Founder of Equities Research. Stockdiagnostics Specialist

Founder of Equities Research. Stockdiagnostics Specialist
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Thursday, February 12, 2015

Titan Machinery Unusual Volume With No News

 Is it Undetected Insider Trading ............again?
(click images to enlarge)


Titan Machinery (21 million shares outstanding) only averages volume per day of approximately 160,000 shares but yesterday it traded nearly 1 million shares. Titan is a quiet under the radar stock that trades hardly any volume and recently has traded under 100,000 shares per day during the past month. Aside from the 4 days a year that the company reports quarterly results the shares never really trade more than 200,000 shares per day. So let's see what happens today and the rest of the week to find out if there is possibly some news coming out that maybe someone was privileged to yesterday?@#$%^&????

I am suspicious of the trading yesterday because this happen once before and after an unusual spike in volume with no news on a quiet July day prior to a 4th of July trading holiday, but days later the company filed that the company's original auditor for nearly 30 years had resigned.  I raised the red flag back then but because my following is quite small nobody paid any attention.

T.R. says:

SEC received TITAN 8-K July 2,2013 @ 16:56:12 est.
The unusual volume on the morning of June 28,2013 looks like somebody saw this 8-K coming.


Chart from May through July 2013 (see volume before news




Titan Machinery (NASDAQ : TITN) is a very peculiar stock. The company has a market capitalization of nearly $300 million but the company's underlying fundamentals disclose a business that is on the brink of bankruptcy.  Shares of the stock are being held and practically tied up by a group of major mutual funds that for some reason have added to their positions as the company's future becomes more and more in doubt.

Titan has a history of questionable related party transactions and a family member who has led underwriting from a boutique investment firm.


Questionable Accounting: 
 "in certain circumstances, n upon the customer's written request, equip revenue is recognized before delivery occurs"
 https://twitter.com/stockpicker908/status/366579314147328000


From Morningstar: Institutional Holdings


Thursday, February 5, 2015

TOP SHORT PICK STRATASYS GETTING FLATTENED

Stratasys (NASDAQ: SSYS $58.38) was top short pick here at Equities Research based on their poor fundamentals and low margins.
The Shares had a nice run higher after a September 2013 underwriting led by JP Morgan when the company received over $400 million.
After announcing poor quarterly results this week shares tumbled over $25 this week as investors lost nearly 30% since Monday.

BARRONs: 























Wednesday, January 14, 2015

Titan Machinery's $500 Million Negative Cash Flow

The End is nearing for Titan Machinery (NASDAQ: TITN) as sales and net income have continued to declined and inventories and debt have skyrocketed.

Titan Machinery  has generated Negative Operational Cash Flow of $500 million over the last 19 quarters.


Friday, December 12, 2014

After the close: William Blair Analysts Lowers Price Target on Titan to $10

Titan Machinery (NASDAQ: TITN) closed yesterday at a new 5 year low @ $11.75.

Titan Machinery $150 million convertible note closed at an all time low @ $72.38 w 12.03% yield.


Since the Equities Research Warning on February 1,2013 shares of Titan @ $29.07, the stock has declined 60% while the Standard & Poors 500  Index has advanced 33%. (source: bigchart.com)



Titan filed their FY2015 3rd Quarter 10Q for the period ending October 31,2014 on Wednesday. Included in the SEC disclosure were two footnotes:

After the close yesterday William Blair Analyst lowered Price target on Titan from $12 to $10.
Pre-market yesterday analyst at Stephens lowered Price Target on Titan.

Wednesday, December 10, 2014


$TITN LOWERS FULL YEAR EPS GUIDANCE to Loss Per Share ($0.02) to ($0.23).

 

From 10Q
NOTE 4—LINES OF CREDIT / FLOORPLAN PAYABLE

Floorplan Lines of Credit

Floorplan payable balances reflect the amount owed for new equipment inventory purchased from a manufacturer and for used equipment inventory, which is primarily purchased through trade-in on equipment sales. Certain of the manufacturers from which the Company purchases new equipment inventory offer financing on these purchases, either offered directly from the manufacturer or through the manufacturers’ captive finance subsidiaries. CNH Industrial America LLC's captive finance subsidiary, CNH Industrial Capital America LLC ("CNH Industrial Capital"), also provides financing of used equipment inventory. The Company also has floorplan payable balances with non-manufacturer lenders for new and used equipment inventory. Changes in manufacturer floorplan payable are reported as operating cash flows and changes in non-manufacturer floorplan payable are reported as financing cash flows in the Company's consolidated statements of cash flows.

As of October 31, 2014, the Company had discretionary floorplan lines of credit for equipment inventory purchases totaling approximately $1.16 billion, which includes a $350.0 million Floorplan Payable Line with a group of banks led by Wells Fargo Bank, National Association ("Wells Fargo"), a $450.0 million credit facility with CNH Industrial Capital, a $225.0 million credit facility with Agricredit Acceptance LLC and the U.S. dollar equivalent of $135.0 million in credit facilities related to our foreign subsidiaries. Floorplan payables relating to these credit facilities totaled approximately $696.9 million of the total floorplan payable balance of $761.2 million outstanding as of October 31, 2014 and $692.8 million of the total floorplan payable balance of $750.5 million outstanding as of January 31, 2014. As of October 31, 2014, the Company had approximately $411.7 million in available borrowings remaining under these lines of credit (net of adjustments based on borrowing base calculations and standby letters of credit under the Wells Fargo credit agreement, and rental fleet financing and other acquisition-related financing arrangements under the CNH Industrial Capital credit agreement). The U.S. floorplan payables carried various interest rates primarily ranging from 2.78% to 4.98%, and the foreign floorplan payables carried various interest rates primarily ranging from 1.59% to 10.50%, as of October 31, 2014.

Effective October 31, 2014, the Company amended its credit facility with Wells Fargo. The amendment, among other things, replaced the consolidated net income financial covenant with a minimum consolidated income before income taxes

10


covenant, calculated as the income before income taxes for the last four quarters, adjusted for certain impairment charges, realignment charges, and foreign currency remeasurement losses resulting from a devaluation of the Ukrainian hryvnia. The minimum income before income tax covenant is $10.0 million for the four quarter period ended October 31, 2014, $5.0 million for the period ended January 31, 2015, $6.0 million for each of the two periods ended April 30, 2015 and July 31, 2015, $10.0 million for each of the two periods ended October 31, 2015 and January 31, 2016, and $15.0 million for each period thereafter. The amendment also modified certain borrowing base advance rates and changed the interest rate margin from 1.5% to 2.625% to 1.5% to 2.875% per annum.

Effective October 31, 2014, the Company also amended its credit facility with CNH Industrial Capital. The amendment, amongst other things, replaced the minimum debt service ratio financial covenant with a minimum fixed charge coverage ratio financial covenant of not less than 1.25:1.00, and added or modified related definitions.

Working Capital Line of Credit
As of October 31, 2014, the Company had a $112.5 million working capital line of credit under the credit facility with Wells Fargo. The Company had $75.6 million and $47.8 million outstanding on its working capital line of credit as of October 31, 2014 and January 31, 2014, respectively. Amounts outstanding are recorded as long-term debt, within long-term liabilities on the consolidated balance sheets, as the Company does not have an obligation to repay amounts borrowed within one year.


NOTE 5—SENIOR CONVERTIBLE NOTES
The Company’s 3.75% Senior Convertible Notes issued on April 24, 2012 (“Convertible Notes”) consisted of the following:









October 31, 2014
January 31, 2014
(in thousands except conversion
rate and conversion price)
Principal value
$
150,000

$
150,000

Unamortized debt discount
(18,544
)
(21,107
)
Carrying value of senior convertible notes
$
131,456

$
128,893

Carrying value of equity component, net of deferred taxes
$
15,546

$
15,546

Conversion rate (shares of common stock per $1,000 principal amount of notes)
23.1626

Conversion price (per share of common stock)
$
43.17

     
The Company recognized interest expense associated with its Senior Convertible Notes as follows:

















Three Months Ended October 31,
Nine Months Ended October 31,
2014
2013
2014
2013
(in thousands)
(in thousands)
Cash Interest Expense
Coupon interest expense
$
1,406

$
1,406

$
4,219

$
4,219

Noncash Interest Expense
Amortization of debt discount
864

806

2,563

2,392

Amortization of transaction costs
135

131

402

391

$
2,405

$
2,343

$
7,184

$
7,002


As of October 31, 2014, the unamortized debt discount will be amortized over a remaining period of approximately 4.5 years. As of October 31, 2014 and January 31, 2014, the if-converted value of the Senior Convertible Notes does not exceed the principal balance. The effective interest rate of the liability component was equal to 7.0% for each of the statements of operations periods presented.