Market Overview

Titan Machinery Inc. Announces Results for Fiscal Second Quarter Ended July 31, 2018

Share:

- Revenue for Second Quarter of Fiscal 2019 Increased 11.5% to $300 million -

- EPS for the Second Quarter of Fiscal 2019 was $0.23, or Adjusted EPS of $0.28,
Compared to a Loss per Share of $0.24, or Adjusted Loss per Share of $0.04, in the Prior Year Period -

- Company Updates Fiscal 2019 Modeling Assumptions, including an Increase in EPS Range -

WEST FARGO, N.D., Aug. 30, 2018 (GLOBE NEWSWIRE) -- Titan Machinery Inc. (NASDAQ:TITN), a leading network of full-service agricultural and construction equipment stores, today reported financial results for the fiscal second quarter ended July 31, 2018.

David Meyer, Titan Machinery's Chairman and Chief Executive Officer, stated, "Our second quarter results reflect the financial benefits of our fiscal 2018 restructuring efforts and our consistent focus on improving the quality and level of our equipment inventory, which have driven lower operating expenses and improved equipment gross profit margins. In the quarter, we also saw our lower expense base provide strong operating leverage as we experienced higher sales volumes. Along with increased equipment revenues, we also saw increased revenues from our parts and service businesses in the second quarter of fiscal 2019, which benefited from the late start to the spring planting season in many of our domestic and European markets. The strength in our parts and services businesses combined with lower operating expenses led to a significant increase in our second quarter absorption rate, from 80.1% in the second quarter last year to 88.6% in the second quarter this year."

Fiscal 2019 Second Quarter Results

Consolidated Results
For the second quarter of fiscal 2019, revenue was $299.9 million, compared to $268.9 million in the second quarter last year. Equipment sales were $192.7 million for the second quarter of fiscal 2019, compared to $167.9 million in the second quarter last year. Parts sales were $60.0 million for the second quarter of fiscal 2019, compared to $55.6 million in the second quarter last year. Revenue generated from service was $31.3 million for the second quarter of fiscal 2019, compared to $30.5 million in the second quarter last year. Revenue from rental and other was $15.9 million for the second quarter of fiscal 2019, compared to $14.9 million in the second quarter last year.

Gross profit for the second quarter of fiscal 2019 was $58.9 million, compared to $52.8 million in the second quarter last year. Gross profit margins remained flat at 19.6% with the comparable period last year. The increase in gross profit was driven by higher revenue. The impact of higher equipment gross profit margins was offset by a higher mix of equipment revenue in the quarter resulting in the overall flat gross profit margin of 19.6%.

Operating expenses decreased by $2.9 million to $47.6 million, or 15.9% of revenue, for the second quarter of fiscal 2019, compared to $50.5 million, or 18.8% of revenue, for the second quarter of last year.  These decreases are the result of cost savings arising from the Company's fiscal 2018 restructuring efforts that were completed early in the third quarter of fiscal 2018 and greater operating expense leverage on higher sales volumes.

Floorplan interest expense was $1.7 million for the second quarter of fiscal 2019, compared to $2.2 million in the second quarter of last year. The decrease in floorplan interest expense is primarily due to a decrease in the level of interest-bearing inventory in the second quarter of fiscal 2019.

In the second quarter of fiscal 2019, net income was $5.2 million, or earnings per diluted share of $0.23, compared to a net loss of $5.2 million, or a loss per diluted share of $0.24 for the second quarter of last year.

On an adjusted basis, net income for the second quarter of fiscal 2019 was $6.3 million, or adjusted earnings per diluted share of $0.28, compared to an adjusted net loss of $1.0 million, or an adjusted loss per diluted share of $0.04, for the second quarter of last year.

The Company generated $16.8 million in adjusted EBITDA in the second quarter of fiscal 2019, compared to $6.5 million in the second quarter of last year.

Segment Results
Agriculture Segment - Revenue for the second quarter of fiscal 2019 was $152.8 million, compared to $138.5 million in the second quarter last year. Revenue benefited from increased equipment revenue as well as an increase in parts and service activity due to the late start to the planting season.  Pre-tax income for the second quarter of fiscal 2019 was $5.0 million, compared to a pre-tax loss of $6.9 million in the second quarter last year. Adjusted pre-tax income for the second quarter of fiscal 2019 was $5.2 million, compared to an adjusted pre-tax loss of $1.7 million in the second quarter last year.

Construction Segment - Revenue for the second quarter of fiscal 2019 was $79.2 million, compared to $77.9 million in the second quarter last year. Our Construction segment was break-even for the second quarter of fiscal 2019, compared to pre-tax income of $0.9 million in the second quarter last year. Adjusted pre-tax income for the second quarter of fiscal 2019 was $0.3 million, compared to adjusted pre-tax income of $1.2 million in the second quarter last year.

International Segment - Revenue for the second quarter of fiscal  2019 was $67.8 million, compared to $52.4 million in the second quarter last year. Our International segment revenue increase was driven by higher sales volumes in each of our equipment, parts and service businesses. Pre-tax income for the second quarter of fiscal 2019 was $3.7 million, compared to pre-tax income of $0.3 million in the second quarter last year. Adjusted pre-tax income for the second quarter of fiscal 2019 was $3.9 million compared to adjusted pre-tax income of $0.3 million in the second quarter last year. These increases were due to increased revenues and higher equipment gross profit margins.

Fiscal 2019 First Six Months Results

Revenue was $545.6 million for the first six months of fiscal 2019, compared to $533.0 million for the same period last year. Net income for the first six months of fiscal 2019 was $3.6 million, or $0.16 per diluted share, compared to a net loss of $11.1 million, or a loss per diluted share of $0.51, for the same period last year. On an adjusted basis, net income for the first six months of fiscal 2019 was $4.7 million, or $0.21 per diluted share, compared to an adjusted net loss of $5.1 million, or a loss per diluted share of $0.23, in the same period last year. The Company generated $22.1 million in adjusted EBITDA in the first six months of fiscal 2019, compared to $8.1 million in the same period last year.

Balance Sheet and Cash Flow

The Company ended the second quarter of fiscal 2019 with $49.7 million of cash. The Company's inventory level increased to $547.1 million as of July 31, 2018, compared to $472.5 million as of January 31, 2018. This inventory increase includes a $73.8 million increase in equipment inventory, which reflects an increase in new equipment inventory of $87.6 million, partially offset by a $13.8 million decrease in used equipment inventory. The increase in new equipment inventory is primarily in core products for seasonal stocking and purchasing equipment ahead of potential steel surcharges later in the year. The Company had $365.6 million outstanding floorplan payables on $611.8 million total discretionary floorplan lines of credit as of July 31, 2018, compared to $247.4 million outstanding floorplan payables as of January 31, 2018. The increase in our floorplan payable balance is primarily due to increased equipment inventory levels as well as using our floorplan lines to reduce long-term debt, including our senior convertible notes.

During the second quarter of fiscal 2019, the Company repurchased $20.0 million of face value of its senior convertible notes with $20.0 million in cash. The Company has now retired $104.4 million, or approximately 70%, of the original $150.0 million face value of its senior convertible notes with $95.1 million in cash.

In the first six months of fiscal 2019, the Company's net cash used for operating activities was $14.1 million, compared to net cash provided by operating activities of $66.9 million in the first six months of fiscal 2018. The Company evaluates its cash flow from operating activities net of all floorplan payable activity and maintaining a constant level of equity in its equipment inventory. Taking these adjustments into account, adjusted net cash used for operating activities was $36.5 million in the first six months of fiscal 2019, compared to adjusted net cash used for operating activities of $19.3 million in the first six months of fiscal 2018.

Closing of AGRAM Acquisition

On July 2, 2018, the Company completed its acquisition of two commonly-controlled German companies, AGRAM Landtechnikvertrieb GmbH and AGRAM Landtechnik Rollwitz GmbH (collectively, "AGRAM"), which consists of four CaseIH agriculture dealership locations in the following cities of Germany: Altranft, Burkau, Gutzkow and Rollwitz. In its most recently completed fiscal year, AGRAM generated revenue of approximately $30.0 million. The total purchase price amounted to $19.2 million. The Company's preliminary purchase price allocation reflects the acquisition of $38.0 million in total assets, including a total value of goodwill and other intangible assets of $2.6 million. The acquisition date of July 2, 2018 falls within our fiscal third-quarter as all of our European subsidiaries report on a calendar year basis and are included in our consolidated financial statements on that basis, accordingly no financial effects of the acquisition are recognized in our second quarter financial statements. The Company expects the AGRAM acquisition to be accretive to fiscal 2019 earnings.

Mr. Meyer concluded, "We are pleased with our performance in the second quarter, particularly with our Agriculture and International segments, and we are confident that we will see improved top and bottom line performance from our Construction segment in the second half of fiscal 2019. Our second quarter results demonstrate the benefits from the structural improvements we have made to our business over the past couple of years and how those improvements can be leveraged on a growing base of revenues. We are excited to continue delivering earnings growth this year and enhanced profit margins as we look to the future."

Updating Fiscal 2019 Modeling Assumptions

The Company's fiscal 2019 modeling assumptions are as follows:

  Current Assumptions   Previous Assumptions
Segment Revenue      
Agriculture Up 0-5%   Up 0-5%
Construction Up 0-5%   Up 3-8%
International* Up 10-15%   Up 10-15%
       
Equipment Margin 8.7 - 9.2%   8.2 - 8.7%
       
Diluted EPS $0.45 - $0.65   $0.35 - $0.55
       
*International segment revenue includes the post-acquisition contribution from AGRAM.

Conference Call and Presentation Information

The Company will host a conference call and audio webcast today at 7:30 a.m. Central time (8:30 a.m. Eastern time).  Investors interested in participating in the live call can dial (877) 705-6003 from the U.S. International callers can dial (201) 493-6725.  A telephone replay will be available approximately two hours after the call concludes and will be available through Thursday, September 13, 2018, by dialing (844) 512-2921 from the U.S., or (412) 317-6671 from international locations, and entering confirmation code 13682457.

A copy of the presentation that will accompany the prepared remarks from the conference call is available on the Company's website under Investor Relations at www.titanmachinery.com. An archive of the audio webcast will be available on the Company's website under Investor Relations at www.titanmachinery.com for 30 days following the audio webcast.

Non-GAAP Financial Measures

Within this release, the Company refers to certain adjusted financial measures, which have directly comparable GAAP financial measures as identified in this release. The Company believes that these non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide more information to assist investors in evaluating current period performance and in assessing future performance. For these reasons, internal management reporting also includes non-GAAP measures. Generally, the non-GAAP measures include adjustments for items such as gains or losses on the repurchase of senior convertible notes, costs associated with our restructuring activities, impairment charges, and the reclassification of accumulated losses on our interest rate swap instrument. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for the GAAP financial measures presented in this release and the Company's financial statements and other publicly filed reports. Non-GAAP measures as presented herein may not be comparable to similarly titled measures used by other companies. Investors are encouraged to review the reconciliations of adjusted financial measures used in this release to their most directly comparable GAAP financial measures. These reconciliations are attached to this release. The tables included in the Non-GAAP Reconciliations section reconcile net income (loss), diluted earnings (loss) per share, income (loss) before income taxes, and net cash provided by (used for) operating activities (all GAAP financial measures) for the periods presented to adjusted net income (loss), adjusted EBITDA, adjusted diluted earnings (loss) per share, adjusted income (loss) before income taxes, and adjusted net cash provided by (used for) operating activities (all non-GAAP financial measures) for the periods presented.

About Titan Machinery Inc.

Titan Machinery Inc., founded in 1980 and headquartered in West Fargo, North Dakota, is a leading global dealership with a network of full-service agriculture and construction stores.  The network consists of US locations in Arizona, Colorado, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, South Dakota, Wisconsin, and Wyoming and European locations in Bulgaria, Germany, Romania, Serbia, and Ukraine. The Titan Machinery locations represent one or more of the CNH Industrial Brands, including Case IH, New Holland Agriculture, Case Construction, New Holland Construction, and CNH Industrial Capital. Additional information about Titan Machinery Inc. can be found at www.titanmachinery.com.

Forward Looking Statements

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "potential," "believe," "estimate," "expect," "intend," "may," "could," "will," "plan," "anticipate," and similar words and expressions are intended to identify forward-looking statements. Such statements are based upon the current beliefs and expectations of our management. Forward-looking statements made herein, which include statements regarding Agriculture, Construction, and International segment initiatives and improvements, segment revenue realization, growth and profitability expectations, inventory expectations, leverage expectations, agricultural and construction equipment industry conditions and trends, and modeling assumptions and expected results of operations for the fiscal year ending January 31, 2019, involve known and unknown risks and uncertainties that may cause Titan Machinery's actual results in current or future periods to differ materially from the forecasted assumptions and expected results. The Company's risks and uncertainties include, among other things, a substantial dependence on a single distributor, the continued availability of organic growth and acquisition opportunities, potential difficulties integrating acquired stores, industry supply levels, fluctuating agriculture and construction industry economic conditions, the success of recently implemented initiatives within the Company's operating segments, the uncertainty and fluctuating conditions in the capital and credit markets, difficulties in conducting international operations, foreign currency risks, governmental agriculture policies, seasonal fluctuations, the ability of the Company to reduce inventory levels, climate conditions, disruption in receiving ample inventory financing, and increased competition in the geographic areas served. These and other risks are more fully described in Titan Machinery's filings with the Securities and Exchange Commission, including the Company's most recently filed Annual Report on Form 10-K, as updated in subsequently filed Quarterly Reports on Form 10-Q, as applicable. Titan Machinery conducts its business in a highly competitive and rapidly changing environment. Accordingly, new risk factors may arise. It is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on Titan Machinery's business or the extent to which any individual risk factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Other than required by law, Titan Machinery disclaims any obligation to update such factors or to publicly announce results of revisions to any of the forward-looking statements contained herein to reflect future events or developments.

Investor Relations Contact:
ICR, Inc.
John Mills, jmills@icrinc.com
Partner
646-277-1254


 
TITAN MACHINERY INC.
Consolidated Balance Sheets
(in thousands, except per share data)
(Unaudited)
       
  July 31, 2018   January 31, 2018
Assets      
Current Assets      
Cash $ 49,673     $ 53,396  
Receivables, net of allowance for doubtful accounts 78,411     60,672  
Inventories 547,062     472,467  
Prepaid expenses and other 11,149     12,611  
Total current assets 686,295     599,146  
Noncurrent Assets      
Intangible assets, net of accumulated amortization 5,361     5,193  
Property and equipment, net of accumulated depreciation 143,575     151,047  
Deferred income taxes 2,785     3,472  
Other 1,433     1,450  
Total noncurrent assets 153,154     161,162  
Total Assets $ 839,449     $ 760,308  
       
Liabilities and Stockholders' Equity      
Current Liabilities      
Accounts payable $ 18,721     $ 15,136  
Floorplan payable 365,634     247,392  
Senior convertible notes 44,444      
Current maturities of long-term debt 1,974     1,574  
Deferred revenue 22,731     32,324  
Accrued expenses and other 26,811     31,863  
Total current liabilities 480,315     328,289  
Long-Term Liabilities      
Senior convertible notes     62,819  
Long-term debt, less current maturities 22,419     34,578  
Deferred income taxes 2,492     2,275  
Other long-term liabilities 8,268     10,492  
Total long-term liabilities 33,179     110,164  
Stockholders' Equity      
Common stock      
Additional paid-in-capital 247,149     246,509  
Retained earnings 80,613     77,046  
Accumulated other comprehensive loss (1,807 )   (1,700 )
Total stockholders' equity 325,955     321,855  
Total Liabilities and Stockholders' Equity $ 839,449     $ 760,308  
 


 
TITAN MACHINERY INC.
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
               
  Three Months Ended July 31,   Six Months Ended July 31,
  2018   2017   2018   2017
Revenue              
Equipment $ 192,721     $ 167,881     $ 349,625     $ 335,796  
Parts 59,998     55,580     111,533     112,163  
Service 31,271     30,509     58,627     59,275  
Rental and other 15,901     14,901     25,784     25,755  
Total Revenue 299,891     268,871     545,569     532,989  
Cost of Revenue              
Equipment 174,472     154,729     316,239     310,246  
Parts 42,544     39,103     79,202     79,460  
Service 11,432     11,444     22,634     22,238  
Rental and other 12,542     10,788     21,035     19,319  
Total Cost of Revenue 240,990     216,064     439,110     431,263  
Gross Profit 58,901     52,807     106,459     101,726  
Operating Expenses 47,633     50,523     94,360     102,510  
Impairment of Long-Lived Assets 156         156      
Restructuring Costs 565     5,549     565     7,893  
Income (Loss) from Operations 10,547     (3,265 )   11,378     (8,677 )
Other Income (Expense)              
Interest income and other income 1,462     682     1,846     1,460  
Floorplan interest expense (1,727 )   (2,163 )   (3,077 )   (4,819 )
Other interest expense (2,490 )   (2,464 )   (4,520 )   (4,584 )
Income (Loss) Before Income Taxes 7,792     (7,210 )   5,627     (16,620 )
Provision for (Benefit from) Income Taxes 2,612     (2,024 )   2,061     (5,502 )
Net Income (Loss) 5,180     (5,186 )   3,566     (11,118 )
               
Diluted Earnings (Loss) per Share $ 0.23     $ (0.24 )   $ 0.16     $ (0.51 )
Diluted Weighted Average Common Shares 21,831     21,546     21,788     21,461  
 


 
TITAN MACHINERY INC.
Consolidated Condensed Statements of Cash Flows
(in thousands)
(Unaudited)
       
  Six Months Ended July 31,
  2018   2017
Operating Activities      
Net income (loss) $ 3,566     $ (11,118 )
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities      
Depreciation and amortization 11,447     12,268  
Impairment 156      
Other, net 5,022     (2,961 )
Changes in assets and liabilities      
Inventories (73,915 )   (31,981 )
Manufacturer floorplan payable 69,225     107,833  
Other working capital (29,588 )   (7,164 )
Net Cash Provided by (Used for) Operating Activities (14,087 )   66,877  
Investing Activities      
Property and equipment purchases (5,754 )   (17,694 )
Proceeds from sale of property and equipment 614     2,253  
Other, net (169 )   78  
Net Cash Used for Investing Activities (5,309 )   (15,363 )
Financing Activities      
Net change in non-manufacturer floorplan payable 50,422     (38,030 )
Repurchase of senior convertible notes (20,025 )   (19,340 )
Net proceeds from (payments on) long-term debt (14,062 )   10,278  
Other, net (618 )   (482 )
Net Cash Provided by (Used for) Financing Activities 15,717     (47,574 )
Effect of Exchange Rate Changes on Cash (44 )   435  
Net Change in Cash (3,723 )   4,375  
Cash at Beginning of Period 53,396     53,151  
Cash at End of Period $ 49,673     $ 57,526  
 


 
TITAN MACHINERY INC.
Segment Results
(in thousands)
(Unaudited)
       
  Three Months Ended July 31,   Six Months Ended July 31,
  2018   2017   % Change   2018   2017   % Change
Revenue                      
Agriculture $ 152,813     $ 138,545     10.3 %   $ 295,684     $ 302,170     (2.1 )%
Construction 79,245     77,890     1.7 %   141,336     141,310     %
International 67,833     52,436     29.4 %   108,549     89,509     21.3 %
Total $ 299,891     $ 268,871     11.5 %   $ 545,569     $ 532,989     2.4 %
                       
Income (Loss) Before Income Taxes                      
Agriculture $ 4,960     $ (6,882 )   n/m     $ 6,283     $ (10,779 )   n/m  
Construction (30 )   930     (103.2 )%   (2,927 )   (1,703 )   (71.9 )%
International 3,726     283     n/m     3,639     878     n/m  
Segment income (loss) before income taxes 8,656     (5,669 )   n/m     6,995     (11,604 )   n/m  
Shared Resources (864 )   (1,541 )   44.0 %   (1,368 )   (5,016 )   72.7 %
Total $ 7,792     $ (7,210 )   n/m     $ 5,627     $ (16,620 )   133.9 %


 
TITAN MACHINERY INC.
Non-GAAP Reconciliations
(in thousands, except per share data)
(Unaudited)
               
  Three Months Ended July 31,   Six Months Ended July 31,
  2018   2017   2018   2017
Adjusted Net Income (Loss)              
Net Income (Loss) $ 5,180     $ (5,186 )   $ 3,566     $ (11,118 )
Adjustments              
(Gain) loss on repurchase of senior convertible notes 615         615     (40 )
Debt issuance cost write-off     416         416  
Restructuring & impairment charges 721     5,549     721     7,893  
Interest rate swap termination & reclassification             631  
Total Pre-Tax Adjustments 1,336     5,965     1,336     8,900  
Less: Tax Effect of Adjustments (1) 248     1,941     248     3,116  
Plus: Income Tax Valuation Allowance     200         200  
Total Adjustments 1,088     4,224     1,088     5,984  
Adjusted Net Income (Loss) $ 6,268     $ (962 )   $ 4,654     $ (5,134 )
               
Adjusted Diluted EPS              
Diluted EPS $ 0.23     $ (0.24 )   $ 0.16     $ (0.51 )
Adjustments (2)              
(Gain) loss on repurchase of senior convertible notes 0.03         0.03      
Debt issuance cost write-off     0.02         0.02  
Restructuring & impairment charges 0.03     0.25     0.03     0.36  
Interest rate swap termination & reclassification             0.03  
Total Pre-Tax Adjustments 0.06     0.27     0.06     0.41  
Less: Tax Effect of Adjustments (1) 0.01     0.08     0.01     0.14  
Plus: Income Tax Valuation Allowance     0.01         0.01  
Total Adjustments 0.05     0.20     0.05     0.28  
Adjusted Diluted EPS $ 0.28     $ (0.04 )   $ 0.21     $ (0.23 )
               
Adjusted Income (Loss) Before Income Taxes              
Income (Loss) Before Income Taxes $ 7,792     $ (7,210 )   $ 5,627     $ (16,620 )
Adjustments              
(Gain) loss on repurchase of senior convertible notes 615         615     (40 )
Debt issuance cost write-off     416         416  
Restructuring & impairment charges 721     5,549     721     7,893  
Interest rate swap termination & reclassification             631  
Total Adjustments 1,336     5,965     1,336     8,900  
Adjusted Income (Loss) Before Income Taxes $ 9,128     $ (1,245 )   $ 6,963     $ (7,720 )
               
Adjusted Income (Loss) Before Income Taxes - Agriculture              
Income (Loss) Before Income Taxes $ 4,960     $ (6,882 )   $ 6,283     $ (10,779 )
Restructuring & impairment charges 233     5,194     233     6,672  
Adjusted Income (Loss) Before Income Taxes $ 5,193     $ (1,688 )   $ 6,516     $ (4,107 )
               
Adjusted Income (Loss) Before Income Taxes - Construction              
Income (Loss) Before Income Taxes $ (30 )   $ 930     $ (2,927 )   $ (1,703 )
Restructuring & impairment charges 332     252     332     338  
Adjusted Income (Loss) Before Income Taxes $ 302     $ 1,182     $ (2,595 )   $ (1,365 )
               
Adjusted Income (Loss) Before Income Taxes - International              
Income (Loss) Before Income Taxes $ 3,726     $ 283     $ 3,639     $ 878  
Restructuring & impairment charges 156         156      
Adjusted Income (Loss) Before Income Taxes $ 3,882     $ 283     $ 3,795     $ 878  
               
Adjusted EBITDA              
Net Income (Loss) $ 5,180     $ (5,186 )   $ 3,566     $ (11,118 )
Adjustments              
Interest expense, net of interest income 2,365     1,963     4,264     3,921  
Provision for (benefit from) income taxes 2,612     (2,024 )   2,061     (5,502 )
Depreciation and amortization 5,921     6,173     11,447     12,268  
EBITDA 16,078     926     21,338     (431 )
Adjustments              
Restructuring & impairment charges 721     5,549     721     7,893  
Interest rate swap termination & reclassification             631  
Total Adjustments 721     5,549     721     8,524  
Adjusted EBITDA $ 16,799     $ 6,475     $ 22,059     $ 8,093  
               
Net Cash Provided By (Used for) Operating Activities              
Net Cash Provided by (Used for) Operating Activities         $ (14,087 )   $ 66,877  
Net Change in Non-Manufacturer Floorplan Payable         50,422     (38,030 )
Adjustment for Constant Equity in Inventory         (72,833 )   (48,157 )
Adjusted Net Cash Used for Operating Activities         $ (36,498 )   $ (19,310 )
               
(1) The tax effect of adjustments for the three and six months ended July 31, 2018 was calculated using a 21% tax rate for all U.S. related items.  This rate was determined based on a 21% federal statutory rate and no impact for state taxes given our valuation allowance against stated deferred tax assets.  No tax effect was recognized for foreign related items as all adjustments occurred in a foreign jurisdiction that has a full valuation allowance on its deferred tax assets.  The tax effect of adjustments for the three and six months ended July 31, 2017 was calculated using a 35% tax rate.  This rate was applied as all adjustments were made to our U.S. operations and was determined based on a 35% federal statutory tax rate and no impact for state taxes given our valuation allowances against state deferred tax assets.
(2) Adjustments are net of amounts allocated to participating securities where applicable.

 

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