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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2009

Commission File No. 000-33866

TITAN MACHINERY INC.

(Exact name of registrant as specified in its charter)

4876 Rocking Horse Circle
Fargo, ND 58104-6049

(Address of Principal Executive Offices)

Registrant’s telephone number (701) 356-0130

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES x  NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES o  NO  o

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES o NO x

The number of shares outstanding of the registrant’s common stock as of June 1, 2009 was: Common Stock, $0.00001 par value, 17,729,021 shares.

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TITAN MACHINERY INC.

QUARTERLY REPORT ON FORM 10-Q

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PART I. — FINANCIAL INFORMATION

ITEM 1.          FINANCIAL STATEMENTS

TITAN MACHINERY INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

See Notes to Consolidated Financial Statements

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TITAN MACHINERY INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)

See Notes to Consolidated Financial Statements

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TITAN MACHINERY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

See Notes to Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) – Page 2

(in thousands)

See Notes to Consolidated Financial Statements

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TITAN MACHINERY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 -       BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended April 30, 2009 are not necessarily indicative of the results that may be expected for the year ending January 31, 2010. The information contained in the balance sheet as of January 31, 2009 was derived from the Company’s audited financial statements for the year then ended. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Form 10-K for the fiscal year ended January 31, 2009 as filed with the SEC.

Nature of Business

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

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Transportation Solutions, LLC. All significant accounts, transactions and profits between the consolidated companies have been eliminated in consolidation.

Recently Issued Accounting Pronouncements

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

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

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R provides additional guidance on improving the relevance, representational faithfulness, and comparability of the financial information that a reporting entity provides in its financial reports about a business combination and its effects. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company adopted SFAS 141R effective February 1, 2009. Its adoption did not have a material effect on the Company’s consolidated financial statements.

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

Earnings Per Share

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

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

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NOTE 2 -       INVENTORIES

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

NOTE 3 -       LINES OF CREDIT/FLOORPLAN NOTES PAYABLE

Operating Line of Credit

The Company had no amount outstanding on the line of credit with Bremer Bank National Association (“Bremer Bank”) at April 30, 2009 and January 31, 2009. The agreement provides for available borrowings of $25,000,000 and carries a variable interest rate of prime minus .25%, and has a maturity date of August 1, 2009. The agreement contains certain financial covenants which impose minimum levels of current ratio, debt service coverage, and inventory turnover ratio and a maximum level of debt to tangible net worth ratio. As of April 30, 2009, the Company was in compliance with all of these financial covenants and had $24,750,000 in available borrowings under this line of credit. The line is secured by substantially all assets of the Company.

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

Floorplan Lines of Credit

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

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

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NOTE 4 -       STOCK WARRANTS, STOCK OPTIONS AND RESTRICTED STOCK

Common Stock Warrants

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

(number of warrants and aggregate intrinsic value in thousands)

Stock Options

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

(number of options and aggregate intrinsic value in thousands)

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Restricted Stock

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

(number of restricted shares in thousands)

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

NOTE 5 -      SUBSEQUENT EVENTS

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

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

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

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our interim consolidated financial statements and related notes included in Item 1 of Part 1 of this Quarterly Report, and the audited consolidated financial statements and 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 year ended January 31, 2009.

Critical Accounting Policies

There have been no material changes in our Critical Accounting Policies, as disclosed in our Annual Report on Form 10-K for the year ended January 31, 2009.

Overview

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

Our net income was $1.8 million, or $0.10 per diluted share, in the quarter ended April 30, 2009, compared to $3.4 million, or $0.24 per diluted share, in the quarter ended April 30, 2008. Significant factors impacting the quarter were:

·                  Revenue growth due to acquisitions, offset by declines in same-store sales;

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

·                  Increase in operating expenses primarily due to acquisitions; and

·                  Significantly higher diluted weighted average shares resulting from our follow-on offering in May 2008, which negatively impacts earnings per share comparisons to the prior year.

Results of Operations

Comparative financial data for each of our four sources of revenue are expressed below. The results for these periods include the operating results of the acquisitions made during these periods. The period-to-period comparisons included below are not necessarily indicative of future results:

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The following table sets forth our statements of operations data expressed as a percentage of net revenue for the periods indicated:

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

Revenue

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

Cost of Revenue

The increase in cost of revenue for the three months ended April 30, 2009 was primarily due to increased revenue. Acquisitions contributed $22.5 million in total cost of revenue, while the decline in same-store sales resulted in a decrease in cost of revenue of $12.7 million. As a percentage of revenue, cost of revenue was 82.9%, compared to 83.9% for the first quarter of fiscal 2009.

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Gross Profit

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

Operating Expenses

The $6.5 million increase in operating expenses was primarily due to the additional costs associated with acquisitions such as compensation, rent and depreciation. As a percentage of total revenue, operating expenses increased to 14.8% for the first quarter of fiscal 2010 compared to 11.9% for the first quarter of fiscal 2009. The strong prior year sales resulted in improved fixed operating expense utilization as a percentage of sales in the first quarter of fiscal 2009.

Other Income (Expense)