Titan Machinery Inc.TITN
Titan Machinery Inc. Leases Disclosure
LEASES
As Lessee
The Company, as lessee, leases certain of its dealership locations, office space, equipment and vehicles under operating and financing classified leasing arrangements. The Company has elected to not record leases with a lease term at commencement of 12 months or less on the consolidated balance sheet; such leases are expensed on a straight-line basis over the lease term. Many real estate lease agreements require the Company to pay the real estate taxes on the properties during the lease term and require that the Company maintains property insurance on each of the leased premises. Such payments are deemed to be variable lease payments, as the amounts may change during the term of the lease. Certain leases include renewal options that can extend the lease term for periods of one to ten years. Most real estate leases grant the Company a right of first refusal or other options to purchase the real estate, generally at fair market value, either during the lease term or at its conclusion. In most cases, the Company has not included these renewal and purchase options within the measurement of the right-of-use lease asset and lease liability. Most often the Company cannot readily determine the interest rate implicit in the lease and thus applies its incremental borrowing rate to capitalize the right-of-use asset and lease liability. We estimate our incremental borrowing rate by incorporating considerations of lease term, asset class and lease currency and geographical market. Our lease agreements do not contain any material non-lease components, residual value guarantees or material restrictive covenants.
The Company subleases a small number of real estate assets to third parties, primarily dealership locations for which we have ceased operations. All sublease arrangements are classified as operating leases.
The components of lease expense were as follows:
| Year Ended January 31, | ||||||||||||||||||||||||||
| Classification | 2026 | 2025 | 2024 | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Finance lease cost: | ||||||||||||||||||||||||||
| Amortization of leased assets | Operating expenses | $ | 2,214 | $ | 1,804 | $ | 679 | |||||||||||||||||||
| Interest on lease liabilities | Other interest expense | 3,699 | 2,419 | 172 | ||||||||||||||||||||||
| Operating lease cost | Operating expenses and rental and other cost of revenue | 5,103 | 8,067 | 13,356 | ||||||||||||||||||||||
| Variable lease cost | Operating expenses | 1,864 | 1,864 | 1,885 | ||||||||||||||||||||||
| Sublease income | Interest and other income | (360) | (570) | (2,395) | ||||||||||||||||||||||
| $ | 12,520 | $ | 13,584 | $ | 13,697 | |||||||||||||||||||||
Right-of-use lease assets and lease liabilities consist of the following:
| Classification | January 31, 2026 | January 31, 2025 | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Assets | ||||||||||||||||||||
| Operating lease assets | Operating lease assets | $ | 47,197 | $ | 27,935 | |||||||||||||||
Financing lease assets(a) | Property and equipment, net of accumulated depreciation | 46,869 | 44,233 | |||||||||||||||||
| Total leased assets | $ | 94,066 | $ | 72,168 | ||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Current | ||||||||||||||||||||
| Operating | Current operating lease liabilities | $ | 4,084 | $ | 5,747 | |||||||||||||||
| Financing | 7,166 | 1,684 | ||||||||||||||||||
| Noncurrent | ||||||||||||||||||||
| Operating | Operating lease liabilities | 46,050 | 25,588 | |||||||||||||||||
| Financing | Finance lease liabilities | 42,140 | 44,894 | |||||||||||||||||
| Total lease liabilities | $ | 99,440 | $ | 77,913 | ||||||||||||||||
(a)Finance lease assets are recorded net of accumulated amortization of $3.6 million and $2.0 million as of January 31, 2026 and 2025, respectively.
Maturities of lease liabilities as of January 31, 2026 are as follows:
| Operating | Finance | |||||||||||||||||||
| Leases | Leases | Total | ||||||||||||||||||
| Fiscal Year Ending January 31, | (in thousands) | |||||||||||||||||||
| 2027 | $ | 7,357 | $ | 10,377 | $ | 17,734 | ||||||||||||||
| 2028 | 6,657 | 9,316 | 15,973 | |||||||||||||||||
| 2029 | 6,284 | 23,963 | 30,247 | |||||||||||||||||
| 2030 | 6,003 | 9,206 | 15,209 | |||||||||||||||||
| 2031 | 5,661 | 3,703 | 9,364 | |||||||||||||||||
| Thereafter | 46,966 | 1,784 | 48,750 | |||||||||||||||||
| Total lease payments | 78,928 | 58,349 | 137,277 | |||||||||||||||||
| Less: Interest | 28,794 | 9,043 | 37,837 | |||||||||||||||||
| Present value of lease liabilities | $ | 50,134 | $ | 49,306 | $ | 99,440 | ||||||||||||||
The weighted-average lease term and discount rate as of January 31, 2026 and 2025 are as follows:
| January 31, 2026 | January 31, 2025 | |||||||||||||
| Weighted-average remaining lease term (years): | ||||||||||||||
| Operating leases | 12.5 | 7.8 | ||||||||||||
| Financing leases | 2.5 | 3.5 | ||||||||||||
| Weighted-average discount rate: | ||||||||||||||
| Operating leases | 7.7% | 6.7% | ||||||||||||
| Financing leases | 7.9% | 7.8% | ||||||||||||
Other lease information is as follows:
| Year Ended January 31, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||||||||||||||
| Operating cash flows from operating leases | $ | 4,992 | $ | 8,899 | $ | 12,561 | ||||||||||||||
| Operating cash flow from finance leases | 3,699 | 2,419 | 172 | |||||||||||||||||
| Financing cash flows from finance leases | 2,049 | 1,622 | 596 | |||||||||||||||||
| Operating lease assets obtained in exchange for new operating lease liabilities | 9,676 | 1,893 | 16,006 | |||||||||||||||||
| Finance lease assets obtained in exchange for new finance lease liabilities | 4,838 | 66,705 | 113 | |||||||||||||||||
As Lessor
The Company rents equipment to customers, primarily in the Construction segment, on a short-term basis. Our rental arrangements generally do not include minimum, noncancellable periods as the lessee is entitled to cancel the arrangement at any time. Most often, our rental arrangements extend for periods ranging from a few days to a few months. We maintain a fleet of dedicated rental assets within our Construction segment and, within all segments, may also provide short-term rentals of certain equipment inventory assets. Certain rental arrangements may include rent-to-purchase options whereby customers are given a period of time to exercise an option to purchase the related equipment at an established price with any rental payments paid applied to reduce the purchase price.
All of the Company's leasing arrangements as lessor are classified as operating leases. Rental revenue is recognized on a straight-line basis over the rental period. Rental revenue includes amounts charged for loss and damage insurance on rented equipment. In most cases, our rental arrangements include non-lease components, including delivery and pick-up services. The Company accounts for these non-lease components separate from the rental arrangement and recognizes the revenue associated with these components when the service is performed. The Company has elected to exclude from rental revenue all sales, value added and other taxes collected from our customers concurrent with our rental activities. Rental billings most often occur on a monthly basis and may be billed in advance or in arrears, thus creating unbilled rental receivables or deferred rental revenue amounts. The Company manages the residual value risk of its rented assets by (i) monitoring the quality, aging and anticipated retail market value of our rental fleet assets to determine the optimal period to remove an asset from the rental fleet, (ii) maintaining the quality of our assets through on-site parts and service support and (iii) requiring physical damage insurance of our lessee customers. We primarily dispose of our rental assets through the sale of the asset by our retail sales force.
Revenue generated from leasing activities is disclosed, by segment, in Note 3, Revenue. The following is the balance of our dedicated rental fleet assets of our Construction segment as of January 31, 2026 and 2025, respectively:
| January 31, 2026 | January 31, 2025 | |||||||||||||
| (in thousands) | ||||||||||||||
| Rental fleet equipment | $ | 70,694 | $ | 76,447 | ||||||||||
| Less accumulated depreciation | (25,020) | (26,327) | ||||||||||||
| $ | 45,674 | $ | 50,120 | |||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 31, 2026 | Showing above |
| 2025 | Apr 7, 2025 | |
| 2024 | Apr 3, 2024 | |
| 2023 | Mar 30, 2023 | |
| 2022 | Apr 1, 2022 | |
| 2021 | Mar 31, 2021 | |
| 2020 | Apr 7, 2020 | |
| 2019 | Apr 5, 2019 | |
| 2018 | Apr 6, 2018 | |
| 2017 | Apr 7, 2017 | |
| 2016 | Apr 13, 2016 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.