Monday, April 7, 2014

A Review of Securities & Exchange Commission's Comments regarding Titan Machinery Disclosure

  • On April 10,2013, Titan Machinery Inc (NASDAQ: TITN) filed its Fiscal 2013 year end financials (10K) for the 12 month period ending January 31,2013 with the SEC. 
  • On April 25,2013, Titan Machinery Inc filed its Proxy Statement for its Annual Shareholder meeting (DEF 14A) with the SEC.
This Thursday, April 10th, before the market opens, Titan will disclose Fiscal Year 2014 financials for the 12 month period ending January 31,2014.

Securities & Exchange Commission Division of Corporate Finance Comments December 9,2013

 Equities Research:
 It will be interesting to see if the new auditor allows the company to recognize revenue in Fiscal 2014 in this same manner as Fiscal 2013: (from Fiscal 2013 10K):
 " However, in certain circumstances, and upon the customer's written request, equipment revenue is recognized before delivery occurs"

I was very critical of the financials disclosed by in both filings and analyzed both documents in my blog post : "The Most Overpriced Stock in the Market Files Proxy Statement".
                                         My reports raised many red flags :
  •  Following key words are what caught my eye, especially since these hats are worn by 4 or 5 execs:
    3 Brothers, A Son, A Brother-In-Law, COO, Chairman, Founder, Commission, Managing Director of Underwriter, Owner of Construction Company, Unsecured loans, LEASE Arrangements with Top 3 Execs outside Entities, Real Estate Sale between TITN and Top two Execs Outside Entity, Private Jet, Consulting fees, underwriting fees....(oh yeah, the time Chairman went on Mad Money and then sold shares ) 
  •  A. 10 K Highlights of Weak Fundamentals
    B. Roddy Boyd / Herb Greenberg Recognizes my Work
    C.Certain Related Party Transactions
    D.Insider Selling after Making Hyped Up Projections (missed by a mile)
    E.Increase Of Authorized Shares
    F.CNH AMERICA Floor Debt Plan
    G.Property sold to Entity owned by Top 2 Execs.without disclosure
    H.Property Ownership Company owned by Top 2 Execs outside entity.
    I.Brother-in-law Construction Company building multi-million dollars worth of buildings.
    J.OLD INVENTORY list (108 page document), not sure how if its obsolete yet.
    K.History of Negative Operational Cash Flow
    L.Private Jet
    M.$150 million convertible note disclosure. (using best scenario vs. worse scenario in disclosure)
    N.Immediate Family Members: commissions, raises, fees, consulting agreements
    O.Cash Advance Business offering loans to Bad Credit/No Credit borrowers
    P.Variable Interest on Debt
    Q.Interest Expense
    R.disclosure of former CFO, now Treasurer)
    S.Auditor's History
    T. CEO & chairman both increased salaries 48% in cash 

On Titan's last conference call in December 2013 the company lowered their year end guidance: 
For fiscal 2014 revenue range of $2.15billion to $2.35 billion and expect annual net income in the range of $11.6million to$15.8million.  Fiscal Year 2013 net income was $42 million. That is a 65% decline year over year decline. Note with shares trading at $15, the PE ratio is nearly 30.


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