Wednesday, June 20, 2018

Titan Machinery Co-Founder is Company's Underwriter



MANAGEMENT HYPES GUIDANCE, Stock SkyRockets, Insiders Sell, Months Later Miss Guidance by a Miles (click here


ClearCase of  Insider Selling before News was made Public. (Click here)

click: Related Party Transactions Appear to Be Slippery


There are many related party transactions in the disclosure through out the years. Specifically $100 million worth of leases with an outside entity that management has (had) an equity stake in.  

A co founder of the company who sits on the board is also the underwriter of the public company and receives fees. Adam Smith Investments is an outside entity controlled by this Director and Adam Smith files with SEC as a Promotor.

Compare Holdings from DEF14 Proxy for Tony Christianson in Spring of 2017 vs Spring of 2018.







ACCORDING TO THIS SEC FORM D FILING
Adam Smith re Cherry Tree relationship Adam Smith Fund. According to this SEC Filing Adam Smith is disclosed as a a "PROMOTER"
CHERRY TREE payments




HOT IPO TITAN


Company also has a history of Directors leaving. Six of Eight Directors left within a 2 year period.










RELATED PARTY TRANSACTIONS






 TITAN's  MANAGEMENT OUTSIDE ENTITY BUYS PROPERTY FOR $1.00.
12 acres of commercial land for $1.00. 
Dealer Sites LLC is the property ownership company for Titan Machinery, which acquired the property from the city for $1 and will lease it to its operating company, Titan. 
link to article: 


TITAN SELLS PROPERTY TO DEALER SITES (but there is no SEC disclosure)
Check out this article i found, it is from July 2011. (2 days before the 2nd quarter ended). 
I can't find any disclosure of this transaction in any SEC filing though.

*****What's most strange about this transaction is that TITAN purchased the Property in May and then turned around and sold it to Dealer Sites two months later for a profit. While all this real estate is trading hands, The Chairman appears on Jim Cramer's Mad Money hyping the stock and then the Chairman and CEO combined to UNLOAD $14million worth of stockWhat a Quarter these guys had. (Q2 ending July 31,2011).

 This is really too close for comfort IMO, considering Dealer Sites LLC is an entity owned in part by TITN top 2 executives. Years ago Dealer Sites was disclosed in TITN SEC documents as being owned by not only top 2 execs of TITN , but also other family relationships as well. In Recent disclosure the wording has changed to only say top 2 execs only have a minority interest and/or less than 10% interest in other disclosure.

6340 E. County Road 101, Shakopee 

Price: $2,476,734 Filing date: 7/28/2011 

*****Seller: Titan Machinery Inc.***** Buyer: Dealer Sites LLC 

Property ID: 271030010 


6340 E. County Road 101, Shakopee
Price: $2,450,000 Filing date: 5/31/2011
******Seller: St. Joseph's Equipment Inc. ********Buyer: Titan Machinery Inc.
Property ID: 271030010 



The purchase of the property from St Joseph's is in the SEC 2Q FY2011 10Q , but the sale to Dealer Sites LLC is not disclosed.
"On May 31, 2011, the Company acquired certain assets of St. Joseph Equipment Inc. The acquired entity consisted of four construction equipment locations in Shakopee, Hermantown and Elk River, Minnesota, and La Crosse, Wisconsin. The acquisition establishes the Company’s first construction equipment store in Wisconsin and allows the Company to have the exclusive Case Construction contract for the entire state of Minnesota and 11 counties in western Wisconsin. The acquisition-date fair value of the total consideration transferred for the dealerships was $17.0 million."

Titan Machinery (NASDAQ: TITN $21.78) filed a Schedule 14A (Definitive proxy statement) last night with the Securities & Exchange Commission.
·        
Certain Transactions 
        Described below are transactions and series of similar transactions that have occurred during fiscal 2013 to which we were a party or are a party in which:
the amounts involved exceeded or will exceed $120,000; and 
a director, executive officer, beneficial owner of more than five percent of any class of our voting securities or any member of their immediate family had or will have a direct or indirect material interest. 
        As of January 31, 2013, we leased real estate for 48 of our 120 stores from Dealer Sites, LLC, ("Dealer Sites") an entity in which a minority position was owned by an entity affiliated with David Meyer, our Chairman and Chief Executive Officer, an entity affiliated with Tony Christianson, one of our directors, and Peter Christianson, our President and Chief Operating Officer, and certain of their immediate family members (collectively the "Related Persons"). The collective equity ownership of the Related Persons in Dealer Sites was approximately 30% during the first 11 months of fiscal 2013. Effective December 31, 2012, the collective ownership of the Related Persons was reduced to approximately 9%, due to a purchase and sale of equity interests between certain of the Related Persons and other unaffiliated owners of Dealer Sites. The Company also entered into sale-leaseback agreements with Dealer Sites from which the Company received $1.3 million for the year ended January 31, 2013. 
        We also lease one dealership site from C.I. Farm Power Inc., an entity owned by Mr. Peter Christianson. 
        The table below states for fiscal 2013 through the end of the respective lease terms, the aggregate amount of all periodic minimum lease payments or installments made or due, including any required or optional payments due at the conclusion of the respective leases, are as follows: 
Lessor
Period 
Aggregate
Payments Made
or Due 
Dealer Sites, LLC
Fiscal 2013
$
6,899,000
Fiscal 2014, through
January 2028

$

103,047,000
C.I. Farm Power, Inc. 
Fiscal 2013

$

144,000
Fiscal 2014, through
July 2013

$

72,000
        We believe the terms of the leases to be commercially reasonable, and are not any less favorable to us than could be obtained in an arm's length transaction with an unrelated party. 
        During fiscal 2013, Ted Christianson served as our Vice President, Finance and Treasurer and received total cash compensation of approximately $333,000 and a restricted stock award of 1,012 shares of our common stock, with a grant-date fair value of $29,986. Ted Christianson is the brother of Peter Christianson, our President and Chief Operating Officer, and of Tony Christianson, a member of our Board of Directors. 
35


        During fiscal 2013, Sam Christianson, the son of Peter Christianson, was an employee of the Company and received total cash compensation of approximately $190,000 pursuant to a standard commission-based plan of compensation that is subject to annual variation. 
        Both of the above identified employees participated in employee benefits plans and programs available to our other full time employees. 
        C.I. Construction, LLC, ("CI") performs construction management services for certain of the Company's new store construction projects, shop additions, and existing facilities remodel projects. CI is owned by Rob Thompson, who is the brother-in-law of Tony Christianson, a member of our Board of Directors, and Peter Christianson, a member of our Board of Directors and our President and Chief Operating Officer. CI is responsible for developing designs/specifications, drawings, bid packages, advising on the selection of suppliers and contractors, and overseeing the construction process. CI is also an authorized reseller of certain building materials that the Company generally incorporates into its new construction and certain remodeling projects. 
        CI receives a fee equal to 4.5% of the construction costs, excluding expenditures for certain fixtures and fixed assets that the Company originates. CI is also reimbursed for the labor costs of CI's site supervisors and on-site staff, and utilities, equipment rental, travel, and other direct costs incurred by CI in performing the services. CI also receives payment as a reseller of certain building materials used in its construction projects. 
        During fiscal 2013, CI received an aggregate amount of $6.7 million in direct or indirect payments from the Company for the above construction-related services and product resales, as well as reimbursement for other construction-related costs. We do not believe the terms of any of the transactions and agreements described above are any less favorable to us than could be obtained in an arm's length transaction with an unrelated party. 
        During fiscal 2013, Cherry Tree Companies, LLC, an entity controlled by Tony Christianson, a member of our Board of Directors, received aggregate compensation of $173,000, consisting of a one-time payment of $113,000 pursuant to compensation paid to the underwriters in our April 2012 convertible note offering and a $5,000 per month payment for consulting services rendered to the Company. We do not believe the terms of our consulting or underwriter compensation arrangements with Cherry Tree Companies, LLC were any less favorable to us than could be obtained in an arm's length transaction with an unrelated party. 

*******If you look below at the April 2012 DEF Proxy Disclosure and compare it to the 2013 proxy disclosure above, you'll notice that TITN entered into an additional $50million worth of lease contracts (bringing total to over $100million) with the entity Dealer Sites LLC which is an entity that is owned in part to the top 2 Execs at TITN. What really raises an even bigger Red Flag is that TITN only increased locations owned by Dealer Sites by 2, 46 to 48 locations, but added over $50 million in leases agreements! there was no disclosure of the additional lease arrangements in the 10K filed less than 3 weeks ago. did all these lease agreements get done over the last 3 weeks?

A close look at C&I Farm Power lease looks fuzzy too. The dates (time frames) don't add up and the payment has been reduced from (changed) to $216,000 (below '12) down to $72,000 (above '13). Was $144,000 paid to C&I?

2012 DEF14 Proxy Statement 
o    The table below states for fiscal 2012 through the end of the respective lease terms, the aggregate amount of all periodic payments or installments made or due, including any required or optional payments due at the conclusion of the respective leases, are as follows:
Lessor
Period
Aggregate
Payments
Made or Due
Dealer Sites, LLC
Fiscal 2012
$
6,196,986
Fiscal 2013, through
January 2027
$
51,424,827
C.I. Farm Power, Inc. 
Fiscal 2012

$

144,000
Fiscal 2013, through
July 2013
$
216,000



Wednesday, April 27, 2016

Related Party Transactions Appear to Be SlipperyIn 2012 the Minnesota Department of Revenue Charged the owner of C.I. Construction with 21 felonytax crimes.

Since the charge, C.I. Construction has generated revenue of $13 million directly from Titan Machinery. (prior to the charge we are to believe that C.I. Construction did not do any business with Titan)



Friday, June 8, 2018

Titan Machinery Files 10Q Sending Stock to New YTD Low





Securities and Exchange Commission Division of Corporate Finance has commented on Titan Machinery's past Filings, IS it time for them to return? 
Is it Time for FINRA and SEC to start looking at the unusual trading ahead of news in the stock of Titan?
    Titan Machinery laid off 14% of their American workers and closed 15 locations in last year to cut costs. Why did they pay one landlord in April 2018 $3 million to terminate a lease? Would it not have been in the best interest of the shareholders to keep the location? Who was the landlord of that location? was it a related party transaction? who was responsible for signing that lease and when was it signed and what was the term of that lease?
Why didn't they sell the 15 locations? Were all 15 locations worthless? If one location cost $3 million to terminate a lease does that mean all 100 locations are worthless? The company has purchased over 50 acquisitions over last two decades and are closing the stores instead of selling the stores. The company only has $50 million in cash and $395 million in current liabilities as of April 30,2018. But with the Wells Fargo Indenture due May 1,2019, the $68 million note is now moved from long term debt and needs to be added to the current liability of $395 million.


          




 In the Annual Report (10K) there is no mention that the company is in risk of going bankrupt but instead says if they violate covenants that they "would work with lenders" 


 
In 2017 the CEO said company was closing 15 locations to cut cost and laid off a significant amount of employees. This is what Wall Street wanted to hear and the stock SkyRocketed. The CEO sold over $2 million worth of stock with some sales above $21. While the COO has sold 26% of his position at $24 a share. Makes one wonder if the real reason for the store closings was for the stock to go up so they could ring their personal cash registers. The CFO was granted 149% performance Bonus for FY2018 year end.
Also during FY2018 the co-founder of the company who abruptly resigned as the President received the balance of $700,000 of his severance package. (There was no mention whether he and his spouse will still have use of aircraft company has an ownership.)
   Titan Machinery disclosed in their 10Q yesterday for the first time that Equipment revenue is made up of NonCash Consideration of equipment trade ins. How did the NonCash Consideration values contribute to the improved profit margins on the equipment sales figure? Why didn't Deloitte want this disclosed in the past? Was all the Inventory recently liquidated at auctions for a fraction on the dollar originally booked as NonCash Consideration when it was originally accepted in trade ins? what values were given on the trade-ins and how over priced were those assets inflated?  How did the NonCash Considerations effect the BONUSES and Stock Grants that were received by the Officers of the company as reward for reaching Sales milestones over the years. Note: In most recent 10K, The officers received 149% Bonuses.
      TItan Machinery Current Liabilities increased from $320 to $390 million. The Wells Fargo Indenture due May 1,2019 is approximately $70 million and the company only has $50 million cash. Titan generated negative operational cash flow of Negative $27 million in Q1. a decrease of $68 million vs Fy2018 Q1 . with negative cash flow the co may need to Raise Capital via a Debt Underwriting or an equity raise. The interest from more debt will eat any chance of a profit and additional shares thru an issuance of more stock will dilute shareholders.
In its most recent 10Q Titan Machinery disclosed for the first time that they use non cash consideration to account for equipment revenue.
This practice has never been disclosed before.
The company prior to Q filing a week earlier made a press release touting their dramatically improved equipment profit margins.
I question whether the co used non cash consideration to account for equipment revenue in the past? If so, I question the accuracy of prior filings.  The company reported nearly $2 billion in equipment revenue in the past and now equipment rev is less than $1 billion annually.
In the last 18 months the company has had to LIQUIDATE USED EQUIPMENT inventory at a fraction on the dollar to generate enough cash to pay debt and pay off the severance agreement  to their co founder who abruptly resigned as president after a DEF14 A was filed.
If the Used Equipment in the past was accounted for as non cash consideration, is it possible that those trade in values were seriously inflated to record higher revenue at the time, only to have those trade ins eventually sold for discounts at auctions?
there are plenty of other questionable disclosures that i have found and I have included them in my report (there are many links within the report) https://newsgrade.blogspot.com/2018/06/titan-machinery-files-10q-sending-stock.html









Also note, the company admitted that they inflated assets and under reported losses by 50% in a 10Q, but never restated the 10Q.
There are many related party transactions in the disclosure through out the years. Specifically $100 million worth of leases with an outside entity that management has (had) an equity stake in.  
In the company's most recent DEF14A there is a new STOCK OWNERSHIP guideline for Officers and directors stating that the officers and directors NEED to increase their holdings in the stock based on the Price of the common stock as per its dollar value. 
Also in the most recent DEF 14 the Officers received bonuses based on the company's sales benchmarks. Is there a conflict with the non cash considerations values used to figure revenue numbers?
Deloitte Audited Related Fees increased from $25k to $61k  over last last FY. Meanwhile Company sales declined dramatically. 
A co founder of the company who sits on the board is also the underwriter of the public company and receives fees. Adam Smith Investments is an outside entity controlled by this Director and Adam Smith files with SEC as a Promotor.
Company closed 15 locations in last year to cut cost. In latest 10Q they disclosed that in April 2018 they paid $3 million to terminate one lease.  I want to know who owned that location? when was lease signed? what was the term? And what it not have been in the Best interest of shareholders to keep location open?  How did the company cut costs by closing the location when they paid $3 million to terminate the lease?
The company discloses their Used and New Equipment Inventories but don't disclose the breakdown of their USED and New Equipment revenues in their 10Q. They also claim to be in the equipment rental business but according to 10Q only rental revenue came in the USA construction business and almost nil for international and agriculture divisions.  Also note the revenue for the rental segment revenue line over each quarter and then notice how in most recent 10Q the rental profit and margins declined dramatically while sales barely slipped. More importantly the gross profit of the rental business all of a sudden made up significantly less of the gross profit of the four divisions.
International revenue are not broken down by construction and agriculture for some reason. never ever.
Company also has a history of Directors leaving. Six of Eight Directors left within a 2 year period.
Also a local minnesota penny stock brokerage firm called FELTL upgraded the stock a couple years ago stating that Titan would earn over $20 Million in Net Income and gave the stock a $40 plus price target. The company has not earned a profit in over 4 years and have lost over $130 million (aggregate) in that time frame.

There are so many notes I have that you can find in my link.







FY2019 Q1 10Q Highlights:




















Titan Machinery (NASDAQ: TITN $17.34) reported FY2019 Q1 financials last week in a press release on Thursday May 31st pre-market followed by a brief Conference Call.  Titan stock traded volume over 900,000 shares and closed Thursday @ $18.09 down $2.93 (-14%) from Wednesday's close of $21.02.
Yesterday morning Titan Machinery filed FY2019 10Q with the Securities & Exchange Commission and shares hit a New intra day Year To Date low of $17.00 before closing the day @ $17.34, down $0.68  (-3.77%)  for the day.
Since Reaching a 52 week intra-day high on March 29th @ $25.09 the shares are now down $7.75 declining 31% in ten weeks. The S&P 500 Index has gained 5% over the same time frame.

Titan Machinery is a retailer of Agriculture and Construction Equipment based in Midwest USA with International locations in Europe. According to the company's disclosure the company leases their locations. At the current stock price the market capitalization is approximately $400 million.

HIGHLIGHTS OF PRESS RELEASE LAST WEEK prior to today's 10Q (CLICK HERE)

Cliff Notes