Tuesday, May 12, 2015

Titan Machinery President to Step Down and Resign as Director

 Titan Machinery Reports $30 million Loss and Directors are Exiting
Founder Peter Christenson To Step Down From Board
**read here to see when house of cards were built

President/Founder Steps Down
After the close last night, Titan Machinery filed an 8K with the Securities and Exchange Commission announcing that the company's  President, Peter Christenson, since 2003 will step down and take a consulting role with the company and continue to earn his $500,000 a year salary. Peter Christenson will also resign as a member of the board of directors. a position he also has held for 12 years..(there is no mention if Mr. Christenson will continue to receive spousal travel benefits).

Proxy Statement
Only 4 days ago Titan Machinery filed a DEF 14 A proxy statement for the upcoming FY2016 annual meeting which is to take place in June. In the proxy disclosure Christenson is disclosed as a board member and president but it is still not clear if shareholders receiving this new proxy will be notified of the sudden resignation in time for the June vote. NO mention of who the new nominee will be for the 9th board seat that will now be vacant.

8K Director Resigns
8 weeks ago another board member since 2003 , James Williams, also announced he will be resigning from the board. That announcement came the same day that management released a preliminary FY2015 warning to the street that the company would lose in excess of $30 million for FY2015.
Mr. Williams is the current Chairman of the Nominating Committee and also a member of the 3 person Audit Committee.

Related Party Transactions (Where all the $ Goes)
In related party transactions, Peter Christian is disclosed as an owner of C.I.Farm Power.

History of Related Party Transactions of Titan Machinery  (Where has All the Money Gone)

New Auditor=Less Disclosure
In the Spring of 2014 the company filed it's first DEF 14 A  using the new auditor Deloitte and Touche. Company stated it no longer was required  to disclose the transactions with the outside entity Dealer Sites LLC that management had held a position in because that equity interest had declined to less than 10%.
Although that disclosure was in the spring of 2014, Dealer Sites LLC continued to receive their mailings to the care of  Titan's treasurer Ted Christianson., although he supposively held less than 10% of such entity.
Dealer Sites LLC is important because less than 2 years ago TITAN increased their contract with Dealer Sites from $50 million to over $100 million and extended it out to 2028. This is prior to closing in excess of 10 location in that same period. There has been no disclosure as to whether any of the stores that have been closed were Dealer Sites lease locations. Titan is responsible for taxes and maintenance of those properties.



MAY 2014 Dealer Sites LLC address on tax bill was same as Titan Machinery  But in the April 10K and DEF 14 A in April 2014 the disclosure stated Dealer Sites LLC relationship with Titan Management no longer needed to be disclosed.



As of Spring 2015 mailings for Dealer Sites LLC are being sent to the firm C.T.  Corporations Systems.
Titan is disclosed as 1 of 250 companies that also has disclosure of that same address that CT Corporation states under Dealer Sites LLC.

Dealer Sites LLC disclosure from 2007
"Leases

We (TITAN MACHINERY) lease real estate for 24 of our 34 stores from entities affiliated with Messrs. Meyer, Tony Christianson and/or Peter Christianson. We lease three dealership sites from Meyer Family Limited Partnership, for which Mr. Meyer serves as general partner and of which certain members of Mr. Meyer’s immediate family are limited partners; 18 dealership sites from Dealer Sites, LLC, an entity affiliated by common ownership with Mr. Meyer and Tony Christianson, who collectively owned 40% of Dealer Sites, LLC as of January 31, 2007, and for which Ted Christianson, our Vice President, Finance and Treasurer, serves as president and Mr. Meyer serves as an officer; the site for our Fargo outlet store from C.I. Farm Power, an entity affiliated by common ownership with Peter Christianson; one dealership site from Padre Partnership, an entity affiliated by common ownership with Peter Christianson, who is also the general partner; and one dealership site from Landco LLC, an entity affiliated by common ownership with Peter Christianson and Mr. Meyer."

Hanky Panky Note #4786

General Counsel/Corp. Compliance Officer/Secretary
Does the corporate Compliance Officer Need to be disclosed in SEC filings as an Officer of the Company? Should his Holdings be disclosed as well? I looked but I couldn't find Steve Noack name. It might be somewhere but I surely didn't find it.

ASSUMED NAME
Who is Aurora Distributing and Why did Titan Machinery  create this assumed name the day prior to FY 2015 3rd quarter closed?
  •  3. List the name and complete street address of all persons conducting business under the above Assumed Name, OR if an entity, provide the legal corporate, LLC, or Limited Partnership name and registered office address:
    Titan Machinery Inc.
    644 East Beaton Drive
    West Fargo, ND 58078
Mutual Fund Trading

In February 2015 Fidelity, an institution which held over 5% of shares outstanding  increased their holding in an afternoon trade of 805,000 shares. What is strange is that Titan common stock averages about 100,00 shares a day and this unusual block was traded in what appears to be one transaction. Who sold those shares? How was the trade orchestrated? Its peculiar because nearly 85% of shares outstanding are so tightly held by a handful of insiders and institutions, so how would a person or an entity have such a block of stock and then sell it without disclosing that their new position (balance) has been reduced?


Suspicious trading/Auditor Resignation
It was less than 2 years ago that the company's original auditor abruptly resigned after the FY2014 shareholder meeting which coincided with very suspicious trading activity of Titan Machinery's common stock prior to the Fourth of July market holiday.
5 months after the Accounting Firm resigned the Securities and Exchange Division of Corporate Finance filed the following comment letter to Titan Machinery .

More Suspicious Trading March 2015
After close on March 9th Titan released disappointing warning that year end numbers would be disappointing and the shares were halted after hours. Titan Machinery (NASDAQ: TITN) suspiciously traded down 6% that day while the overall markets were all higher.


Wells Fargo Changes the Rules
The Titan Machinery Bonds are another can of worms.

3 comments:

  1. I'm not an investor and have no stake in this entity, but I know quite a bit about the people and the markets they are in, so I follow it closely. You have identified a number of very significant issues that seem to be of little interest to most people. It's strange to me to see a public company that has apparently been a proxy for their OEM (CNH) in an aggressive bit of consolidation. As I am sure you are aware, this strategy was pursued and failed miserably with another Fargo based company back in the late 90's and into the early 2000's. In that case, the OEM (DE) gave the blessing to the dealer to consolidate a large chunk of its dealer network. (This was the Huizinga model of growth that also failed). The company in question went public and went on a buying spree. Deere execs concluded they were leaving money on the table and reneged on their tacit blessing of allowing the company to continue consolidating. With excess capital in hand that company bought up other similar--but also different enough--dealerships in non-competing product lines (OTR Trucks, Material Handling etc) all of which resulted in heavy losses for the company. The stock tanked. (bottoming out in the $2 range after a high of over $20 after the IPO). The founder, chairman, CEO of the this company ended up buying back the whole company for about $6 a share. Kind of a sweet deal. Well that's capitalism for you. I don't know what's going to happen with Titan, but people who remembered the previous debacle surely knew that this business model was a bust and would never work. Managing a capital intensive business with a B2B sales organization is a tricky proposition. Dealers continuously get the squeeze between the OEM and the end users. Margins are thin and extremely vulnerable to changes in weather (for the ag lines) and in the overall economy--especially housing market-- (on the construction side). Both the OEM and the buyers have excess leverage over the dealer who is a middle man. I am optimistic that the eventual demise of Titan will prevent any future attempts to consolidate at the level of both Titan and its neighbor and competitor in Fargo.

    So having said all that, are you familiar with the other company in question and its demise?

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    Replies
    1. I am not exactly sure what company you are referring to.

      I am familiar with Walterman Implement, CNH distributor that filed bankruptcy and was later raided by the FBI and 5 or 6 officers of the company were sent to prison.

      http://www.fbi.gov/omaha/press-releases/2010/om070110.htm

      CNH appointed Titan to take over a Walterman location.

      http://www.farm-equipment.com/articles/5784-how-the-walterman-implement-case-turned-out

      I was always suspect of how CNH sold all that equipment to Titan prior to the FIAT merger. I felt like CNH was shoving the equipment into Titan inventory so that CNH's sales would get a boost and they would get a higher valuation heading into the FIAT merger.

      How about that sale to Dealer Sites for $1 mentioned above? Why didn't Titan just acquire it directly instead having to pay a long term lease? Titan had to pay for the insurance , the taxes, the maintenance, the utilities on the location. Wonder how that property is valued today? Wonder what the taxes are on that piece of land? hmmmm

      I saw that Dealer Sites has an agent who's name is Brenda Waterworth.

      http://www.bizapedia.com/nd/DEALER-SITES-LLC.html

      I wonder if she is related to Danielle Waterworth, North America Special Asset Manager, working in the agricultural machinery industry with CNH Industrial.

      https://www.youtube.com/watch?v=UEOZbR8lEGo

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    2. A reader just shared the name of the company you are referring to.
      I just did a google search and found the story.

      http://www.farm-equipment.com/articles/5030-dealer-of-the-year-2010---taking-the-company-public-rdo-equipment-cos-most-difficult-years

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