Titan Machinery Inc.

Previous wording

The following risks should be considered in conjunction with Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, including the risks and uncertainties described under the heading "Information Regarding Forward-Looking Statements", and our financial statements and the related notes appearing under Item 8, Financial Statements and Supplementary Data, of this Form 10-K. The following is a discussion of the material factors that we believe make an investment in our common stock risky. These risks may affect our operating results and, individually or in the aggregate, could cause our actual results to differ materially from past and projected future results. Some of these risks could affect particular revenue sources or segments, while others could affect our full business. Although risks are organized by headings, and each risk is discussed separately, many are interrelated. Furthermore, additional risks not currently known to us or that we currently consider immaterial also may materially adversely affect our business in the future. As a result, the trading price of our common stock could decline, and you could lose all or part of your investment in our common stock

Current wording

The following risks should be considered in conjunction with Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of this Form 10-K, including the risks and uncertainties described under the heading "Information Regarding Forward-Looking Statements", and our financial statements and the related notes appearing under Part II, Item 8, Financial Statements and Supplementary Data, of this Form 10-K. The following is a discussion of the material factors that we believe make an investment in our common stock risky. These risks may affect our operating results and, individually or in the aggregate, could cause our actual results to differ materially from past and projected future results. Some of these risks could affect particular revenue sources or segments, while others could affect our full business. Although risks are organized by headings, and each risk is discussed separately, many are interrelated. Furthermore, additional risks not currently known to us or that we currently consider immaterial also may materially adversely affect our business in the future. As a result, the trading price of our common stock could decline, and you could lose all or part of your investment in our common stock

Previous wording

Risks Related to our Reliance on CNH Industrial

Current wording

Risks Related to our Reliance on CNH

Previous wording

We are dependent upon CNH Industrial to supply competitive products.

Current wording

We are dependent upon CNH to supply competitive products.

Previous wording

The substantial majority of our business involves the sale and distribution of new equipment and aftermarket parts supplied by CNH Industrial and the servicing of equipment manufactured by CNH Industrial. Therefore, our financial performance and future success are highly dependent on the overall reputation, brand and success of CNH Industrial in the agricultural and construction equipment manufacturing industries, including its ability to maintain a competitive position in product innovation, product quality, and product pricing.

Current wording

The substantial majority of our business involves the sale and distribution of new equipment and aftermarket parts supplied by CNH and the servicing of equipment manufactured by CNH. Therefore, our financial performance and future success are highly dependent on the overall reputation, brand and success of CNH in the agricultural and construction equipment manufacturing industries, including its ability to maintain a competitive position in product innovation, product quality, and product pricing.

Previous wording

Our ability to maintain or grow market share is dependent on CNH Industrial’s ability to design, manufacture, allocate and deliver to our stores at the right time high quality and desirable products that compare favorably to those of our principal competitors in terms of price, quality, functionality, features, connected and digital solutions, and autonomy. Supply chain issues, labor disputes such as strikes, and labor shortages have in the past, and could in the future, diminish the manufacturing output of CNH Industrial's plants, resulting in our stores not receiving inventories in the expected or required quantities and timelines necessary to satisfy customer demand. Any failure of CNH Industrial to offer competitive products, or delays in bringing strategic new products to market or delivery of ordered products to our stores could have a material adverse effect on our business, results of operations and financial condition.

Current wording

Our ability to maintain or grow market share is dependent on CNH's ability to design, manufacture, allocate and deliver to our stores at the right time high quality and desirable products that compare favorably to those of our principal competitors in terms of price, quality, functionality, features, connected and digital solutions, and autonomy. Supply chain issues, labor disputes such as strikes, and labor shortages have in the past, and could in the future, diminish the manufacturing output of CNH's plants, resulting in our stores not receiving inventories in the expected or required quantities and timelines necessary to satisfy customer demand. Any failure of CNH to offer competitive products, or delays in bringing strategic new products to market or delivery of ordered products to our stores could have a material adverse effect on our business, results of operations and financial condition.

Previous wording

We are dependent upon CNH Industrial’s financial and marketing support.

Current wording

We are dependent upon CNH's financial and marketing support.

Previous wording

CNH Industrial, directly or through its financing affiliate, supports our business by providing financial assistance and marketing support including the following:

Current wording

CNH, directly or through its financing affiliate, supports our business by providing financial assistance and marketing support including the following:

Previous wording

•Retail financing used by many of our customers to purchase CNH Industrial equipment from us;

Current wording

•Retail financing used by many of our customers to purchase CNH equipment from us;

Previous wording

Our financial performance is dependent on CNH Industrial's continued commitment to these offerings, at a level that allows us to be competitive in our markets.

Current wording

Our financial performance is dependent on CNH's continued commitment to these offerings, at a level that allows us to be competitive in our markets.

Previous wording

We are dependent on CNH Industrial’s ongoing commitment to its product warranties and reimbursement of dealers for warranty repairs.

Current wording

We are dependent on CNH's ongoing commitment to its product warranties and reimbursement of dealers for warranty repairs.

Previous wording

CNH Industrial provides product warranties and, in some cases, extended warranties to our customers. Our stores perform warranty work for equipment under these product warranties, and we direct bill CNH Industrial as opposed to invoicing the customer. At any particular time, we have significant receivables from CNH Industrial for warranty work performed. CNH Industrial’s ongoing commitment to its product warranties and timely payment for warranty work is important to both our market share success and our warranty related parts and service revenue.

Current wording

CNH provides product warranties and, in some cases, extended warranties to our customers. Our stores perform warranty work for equipment under these product warranties, and we direct bill CNH as opposed to invoicing the customer. At any particular time, we have significant receivables from CNH for warranty work performed. CNH's ongoing commitment to its product warranties and timely payment for warranty work is important to both our market share success and our warranty related parts and service revenue.

Previous wording

Our CNH Industrial Dealer Agreements may be terminated by CNH Industrial and subject us to restrictions that may adversely impact our business.

Current wording

Our CNH Dealer Agreements may be terminated by CNH and subject us to restrictions that may adversely impact our business.

Previous wording

We have entered into CNH Industrial Dealer Agreements under which we sell CNH Industrial’s branded agricultural and construction equipment, along with aftermarket parts and repair services. Subject to applicable state statutes that may govern the dealer-manufacturer legal relationship, CNH Industrial may terminate our CNH Industrial Dealer Agreements immediately in certain circumstances, following written notice and cure periods for certain breaches of the agreement, and for any reason under our Case Construction agreement following 120 days' prior written notice. If CNH Industrial were to terminate, including non-renewal, all or any of its CNH Industrial Dealer Agreements with us, our business would be severely harmed.

Current wording

We have entered into CNH Dealer Agreements under which we sell CNH's branded agricultural and construction equipment, along with aftermarket parts and repair services. Subject to applicable state statutes that may govern the dealer- manufacturer legal relationship, CNH may terminate our CNH Dealer Agreements immediately in certain circumstances, following written notice and cure periods for certain breaches of the agreement, and for any reason under our Case Construction agreement following 120 days' prior written notice. If CNH were to terminate, including by non-renewal, all or any of its CNH Dealer Agreements with us, our business would be severely harmed.

Previous wording

Furthermore, CNH Industrial may unilaterally change its operating practices under the terms of the CNH Industrial Dealer Agreements to, among other things, change or authorize additional dealers in our sales and service areas, change its distribution system to the detriment of its dealers like us, limit our product offerings, and change pricing or delivery terms. If CNH Industrial were to change the terms of our CNH Industrial Dealer Agreements or its operating practices in a manner that adversely affects us, our business and results of operations would be harmed.

Current wording

Furthermore, CNH may unilaterally change its operating practices under the terms of the CNH Dealer Agreements to, among other things, change or authorize additional dealers in our sales and service areas, change its distribution system to the detriment of its dealers like us, limit our product offerings, and change pricing or delivery terms. If CNH were to change the terms of our CNH Dealer Agreements or its operating practices in a manner that adversely affects us, our business and results of operations would be harmed.

Previous wording

Our CNH Industrial Dealer Agreements impose significant obligations and restrictions on us.

Current wording

Our CNH Dealer Agreements impose significant obligations and restrictions on us.

Previous wording

Under our CNH Industrial Dealer Agreements, we are obligated to actively promote the sale of CNH Industrial equipment within our designated geographic areas of responsibility, fulfill the product warranty obligations of CNH Industrial (subject to CNH Industrial’s payment to us of the agreed upon reimbursement), maintain adequate facilities and workforce to service the needs of our customers, stock equipment and parts inventories at the level deemed necessary by CNH Industrial to meet sales goals as stated in the annual business plan mutually agreed upon by us and CNH Industrial, maintain adequate working capital, and maintain stores only in authorized locations.

Current wording

Under our CNH Dealer Agreements, we are obligated to actively promote the sale of CNH equipment within our designated geographic areas of responsibility, fulfill the product warranty obligations of CNH (subject to CNH's payment to us of the agreed upon reimbursement), maintain adequate facilities and workforce to service the needs of our customers, stock equipment and parts inventories at the level deemed necessary by CNH to meet sales goals as stated in the annual business plan mutually agreed upon by us and CNH, maintain adequate working capital, and maintain stores only in authorized locations.

Previous wording

Consent of CNH Industrial is required for certain material changes in our ownership, governance or business structure, including the acquisition by any person or group of persons of 30% or more of our outstanding stock or 20% or more of our outstanding stock if the acquiring person or group is a competitor of CNH Industrial. This requirement may have the effect of discouraging a sale or other change in control of the Company, including transactions that may be in the best interests of our stockholders.

Current wording

Consent of CNH is required for certain material changes in our ownership, governance or business structure, including the acquisition by any person or group of persons of 30% or more of our outstanding stock or 20% or more of our outstanding stock if the acquiring person or group is a competitor of CNH. This requirement may have the effect of discouraging a sale or other change in control of the Company, including transactions that may be in the best interests of our stockholders.

Previous wording

The acquisition of additional CNH Industrial geographic areas of responsibility and store locations in our Agriculture, Construction, Europe and Australia segments requires the consent of CNH Industrial under our CNH Industrial Dealer Agreements. CNH Industrial may decline, in its sole discretion, to consent to any acquisition of an additional CNH Industrial store location we may pursue. If CNH Industrial is unwilling to consent to any future proposed acquisition of additional dealerships, our ability to execute our acquisition strategy and grow our business may be impaired.

Current wording

The acquisition of additional CNH geographic areas of responsibility and store locations in our Agriculture, Construction, Europe and Australia segments requires the consent of CNH under our CNH Dealer Agreements. CNH may decline, in its sole discretion, to consent to any acquisition of an additional CNH store location we may pursue. If CNH is unwilling to consent to any future proposed acquisition of additional dealerships, our ability to execute our acquisition strategy and grow our business may be impaired. In the event of a proposed divestiture of a store location, CNH has significant influence on the purchaser given that it retains discretion whether or not to grant a dealer agreement to the new owner.

Previous wording

Our CNH Industrial Dealer Agreements require us to operate any material business activities not related to sales of CNH Industrial products or services to customers in agricultural, construction, industrial or similar markets separately from our CNH Industrial dealership business. In addition, our CNH Industrial Dealer Agreements for domestic and international Case Construction equipment prohibit us from carrying other suppliers' products (new equipment and parts) at our domestic and international Case Construction stores that are competitive with CNH Industrial's products, unless consented to by CNH Industrial. These restrictions may discourage or prevent us from pursuing activities that we believe will grow our business.

Current wording

Our CNH Dealer Agreements require us to operate any material business activities not related to sales of CNH products or services to customers in agricultural, construction, industrial or similar markets separately from our CNH dealership business. In addition, our CNH Dealer Agreements for domestic and international Case Construction equipment prohibit us from carrying other suppliers' products (new equipment and parts) at our domestic and international Case Construction stores that are competitive with CNH's products, unless consented to by CNH. These restrictions may discourage or prevent us from pursuing activities that we believe will grow our business.

Previous wording

•agricultural policies, including aid and subsidies to agricultural enterprises provided by governments, policies impacting commodity prices or limiting the export or import of commodities, and alternative fuel mandates; and

Current wording

•government policies, including aid and subsidies to agricultural enterprises provided by governments, policies impacting commodity prices or limiting the export or import of commodities, and alternative fuel mandates; and

Previous wording

•foreign government tariffs that affect export markets for U.S. farm products

Current wording

•foreign government tariffs that affect export markets for U.S. farm products, which is a factor that has been, and may continue to be in the future, more significant due to the tariff policies of the current presidential administration.

Previous wording

In addition to macroeconomic drivers of net farm income, local growing conditions also influence farmers’ buying sentiment. Therefore, droughts, excess rain, hail, and other unfavorable weather conditions affecting certain geographic regions will adversely impact the local farmers’ buying sentiment.

Current wording

In addition to macroeconomic drivers of net farm income, local growing conditions also influence farmers’ buying sentiment. Therefore, droughts, excess rain, hail, and other unfavorable weather conditions affecting certain geographic regions will adversely impact the affected farmers’ buying sentiment.

Previous wording

Our construction equipment customers primarily operate in the natural resource, construction, transportation, agriculture, manufacturing, industrial processing and utilities industries. The construction equipment market is influenced by factors such as:

Current wording

Our construction equipment customers primarily operate in the mining, energy production, residential and commercial construction, public infrastructure projects, agriculture, and forestry industries. The construction equipment market is influenced by factors such as:

Previous wording

The construction industry in many of our geographical areas has experienced periodic, and sometimes prolonged, economic down cycles. During these downturns, our revenues and profitability could be adversely impacted.

Current wording

The construction industry in many of our geographical areas has experienced periodic, and sometimes prolonged, economic down cycles. During these downturns, our revenues and profitability could be materially adversely impacted.

Previous wording

Inflationary increases in the cost of equipment combined with a depressed used equipment market (resulting in lower trade values of used equipment) and higher interest rates have negatively impacted our customers' equipment purchasing decisions.

Current wording

Inflationary increases in the cost of equipment combined with a depressed used equipment market (resulting in lower trade values of customers' used equipment) and higher interest rates have negatively impacted our customers' equipment purchasing decisions.

Previous wording

Many of our customers finance their equipment purchases. The ability to obtain affordable financing is an important part of a customer's decision to purchase agricultural or construction equipment. The affordability of new equipment is influenced by three factors: (i) the cost of the new equipment, which has increased significantly due to inflation and other factors over the past few years, and may experience additional increases due to tariffs on imported materials, parts and components that are required to manufacture the equipment; (ii) the trade value granted to the customer by the dealer for the used equipment being traded (and in the current down cycle, the value of used equipment has fallen significantly, resulting in less trade value and requiring a greater cash contribution in the transaction); and (iii) the interest rate applied to the amount financed in the transaction. Interest rates have risen significantly over the past four years and remain elevated. All of these factors, along with significantly lower net farm income, have contributed to make equipment purchases less affordable, resulting in a depressed agriculture equipment market. As a result, our revenue and profitability decreased significantly in fiscal 2025. The results of the past fiscal year evidence our susceptibility to these non-controllable market factors that adversely affected our financial performance.

Current wording

Many of our customers finance their equipment purchases. The ability to obtain affordable financing is an important part of a customer's decision to purchase agricultural or construction equipment. The affordability of new equipment is influenced by three factors: (i) the cost of the new equipment, which has increased significantly due to inflation and other factors over the past few years, and may experience additional increases due to tariffs on imported materials, parts and components that are required to manufacture the equipment; (ii) the trade value granted to the customer by the dealer for the used equipment being traded (in the current down cycle, the value of used equipment has fallen significantly, resulting in less trade value and requiring a greater cash contribution in the transaction); and (iii) the interest rate applied to the amount financed in the transaction. Interest rates have risen significantly over the past four years and remain elevated. All these factors, along with lower net farm income, have reduced affordability in a depressed equipment market. As a result, our revenue and profitability decreased significantly in fiscal 2025 and has not recovered in fiscal 2026. The results of the past two fiscal years evidence our susceptibility to these non-controllable market factors that adversely affected our financial performance.

Previous wording

The agricultural and construction equipment distribution (including parts and service) and rental industries are highly competitive and fragmented, with large numbers of companies operating on a regional or local basis. Historically, our competitors have competed aggressively on the basis of pricing or inventory availability, resulting in decreased margins on our sales to the extent we choose to match our competitors' pricing. To the extent we choose not to match or remain within a reasonable range of our competitors' pricing, we may lose sales and market share. In addition, to the extent CNH Industrial's equipment manufacturer competitors (such as Deere, Caterpillar, Komatsu, Volvo Group, and AGCO) provide their dealers with more innovative or higher quality products, lower cost products, better customer financing, or have more effective marketing programs, or the CNH Industrial reputation is tarnished in the marketplace or with our customers, our ability to compete and our results of operations could be adversely affected. In addition, e-commerce companies selling parts have negatively impacted dealers' parts sales and margins, and we expect that this competitive pressure will continue to increase in the future.

Current wording

The agricultural and construction equipment distribution (including parts and service) and rental industries are highly competitive and fragmented, with large numbers of companies operating on a regional or local basis. Historically, our competitors have competed aggressively on the basis of pricing or inventory availability, resulting in decreased margins on our sales to the extent we choose to match our competitors' pricing. To the extent we choose not to match or remain within a reasonable range of our competitors' pricing, we may lose sales and market share. In addition, to the extent CNH's equipment manufacturer competitors (such as Deere, Caterpillar, Komatsu, Volvo Group, and AGCO) provide their dealers with more innovative or higher quality products, lower cost products, better customer financing, better warranty programs, or have more effective marketing programs, or the CNH reputation is tarnished in the marketplace or with our customers, our ability to compete and our results of operations could be materially adversely affected. In addition, e-commerce companies selling parts have negatively impacted dealers' parts sales and margins, and we expect that this competitive pressure will continue to increase in the future.

Previous wording

The recent agreements of equipment manufacturers, including CNH Industrial, to provide farmers and independent repair shops access to diagnostic tools could negatively impact our repair services business.

Current wording

The recent agreements of equipment manufacturers, including CNH, to provide farmers and independent repair shops access to diagnostic tools could negatively impact our repair services business.

Previous wording

In the past, state and federal legislation has been introduced, including in states in our footprint, that generally would require the manufacturers of products to provide the purchaser or independent repair technicians with documents, diagnostic software, and other information that would allow the equipment to be repaired without having it returned to the dealer for repair. Separately, the American Farm Bureau Federation and CNH Industrial brands, Case IH and New Holland, signed a memorandum of understanding in March 2023 (the “Memorandum of Understanding”) that allows farmers and independent repair shops to access CNH Industrial's brand manuals, tools, product guides and information to self-diagnose and self-repair machines, and enables farmers and independent repair shops to directly purchase diagnostic tools. The Memorandum of Understanding follows a similar format as agreed to by Deere in January 2023 which, in turn, follows the auto industry format. It is difficult to predict the long-term impact of the Memorandum of Understanding, or right to repair legislation if enacted in any area of our footprint, on our repair services business.

Current wording

In the past, state and federal legislation has been introduced, including in states in our footprint, that generally would require the manufacturers of products to provide the purchaser or independent repair technicians with documents, diagnostic software, and other information that would allow the equipment to be repaired without having it returned to the dealer for repair. Separately, the American Farm Bureau Federation and CNH brands, Case IH and New Holland, signed a memorandum of understanding in March 2023 (the “Memorandum of Understanding”) that allows farmers and independent repair shops to access CNH's brand manuals, tools, product guides and information to self-diagnose and self-repair machines, and enables farmers and independent repair shops to directly purchase diagnostic tools. The Memorandum of Understanding follows a similar format as agreed to by Deere in January 2023 which, in turn, follows the auto industry format. It is difficult to predict the long-term impact of the Memorandum of Understanding, or right to repair legislation if enacted in any area of our footprint, on our repair services business.

Previous wording

We currently operate dealership locations in Bulgaria, Germany, Romania, Ukraine and Australia. In fiscal 2025, total Europe and Australia segment revenues were 17.8% of our consolidated total revenue. As of January 31, 2025, total Europe and Australia segment assets were 24.3% of our consolidated total assets.

Current wording

We currently operate dealership locations in Bulgaria, Germany, Romania, Ukraine and Australia. In fiscal 2026, total Europe and Australia segment revenues were 23.0% of our consolidated total revenue. As of January 31, 2026, total Europe and Australia segment assets were 27.4% of our consolidated total assets.

Previous wording

The Russian military occupation of Ukraine has significantly disrupted our Ukrainian operations. While all of our Ukrainian stores are open, the outcome of the Russian military operation remains unclear, and we cannot predict the impact this conflict will have on our Ukrainian operations. The military conflict and related political instability, if it intensifies, may make it impossible for us to effectively operate our Ukraine dealerships, which may result in our decision to cease operations or dispose of our assets in Ukraine. This would result in asset write-offs and a loss in revenues and profits. See additional information in Note 1, Business Activity and Significant Accounting Policies, to the Consolidated Financial Statements at Item 8, Financial Statements and Supplementary Data, of this Form 10-K. Moreover, upon any sale of our assets in Ukraine the existing currency restrictions may limit our ability to repatriate those funds to the United States or Europe. Even if we continue operations, the military conflict has significantly impacted, and we expect that it will continue to impact, our customers' liquidity and purchasing decisions for our products and services. If no crops are planted or a growing season is negatively impacted, this occurrence will limit our Ukrainian subsidiary's ability to generate cash and repay outstanding debt, and as a result of imposed currency exchange controls and other restrictions, restrict our ability to manage our cash held in Ukraine and our investment in our Ukrainian business. The military intervention has disrupted our Ukrainian work force, with certain employees being called to active military duty and other employees leaving the country and working remotely. Additional risks related to our operations in Ukraine, likely made more acute by the impact of the military conflict, include further devaluation of the local currency, increased interest rates and increased inflation.

Current wording

The Russian military occupation of Ukraine has significantly disrupted our Ukrainian operations. While all of our Ukrainian stores are open, the outcome of the Russian military operation remains unclear, and we cannot predict the impact this conflict will have on our Ukrainian operations. The military conflict and related political instability, if it intensifies, may make it impossible for us to effectively operate our Ukraine dealerships, which may result in our decision to cease operations or dispose of our assets in Ukraine. This would result in asset write-offs and a loss in revenues and profits. See additional information in Note 1, Business Activity and Significant Accounting Policies, to the Consolidated Financial Statements in Part II, Item 8, Financial Statements and Supplementary Data, of this Form 10-K. Moreover, upon any sale of our assets in Ukraine the existing currency restrictions may limit our ability to repatriate those funds to the United States or Europe. Even if we continue operations, the military conflict has significantly impacted, and we expect that it will continue to impact, our customers' liquidity and purchasing decisions for our products and services. If no crops are planted or a growing season is negatively impacted, this occurrence will limit our Ukrainian subsidiary's ability to generate cash and repay outstanding debt, and as a result of imposed currency exchange controls and other restrictions, restrict our ability to manage our cash held in Ukraine and our investment in our Ukrainian business. The military intervention has disrupted our Ukrainian work force, with certain employees being called to active military duty and other employees leaving the country and working remotely. Additional risks related to our operations in Ukraine, likely made more acute by the impact of the military conflict, include further devaluation of the local currency, increased interest rates and increased inflation.

Previous wording

Our orders for the purchase of new equipment and parts are based primarily on pre-sold equipment and projected demand. Our equipment orders from CNH Industrial typically must be slotted months in advance of actual delivery. If actual sales are materially less than our forecasts, for example because of a significant drop in net farm income, weather disruptions in our agricultural growing regions, or a construction industry recession, we would experience an over-supply of new equipment and parts inventory. This over-supply situation occurred in fiscal year 2025, which has generally caused downward pressure on our product sale prices and margins, decreased our inventory turns, and increased our floorplan financing expenses. Given the variability of the macroeconomic factors affecting demand for equipment, our business will be subject to the risks arising from “over supply”, both in the current downcycle and beyond.

Current wording

Our orders for the purchase of new equipment and parts are based primarily on pre-sold equipment and projected demand. Our equipment orders from CNH typically must be slotted months in advance of actual delivery. If actual sales are materially less than our forecasts, for example because of a significant drop in net farm income, weather disruptions in our agricultural growing regions, or a construction industry recession, we would experience an over-supply of new equipment and parts inventory. This oversupply situation occurred in fiscal 2025 and continued through fiscal 2026, which has generally caused downward pressure on our product sale prices and margins, decreased our inventory turns, and increased our floorplan financing expenses. Given the variability of the macroeconomic factors affecting demand for equipment, our business will be subject to the risks arising from an oversupply situation, both in the current economic downcycle and beyond.

Previous wording

Our used equipment is generally acquired as trade-ins from customers in connection with equipment sales. In accordance with generally accepted accounting principles, each item of our used equipment inventory is valued at the lower of cost or net realizable value. In the current down market, the agreed upon trade values on new equipment deals (frequently agreed to months in advance of the closing of the transaction) and our used equipment in stock have not retained the value that we attributed to it at the time of the trade or receipt, and accordingly ongoing downward adjustments to those values have occurred over the past several months in accordance with the lower of cost or market accounting principles. The amount of these write-downs of inventory are included in our cost of goods sold, and reduce our operating income.

Current wording

Our used equipment is generally acquired as trade-ins from customers in connection with equipment sales. In accordance with generally accepted accounting principles, each item of our used equipment inventory is valued at the lower of cost or net realizable value. In the current downturn, the agreed upon trade-in values on new equipment deals (frequently agreed to months in advance of the transaction closing) have not retained the values that we previously agreed to with the customer. Accordingly, ongoing downward adjustments to those trade-in values have occurred throughout fiscal 2025 and fiscal 2026 in accordance with the lower of cost or market accounting principles. The amounts of these write-downs of inventory are included in our cost of goods sold, and reduce our operating income.

Previous wording

Due to the length and severity of the current downturn, or in any future downturn, it is possible that we may need to change from our normal retail marketing channel to more aggressive marketing channels (such as auctions) for specific pieces or categories of equipment inventory, particularly as equipment inventory ages. If we determine that such measures are appropriate responses in the current or any future downturn, these aggressive measures will generally result in lower profit margins than those we would obtain through our normal marketing channel.

Current wording

Due to the length and severity of the current economic downcycle, or in any future downcycle, it is possible that we may need to change from our normal retail marketing channel to more aggressive marketing channels (such as auctions) for specific pieces or categories of equipment inventory, particularly as equipment inventory ages. If we determine that such measures are appropriate responses in the current or any future economic downcycle, these aggressive measures will generally result in lower profit margins than those we would obtain through our normal marketing channel.

Previous wording

Our credit facilities with CNH Industrial Capital, DLL Finance, and certain of our real estate lenders require us to satisfy a net leverage ratio and fixed charge coverage ratio on an ongoing basis, measured at the end of each fiscal quarter. Under the Bank Syndicate Agreement, if our excess availability (i.e., borrowing base capacity less outstanding loan balance and certain reserves) falls below a certain threshold, we become subject to a minimum fixed charge coverage ratio. Our ability to borrow under these credit agreements depends upon compliance with these financial covenants.

Current wording

Our credit facilities with CNH Capital, DLL Finance, and certain of our real estate lenders require us to satisfy an adjusted debt to tangible net worth ratio and fixed charge coverage ratio on an ongoing basis, measured at the end of each fiscal quarter. Under the Bank Syndicate Agreement, if our excess availability (i.e., borrowing base capacity less outstanding loan balance and certain reserves) falls below a certain threshold, we become subject to a minimum fixed charge coverage ratio. Our ability to borrow under these credit agreements depends upon compliance with these financial covenants.

Previous wording

Our failure to satisfy any covenant, absent a waiver or amendment, would cause us to be in default under our credit facilities and would enable our lenders to accelerate payment of the outstanding indebtedness. Each of our credit agreements include cross-default provisions which provide that certain types of defaults under any other indebtedness will also constitute a default under that credit agreement. If a default occurred, and the lender demanded accelerated payment, we may not be able to satisfy a pay-off request, whether through internal funds or new financing.

Current wording

Our failure to satisfy any covenant, absent a waiver or amendment, would cause us to be in default under our credit facilities and would enable our lenders to accelerate payment of the outstanding indebtedness. Each of our credit agreements includes cross-default provisions so that certain types of defaults under any other credit agreement will also constitute a default under that credit agreement. If a default occurred, and the lender demanded accelerated payment, we may not be able to satisfy a pay-off request, whether through internal funds or new financing.

Previous wording

A substantial portion of our floorplan and working capital borrowings, including the credit facilities with CNH Industrial Capital, the Bank Syndicate, DLL Finance, and our international floorplan facilities are at variable interest rates and expose us to interest rate risk. There are many factors outside our control that have in the past and may, in the future, impact interest rates including publicly announced indices that underlie the interest obligations related to a certain portion of our debt. Factors that impact interest rates include governmental monetary policies, inflation, recession, changes in unemployment, the money supply, and international instability impacting domestic and foreign financial markets. Any increases in interest rates could have an adverse effect on our results of operations. The adverse impact of higher rates on our financial performance is magnified during industry downcycles, such as we are experiencing now, when we have an oversupply of inventory.

Current wording

A substantial portion of our floorplan and working capital borrowings, including the credit facilities with CNH Capital, the Bank Syndicate, DLL Finance, and our international floorplan facilities are at variable interest rates and expose us to interest rate risk. There are many factors outside our control that have in the past and may, in the future, impact interest rates including publicly announced indices that underlie the interest obligations related to a certain portion of our debt. Factors that impact interest rates include governmental monetary policies, inflation, recession, changes in unemployment, the money supply, and international instability impacting domestic and foreign financial markets. Any increases in interest rates could have an adverse effect on our results of operations. The adverse impact of higher rates on our financial performance is magnified during industry economic downcycles, such as we are experiencing now, when we are more likely to have an oversupply of inventory.

Previous wording

The agricultural and construction equipment businesses are highly seasonal, which causes our quarterly results and cash flows to fluctuate during the year. Farmers generally purchase agricultural equipment and service work in preparation for, or in conjunction with, the planting and harvesting seasons. Construction equipment customers’ purchases of equipment and service work, as well as rental of equipment, are also seasonal in our stores located in colder climates where construction work slows significantly in the winter months. In addition, the fourth quarter typically is a significant period for equipment sales in the U.S. because of our customers’ year-end tax considerations, the timing of dealer incentives and the increase in availability of farmers’ funds from completed harvests and construction customers' funds from completed projects. Also, numerous external factors such as credit markets, commodity prices, weather conditions, and other circumstances may disrupt normal purchasing practices and customers’ sentiment, further contributing to the seasonal fluctuations.

Current wording

The agricultural and construction equipment businesses are highly seasonal, which causes our quarterly results and cash flows to fluctuate during the year. Farmers generally purchase agricultural equipment and service work in preparation for, or in conjunction with, the planting and harvesting seasons. Construction customers purchases of equipment and service work, as well as rental of construction equipment, are also seasonal in our stores located in colder climates where construction work slows significantly in the winter months. In addition, the fourth quarter typically is a significant period for equipment sales in the U.S. because of our customers’ year-end tax considerations, the timing of dealer incentives and the increase in availability of farmers’ funds from completed harvests and construction customers' funds from completed projects. Also, numerous external factors such as credit markets, commodity prices, weather conditions, and other circumstances may disrupt normal purchasing practices and customers’ sentiment, further contributing to the seasonal fluctuations.

Previous wording

Weather conditions, particularly severe floods and droughts, can have a significant adverse effect on growing conditions and on regional agricultural and construction markets. Adverse weather conditions may result in fewer acres being planted or harvested by farmers, reduced crop yields on those acres that are planted, and delays or cancellations of construction projects. This in turn could result in lower demand for our agricultural and construction equipment and services and adversely affect our results of operation. Many scientific reports predict that severe weather events can be expected to become more frequent as a result of global climate change. Furthermore, the long-term impacts of climate change, whether involving physical risks (such as the extreme weather conditions discussed above) or transition risks (such as regulatory changes discussed below) are expected to be widespread and unpredictable. As severe weather events become increasingly common, our or our customers’ operations may be disrupted, which could result in increased operational costs or reduced demand for our products and services and extended periods of disruptions could have an adverse effect on our results of operations. In addition, climate change may also reduce the availability or increase the cost of insurance for weather-related events as well as impact the global economy, including potential disruptions to supply chains. We anticipate that climate change-related risks will increase over time.

Current wording

Weather conditions, particularly severe floods and droughts, can have a significant adverse effect on growing conditions and on regional agricultural and construction markets. Adverse weather conditions may result in fewer acres being planted or harvested by farmers, reduced crop yields on those acres that are planted, and delays or cancellations of construction projects. This in turn could result in lower demand for our agricultural and construction equipment and services and adversely affect our results of operations. Many scientific reports predict that severe weather events can be expected to become more frequent as a result of global climate change. Furthermore, the long-term impacts of climate change, whether involving physical risks (such as the extreme weather conditions discussed above) or transition risks (such as regulatory changes discussed below) are expected to be widespread and unpredictable. As severe weather events become increasingly common, our or our customers’ operations may be disrupted, which could result in increased operational costs or reduced demand for our products and services and extended periods of disruptions could have an adverse effect on our results of operations. In addition, climate change may also reduce the availability or increase the cost of insurance for weather-related events as well as impact the global economy, including potential disruptions to supply chains. We anticipate that climate change-related risks will increase over time.

Previous wording

There is global scientific consensus that emissions of greenhouse gases ("GHG") continue to alter the composition of Earth’s atmosphere in ways that are affecting and are expected to continue to affect the global climate. These considerations have led to certain regulatory responses, including but not limited to the EU Corporate Sustainability Reporting Directive and the SEC’s finalized rules (March 6, 2024) requiring public companies to make disclosures regarding climate risks and related matters (such rules are currently stayed pending the outcome of litigation). We expect our European subsidiaries to be subject to the CSRD disclosure rules beginning in 2028. The associated compliance costs are currently uncertain, but we expect that they will be substantial. Various stakeholders, including legislators and regulators, shareholders and non-governmental organizations, as well as companies in many business sectors are continuing to look for ways to reduce GHG emissions.

Current wording

There is global scientific consensus that emissions of greenhouse gases ("GHG") continue to alter the composition of Earth’s atmosphere in ways that are affecting and are expected to continue to affect the global climate. These developments have prompted various regulatory responses, though the scope and ultimate impact of these emerging requirements remain subject to uncertainty. Any associated future compliance costs are similarly uncertain. Various stakeholders, including legislators and regulators, shareholders and non-governmental organizations, as well as companies in many business sectors are continuing to look for ways to reduce GHG emissions.