
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
Interest and other income
|
$
|
1,320
|
|
|
$
|
692
|
|
|
$
|
628
|
|
|
90.8
|
%
|
Floorplan interest expense
|
(768)
|
|
|
(2,054)
|
|
|
(1,286)
|
|
|
(62.6)
|
%
|
Other interest expense
|
(2,222)
|
|
|
(1,944)
|
|
|
278
|
|
|
14.3
|
%
|
Floorplan interest expense decreased 62.6% for the first six months of fiscal 2022, as compared to the same period last year, primarily due to lower borrowings and a lower interest rate environment. The increase in other interest expense in the first six months of fiscal 2022, as compared to the first six months of fiscal 2021, is the result of increased long term debt on real estate purchased in the past year. The increase in Interest and other income in the first six months of fiscal 2022 as compared to the same period of fiscal 2021 is primarily due to the foreign currency remeasurement losses in Ukraine, resulting from a devaluation of the Ukrainian hryvnia in the first quarter of fiscal 2021.
Provision for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2021
|
|
2020
|
|
Decrease
|
|
Change
|
|
(dollars in thousands)
|
|
|
Provision for Income Taxes
|
$
|
7,515
|
|
|
$
|
2,779
|
|
|
$
|
4,736
|
|
|
n/m
|
Our effective tax rate was 25.6% for the first six months of fiscal 2022 and 24.3% for the same period last year. The effective tax rate for the six months ended July 31, 2021 benefited from vesting of share-based compensation but was offset by the recognition of a valuation allowance on certain of our foreign deferred tax assets including recording a valuation allowance on the remaining deferred tax assets of our Germany entity. For the six months ended July 31, 2020, the effective tax rate benefited from a weakening Ukrainian currency but was offset by increased tax expense on the vesting of share-based compensation.
Segment Results
Certain financial information for our Agriculture, Construction and International business segments is presented below. “Shared Resources” in the table below refers to the various unallocated income/(expense) items that we have retained at the general corporate level. Revenue between segments is immaterial.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
Increase/
|
|
Percent
|
|
2021
|
|
2020
|
|
(Decrease)
|
|
Change
|
|
(dollars in thousands)
|
|
|
Revenue
|
|
|
|
|
|
|
|
Agriculture
|
$
|
448,915
|
|
|
$
|
362,700
|
|
|
$
|
86,215
|
|
|
23.8
|
%
|
Construction
|
149,550
|
|
|
137,833
|
|
|
11,717
|
|
|
8.5
|
%
|
International
|
151,869
|
|
|
113,140
|
|
|
38,729
|
|
|
34.2
|
%
|
Total
|
$
|
750,334
|
|
|
$
|
613,673
|
|
|
$
|
136,661
|
|
|
22.3
|
%
|
|
|
|
|
|
|
|
|
Income (Loss) Before Income Taxes
|
|
|
|
|
|
|
|
Agriculture
|
$
|
23,292
|
|
|
$
|
12,914
|
|
|
$
|
10,378
|
|
|
80.4
|
%
|
Construction
|
2,953
|
|
|
(1,498)
|
|
|
4,451
|
|
|
n/m
|
International
|
3,238
|
|
|
(711)
|
|
|
3,949
|
|
|
n/m
|
Segment income before income taxes
|
29,483
|
|
|
10,705
|
|
|
18,778
|
|
|
n/m
|
Shared Resources
|
(172)
|
|
|
736
|
|
|
(908)
|
|
|
n/m
|
Total
|
$
|
29,311
|
|
|
$
|
11,441
|
|
|
$
|
17,870
|
|
|
n/m
|
Agriculture
Agriculture segment revenue for the first six months of fiscal 2022 increased 23.8% compared to the same period last year. We experienced increases across our equipment, parts and service businesses. Equipment sales were driven by increased equipment demand due to higher commodity prices, higher recent net farm income, as well as current and prior year government support payments. All sources of revenue in this segment benefited from the addition of the three HorizonWest locations (acquired in May 2020) that were not in the full prior year six-month period. Same-store sales increased 21.7% for the first six months of fiscal 2022, as compared to the same period last year.
Agriculture segment income before income taxes was $23.3 million for the first six months of fiscal 2022 compared to $12.9 million over the first six months of fiscal 2021. The improvement in segment results was the result of higher equipment revenue along with higher gross profit margin on equipment driven by an industry environment of high demand and lower supply. Decreased inventory levels resulted in lower floorplan and other interest expense for the six months ended July 31, 2021, which also contributed to the improvement in segment results.
Construction
Construction segment revenue for the first six months of fiscal 2022 increased 8.5% compared to the same period last year, due to a same-store sales increase of 19.3% which more than offset our divestiture of the Phoenix and Tucson, Arizona stores in the fourth quarter of fiscal year 2021. Higher equipment sales were driven by increased construction activity throughout the footprint.
Our Construction segment income before income taxes was $3.0 million for the first six months of fiscal 2022 compared to a loss of $1.5 million for the first six months of fiscal 2021. The increase in segment results was primarily due to increased construction activity as well as operational improvements within the segment. The segment also benefited from decreased inventory levels which resulted in lower floorplan and other interest expense for the six months ended July 31, 2021. The dollar utilization of our rental fleet increased from 20.5% in the first six months of fiscal 2021 to 22.9% in the first six months of fiscal 2022.
International
International segment revenue for the first six months of fiscal 2022 increased 34.2% compared to the same period last year. Higher segment revenue is being driven by many of the same macroeconomic factors as the Agriculture segment as well as favorable growing conditions for much of our farming footprint which has had a positive impact on all sources of sales, but primarily equipment sales.
Our International segment income before income taxes was $3.2 million for the first six months of fiscal 2022 compared to a loss before income taxes of $0.7 million for the same period last year. The higher segment results were the result of increased equipment sales and equipment gross profit margin. Impairment charges of $1.5 million were recognized in the first six months of fiscal 2022, related to the impairment of certain intangible and long-lived assets of our German reporting unit.
Shared Resources/Eliminations
We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments. Since these allocations are set early in the year, and a portion is planned to be unallocated, unallocated balances may occur. Shared Resources loss before income taxes was $0.2 million for the first six months of fiscal 2022 compared to income before income taxes of $0.7 million for the same period last year.
Non-GAAP Financial Measures
To supplement net income and diluted earnings per share ("Diluted EPS"), both GAAP measures, we present adjusted net income and adjusted Diluted EPS, both non-GAAP measures, which include adjustments for items such as valuation allowances for income tax, ERP transition costs for fiscal year 2021, impairment charges and foreign currency remeasurement gains/losses in Ukraine. We believe that the presentation of adjusted net income and adjusted Diluted EPS is relevant and useful to our management and investors because it provides a measurement of earnings on activities that we consider to occur in the ordinary course of our business. Adjusted net income and adjusted Diluted EPS should be evaluated in addition to, and not considered a substitute for, or superior to, the most comparable GAAP measure. In addition, other companies may calculate these non-GAAP measures in a different manner, which may hinder comparability of our adjusted results with those of other companies.
The following tables reconcile (i) net income, a GAAP measure, to adjusted net income and (ii) Diluted EPS, a GAAP measure, to adjusted Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Six Months Ended July 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
(dollars in thousands, except per share data)
|
Adjusted Net Income
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
11,249
|
|
|
$
|
6,400
|
|
|
$
|
21,796
|
|
|
$
|
8,662
|
|
Adjustments
|
|
|
|
|
|
|
|
|
ERP transition costs
|
|
—
|
|
|
763
|
|
|
—
|
|
|
1,484
|
|
|
|
|
|
|
|
|
|
|
Impairment charges
|
|
1,498
|
|
|
—
|
|
|
1,498
|
|
|
216
|
|
Ukraine remeasurement (gain) / loss
|
|
(53)
|
|
|
(130)
|
|
|
(183)
|
|
|
635
|
|
Total Pre-Tax Adjustments
|
|
1,445
|
|
|
633
|
|
|
1,315
|
|
|
2,335
|
|
Less: Tax Effect of Adjustments (1)
|
|
—
|
|
|
466
|
|
|
—
|
|
|
1,047
|
|
Plus: Income Tax Valuation Allowance
|
|
278
|
|
|
—
|
|
|
278
|
|
|
—
|
|
Total Adjustments
|
|
1,723
|
|
|
167
|
|
|
1,593
|
|
|
1,288
|
|
Adjusted Net Income
|
|
$
|
12,972
|
|
|
$
|
6,567
|
|
|
$
|
23,389
|
|
|
$
|
9,950
|
|
|
|
|
|
|
|
|
|
|
Adjusted Diluted EPS
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
$
|
0.50
|
|
|
$
|
0.28
|
|
|
$
|
0.97
|
|
|
$
|
0.39
|
|
Adjustments (2)
|
|
|
|
|
|
|
|
|
ERP transition costs
|
|
—
|
|
|
0.03
|
|
|
—
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
Impairment charges
|
|
0.07
|
|
|
—
|
|
|
0.07
|
|
|
0.01
|
|
Ukraine remeasurement (gain) / loss
|
|
(0.01)
|
|
|
—
|
|
|
(0.01)
|
|
|
0.02
|
|
Total Pre-Tax Adjustments
|
|
0.06
|
|
|
0.03
|
|
|
0.06
|
|
|
0.10
|
|
Less: Tax Effect of Adjustments (1)
|
|
—
|
|
|
0.02
|
|
|
—
|
|
|
0.05
|
|
Plus: Income Tax Valuation Allowance
|
|
0.01
|
|
|
—
|
|
|
0.01
|
|
|
—
|
|
Total Adjustments
|
|
0.07
|
|
|
0.01
|
|
|
0.07
|
|
|
0.05
|
|
Adjusted Diluted EPS
|
|
$
|
0.57
|
|
|
$
|
0.29
|
|
|
$
|
1.04
|
|
|
$
|
0.44
|
|
|
|
|
|
|
|
|
|
|
(1) The tax effect of U.S. related adjustments was calculated using a 26% tax rate, determined based on a 21% federal statutory rate and a 5% blended state income tax rate. Included in the tax effect of the adjustments is the tax impact of foreign currency changes in Ukraine of $0.3 million for the three months ended July 31, 2020 and $0.6 million for the six months ended July 31, 2020.
|
|
|
(2) Adjustments are net of amounts allocated to participating securities where applicable.
|
|
|
|
|
Liquidity and Capital Resources
Sources of Liquidity
Our primary sources of liquidity are cash reserves, cash generated from operations, and borrowings under our floorplan and other credit facilities. We expect these sources of liquidity to be sufficient to fund our working capital requirements, acquisitions, capital expenditures and other investments in our business, service our debt, pay our tax and lease
obligations and other commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future, provided that our borrowing capacity under our credit agreements is dependent on compliance with various covenants as further described in the "Risk Factors" section of our Annual Report on Form 10-K.
Equipment Inventory and Floorplan Payable Credit Facilities
As of July 31, 2021, the Company had floorplan payable lines of credit for equipment purchases totaling $771.0 million, which is primarily comprised of a $450.0 million credit facility with CNH Industrial, a $185.0 million floorplan payable line under the Bank Syndicate Agreement, and a $60.0 million credit facility with DLL Finance.
Our equipment inventory turnover increased from 1.6 times for the rolling 12 month period ended July 31, 2020 to 2.7 times for the rolling 12 month period ended July 31, 2021. The increase in equipment turnover was attributable to an increase in equipment sales and a decrease in average equipment inventory over the rolling 12 month period ended July 31, 2021 as compared to the same period ended July 31, 2020. Our equity in equipment inventory, which reflects the portion of our equipment inventory balance that is not financed by floorplan payables, decreased to 44.7% as of July 31, 2021 from 52.1% as of January 31, 2021. The decrease was due to more inventory being financed with non-interest bearing floorplan lines of credit.
Adequacy of Capital Resources
Our primary uses of cash have been to fund our operating activities, including the purchase of inventories and providing for other working capital needs, meeting our debt service requirements, making payments due under our various leasing arrangements, and funding capital expenditures, including rental fleet assets. Based on our current operational performance, we believe our cash flow from operations, available cash and available borrowing capacity under our existing credit facilities will adequately provide for our liquidity needs for, at a minimum, the next 12 months.
As of July 31, 2021, we were in compliance with the financial covenants under our CNH Industrial and DLL Finance credit agreements and we were not subject to the fixed charge coverage ratio covenant under the Bank Syndicate Agreement as our adjusted excess availability plus eligible cash collateral (as defined therein) was not less than 15% of the lesser of (i) aggregate borrowing base and (ii) maximum credit amount as of July 31, 2021. While not expected to occur, if anticipated operating results were to create the likelihood of a future covenant violation, we would expect to work with our lenders on an appropriate modification or amendment to our financing arrangements.
Cash Flow
Cash Flow Provided by (Used for) Operating Activities
Net cash provided by operating activities was $28.6 million for the first six months of fiscal 2022, compared to net cash provided by operating activities of $13.0 million for the first six months of fiscal 2021. The change in net cash provided by operating activities is primarily the result of an increase in net income and an increase in the amount of inventory financed with non-interest bearing floorplan lines of credit from manufacturers which was partially offset by an increase in receivables and prepaid expenses for the first six months of fiscal 2022.
We evaluate our cash flow from operating activities net of all floorplan activity and maintaining a constant level of equity in our equipment inventory. Taking these adjustments into account, our adjusted cash flow used for operating activities was $19.0 million for the first six months of fiscal 2022 compared to an adjusted cash flow provided by operating activities of $16.1 million for the first six months of fiscal 2021. The change in adjusted cash flow provided by (used for) operating activities is primarily the result of the amount of inventory financed with non-interest bearing floorplan lines of credit from manufacturers and a decrease in non-manufacturing floor plan payables for the first six months of fiscal 2022. See the Adjusted Cash Flow Reconciliation below for a reconciliation of adjusted cash flow provided by (used for) operating activities to the GAAP measure of cash flow provided by (used for) operating activities.
Cash Flow Used for Investing Activities
Net cash used for investing activities was $19.4 million for the first six months of fiscal 2022, compared to $16.8 million for the first six months of fiscal 2021. The increase in cash used for investing activities was primarily the result of an increase in property and equipment purchases as the Company purchased formerly leased buildings and bought out vehicle leases in the first six months of fiscal 2022.
Cash Flow Provided by (Used for) Financing Activities
Net cash used for financing activities was $22.4 million for the first six months of fiscal 2022 compared to cash provided by financing activities of $4.5 million for the first six months of fiscal 2021. The decrease in cash provided by
financing activities was primarily the result of an increase in repayments of non-manufacturer floorplan lines of credit partially offset by proceeds from long term debt borrowings in the first six months of fiscal 2022 compared to the same period last year.
Adjusted Cash Flow Reconciliation
We consider our cash flow from operating activities to include all equipment inventory financing activity regardless of whether we obtain the financing from a manufacturer or other source. GAAP requires the cash flows associated with non-manufacturer floorplan payables to be recognized as financing cash flows in the consolidated statement of cash flows. We consider equipment inventory financing with both manufacturers and other sources to be part of the normal operations of our business. We also evaluate our cash flow from operating activities by assuming a constant level of equity in our equipment inventory. Our equity in our equipment inventory reflects the portion of our equipment inventory balance that is not financed by floorplan payables. Our adjustment to maintain a constant level of equity in our equipment inventory is equal to the difference between our actual level of equity in equipment inventory at each period-end as presented in the consolidated balance sheets compared to the actual level of equity in equipment inventory at the beginning of the fiscal year. We refer to this measure of cash flow as Adjusted Cash Flow.
Our equity in equipment inventory decreased to 44.7% as of July 31, 2021 from 52.1% as of January 31, 2021, and decreased to 27.0% as of July 31, 2020 from 27.9% as of January 31, 2020.
Adjusted Cash Flow is a non-GAAP financial measure. We believe that the presentation of Adjusted Cash Flow is relevant and useful to our investors because it provides information on activities we consider to be the normal operation of our business, regardless of financing source and level of financing for our equipment inventory. The following table reconciles net cash provided by (used for) operating activities, a GAAP measure, to adjusted net cash provided by (used for) operating activities and net cash provided by (used for) financing activities, a GAAP measure, to adjusted net cash provided by (used for) financing activities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used for) Operating Activities
|
|
Net Cash Provided by (Used for) Financing Activities
|
|
Six Months Ended July 31, 2021
|
|
Six Months Ended July 31, 2020
|
|
Six Months Ended July 31, 2021
|
|
Six Months Ended July 31, 2020
|
|
(in thousands)
|
|
(in thousands)
|
Cash Flow, As Reported
|
$
|
28,561
|
|
|
$
|
13,035
|
|
|
$
|
(22,373)
|
|
|
$
|
4,519
|
|
Adjustment for Non-Manufacturer Floorplan
|
(22,731)
|
|
|
7,229
|
|
|
22,731
|
|
|
(7,229)
|
|
Adjustment for Constant Equity in Equipment Inventory
|
(24,842)
|
|
|
(4,191)
|
|
|
—
|
|
|
—
|
|
Adjusted Cash Flow
|
$
|
(19,012)
|
|
|
$
|
16,073
|
|
|
$
|
358
|
|
|
$
|
(2,710)
|
|
Information Concerning Off-Balance Sheet Arrangements
As of July 31, 2021, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Therefore, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Forward-looking statements are contained in this Quarterly Report on Form 10-Q, including in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as in our Annual Report on Form 10-K for the year ended January 31, 2021, and in other materials filed or to be filed by the Company with the Securities and Exchange Commission (and included in oral statements or other written statements made or to be made by the Company).
Forward-looking statements are statements based on future expectations and specifically may include, among other things, statements relating to our expectations regarding exchange rate and interest rate impact on our business, the impact of farm income levels on customer demand for agricultural equipment and services, the impact of the COVID-19 pandemic on our business, the general market conditions of the agricultural and construction industries, equipment inventory levels, discussion of the anticipated implementation date of our new ERP system, and our primary liquidity sources, and the adequacy of our capital resources. Any statements that are not based upon historical facts, including the outcome of events that have not yet occurred and our expectations for future performance, are forward-looking statements. The words “potential,” “believe,” “estimate,” “expect,” “intend,” “may,” “could,” “will,” “plan,” “anticipate,” and similar words and expressions are intended to identify forward-looking statements. These statements are based upon the current beliefs and expectations of our management. These forward-looking statements involve important risks and uncertainties that could significantly affect anticipated results or outcomes in the future and, accordingly, actual results or outcomes may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, the duration, scope and impact of the COVID-19 pandemic on the Company's operations and business, adverse market conditions in the agricultural and construction equipment industries, and those matters identified and discussed under the section titled “Risk Factors” in our Annual Report on Form 10-K. In addition to those matters, there may exist additional risks and uncertainties not currently known to us or that we currently deem to be immaterial that may materially adversely affect our business, financial condition or results of operations.