Titan Machinery Closed Week @ $11.42, Where is it Headed Next?

My opinion for the stock is that it heads down below the $5 range. 

The underlying business is shrinking dramatically. IN FY2013 they earned $42 million in net income and FY2015 they reported a loss of $31.5 million.

For the 1st 6 most of FY2016 they have loss ($0.29) , over $ 6 million loss.
Their credit lines were reduced by over $100 million and the covenants of their $150 million Indenture with Wells Fargo has had 6 amendment, the last being made earlier this year "After the company" was non compliant with the terms of the note.

The company faces tighter restrictions on the $WFC note and may be in jeopardy of violating the net income covenant for FY2016 Q3 when they report in December.

Aside from the weak fundamentals crippling the stock , the management has some very suspicious dealings.
Management entered into a long term $100 million contract with an outside entity that Management has an equity interest in. 

A year ago the company filed a 10Q and inflated their assets and understated losses and never deemed it necessary to re file that 10Q.
(by over 50%)

In May of this year the company filed a DEF 14A disclosing that the Founder would continue as President and asked the shareholders for the president to vote their shares via a proxy. After the DEF 14A filing, 4 days later, the founder resigned as President. No DEF 14A was re filed.

Of the 8 directors of the company in May 2015 , 3 have now resigned, including the CEO of CONN who resigned a week ago , effective immediately.

There has been suspicious trading in the stock, specifically around the resignation of the company's original auditor resigned over the 4th of July weekend in 2013.

The company has also had some personal selling (insider selling) after some hyped guidance that pumped up the stock price significantly up at the $29 level. (including an appearance on Jim Cramer's Mad Money.)

In June 2014, after the company reported FY2015Q2 , gave guidance that for the FY2015 ending in less than 6 months, that they would earn close to $1.00 a share in net income for the year ending Jan. 31,2015. Well less than 6 months later they reported a LOSS ($1.51) eps. A huge miss, 

The company is not a growth company any longer and is not profitable any more and should not be trading with a fwd PE 160.

Titan Machinery Closes at New 66 Month Low

February 2013 Warning TITN vs S&P 500 index

source : bigcharts.com

TIP #1 in a,weak economic environment buy a stock that Inflated Assets and Understated Losses $titn http://t.co/GvCRtG7PcN

— tom renna (@StockPicker908) August 25, 2015

TIP #2 BUY a stock that gives guidance that they will earn $1.00 EPS even though 7 mos later report loss ($1.51) eps. http://t.co/FKcnueNitd

— tom renna (@StockPicker908) August 25, 2015

Tip #3 Buy stock after founder resigns from board n steps down as president n co has no president going on 3 mos. http://t.co/poiKl4vXcs

— tom renna (@StockPicker908) August 25, 2015

Tip #4 buy a stock at 170 PE ratio because somebody must know something http://t.co/agyRt7s8BM

— tom renna (@StockPicker908) August 25, 2015

TIP #5 buy stock when Co Founder is chairman of an underwriting firm that does your investment banking http://t.co/ji0dYyYN7s

— tom renna (@StockPicker908) August 25, 2015

TIP #6 BUY stock that has expanded into the #Ukraine the last 2 years because that stock gets a PE over 170 http://t.co/qnxVvitqq8

— tom renna (@StockPicker908) August 25, 2015

TIP #7 Buy Stock that is noncompliant w Debt covenant n gets 6 amendments to terms from banker to keep out of default http://t.co/mggmKtXZtu

— tom renna (@StockPicker908) August 25, 2015

TIP #8 IF you can find 1 stock that can apply to all 7 tips then you are lucky. The 10 mf were lucky n own 85% of one http://t.co/Us1ST6r240

— tom renna (@StockPicker908) August 25, 2015

Best #Short this morning $TITN still PE 188. Stock still up 30% since December. High Debt. Closed stores. Losing $ http://t.co/FKcnueNitd

— tom renna (@StockPicker908) August 24, 2015

How to Pump and Dump: Its in the Guidance! IF you're real slick u can even trick Cramer n go on @MadMoneyOnCNBC $TITN http://t.co/m7eAQpNZcJ

— tom renna (@StockPicker908) August 28, 2015

$cnhi announced 70 layoffs in Grand Island NE. In Feb CNHI 136 layoffs n last aug 238 $TITN disclose in 10K they are largest dealer for cnh

— tom renna (@StockPicker908) August 28, 2015

How to Execute A Short Squeeze! PART II. Give guidance u will earn $1.00 EPS.7 mos later report actual loss ($1.51) http://t.co/FKcnueNitd

— tom renna (@StockPicker908) August 28, 2015

How to Execute A Short Squeeze! PART I "Inflate Assets and Understate Losses n Use #Big4 #Auditor #CPA #Deloitte http://t.co/GvCRtGpq4l

— tom renna (@StockPicker908) August 28, 2015

#Deloitte #CPA #auditor hired by $titn summer 2013. QTR endng April2014 reported inflated assets n Understated Losses http://t.co/GvCRtGpq4l

— tom renna (@StockPicker908) August 28, 2015

$TITN still has not found a President. A Short Story from May. "Titan Reports $31 million Loss n Directors r Exiting" http://t.co/poiKl4vXcs

— tom renna (@StockPicker908) August 28, 2015

$titn biz model: sell equity n borrow $. 2008 IPO raisie approx $60 million.2011 Underwriting apprx $60 million. 2012 $150 million Indenture

— tom renna (@StockPicker908) August 26, 2015

What is TITAN Machinery really?

What is TITAN really?

A January 2008 IPO raising approx $60 million. 

January 2011 2.4 Million Shares @ $28.75 

A Spring 2011 Underwriting approx $60 million.

November 20011 500,000 @ $21.68 

A Spring 2012 $150 million Indenture.


Management (& Family) Outside Entities make all the money:

• on leasing property to TITN.

• sales commissions

• underwriting fees

• mgmt sold stock annually

• having expenses, maintenance and fees on their outside entities properties paid by TITAN.

• Brother-in-law generating millions of dollars worth of construction fees (questionable if its even needed)

TITAN MISSED FY2015 EPS GUIDANCE BY $62 Million

 Gave FY2015 EPS GUIDANCE OF $1.00  (In June 2014)

vs.

Actual FY2015  LOSS ($1.51)  (less than 7 Months Later)

In June 2014, Titan Machinery reported FY2015 1st quarter financials and gave forward annual EPS guidance for the year ending January 31,2015 on the high end of $1.00 per share.

• The Company expects adjusted net income attributable to common stockholders to be in the range of $14.8 million to $21.1 million, and adjusted earnings per diluted share to be in the range of $0.70 to $1.00 based on estimated weighted average diluted common shares outstanding of 21.1 million. 

 In April 2015, Titan Machinery reported FY2015 year end EPS LOSS of $31 million ($1.51 per share)  for the period ending January 31,2015.

Pattern of Poor Guidance/Insider Selling into Hyped Guidance

  Titan Machinery has a history of making aggressive guidance and under delivering.  

April 11,2014 Titan Machinery's guidance yesterday was laughable. Yesterday Titan Machinery shares went flying higher after the company announced they missed revenue guidance for the Q4 FY2014 quarter by 10%. It was just 8 weeks ago in December 2013 when the company lowered their 4th quarter guidance with only 8 weeks before the quarter ended and they still missed by a wide margin. 

* Excluding non-cash items, totaling $7.8 million (or $0.37 per share), adjusted net income attributable to common stockholders for fiscal 2014 was $0.41 per diluted share.

April 2013 the company made the following guidance:

• Income forecast of $2 to $2.30 per share. It reiterated its revenue forecast of $2.35 billion to $2.55 billion.

The Next month, May 2013 guidance was changed:

•  The company now anticipates earning $1.70 to $2 per share, down from its prior forecast of $2 to $2.30 per share. It reiterated its revenue forecast of $2.35 billion to $2.55 billion. "  

The Next Month, June 2013, guidance:

•   For the full year ending January 31, 2014, the Company anticipates revenue in the range of $2.35 billion to $2.55 billion, net income attributable to common stockholders in the range of $36.4 million to $42.8 million, and earnings per diluted share in the range of $1.70 to $2.00

September 2013 they made the following Guidance: 

• For the full year ending January 31, 2014, the Company now expects revenue to be in the range of $2.25 billion to $2.45 billion compared to the previous range of $2.35 billion to $2.55 billion. The Company expects net income attributable to common stockholders to be in the range of $25.4 million to $31.8 million, and earnings per diluted share to be in the range of $1.20 to $1.50 based on estimated weighted average diluted common shares outstanding of 21.2 million, primarily reflecting the lower expected equipment margins. This compares to previous net income attributable to common stockholders guidance in the range of $36.4 million to $42.8 million, and earnings per diluted share in the range of $1.70 to $2.00 based on estimated weighted average diluted common shares outstanding of 21.4 million. 

December 2013 the following guidance 

• The Company is adjusting its annual guidance based on increased visibility of market conditions. For the full year ending January 31, 2014, the Company now expects revenue to be in the range of $2.15 billion to $2.35 billion compared to the previous range of $2.25 billion to $2.45 billion. The Company expects net income attributable to common stockholders to be in the range of $11.6 million to $15.8 million, and earnings per diluted share to be in the range of $0.55 to $0.75 based on estimated weighted average diluted common shares outstanding of 21.1 million, primarily reflecting the lower expected equipment sales and margins. This compares to previous net income attributable to common stockholders guidance in the range of $25.4 million to $31.8 million, and earnings per diluted share in the range of $1.20 to $1.50 based on estimated weighted average diluted common shares outstanding of 21.2 million.

The Actual Results for FY2014 that the above guidance refered to :

• Fiscal 2014 Full Year Results

For the full year ended January 31, 2014, revenue increased 1.3% to $2.23 billion from $2.20 billion last year. Gross profit margin for fiscal 2014 was 15.6%, compared to 15.4% last year. Pre-tax income for the fiscal 2014 was $18.4 million. Excluding the aforementioned non-cash impairment charge of $10.0 million, adjusted pre-tax income was $28.4 million, for a pre-tax margin of 1.3%. This compares to pre-tax income of $70.7 million, or a pre-tax margin of 3.2%, last year. GAAP net income attributable to common stockholders for fiscal 2014 was $8.7 million, or $0.41 per diluted share. Adjusted net income attributable to common stockholders for fiscal 2014 was $16.5 million, or $0.78 per diluted share. This compares to $42.0 million, or $2.00 per diluted share, last year.

 In June 2012:

After giving a $2.55-$2.75 range guidance company reported $2.00 EPS for year ending January 31,2013.

Instead of earning $53.8million to $58  million for year the company only reported $42million.

But Management's Mission was accomplished by getting stock up to $30 so they could sell shares @ $30.

• The underwriter Cherry Tree (owned by director Tony Christianson, the brother of CEO, was compensated for the $150 million indenture offering in April of 2012. In June 2012 TITAN gave the following guidance in a press release:   

  "Net income attributable to common stockholders is expected to be in the range of $53.8 million to $58.0 million, resulting in earnings per diluted share range of $2.55 to $2.75". In July 2012 director Tony Christianson and director Irwin James both sold shares of TITAN (TITN) in the market place above $30 per share. 

 7/13/2011

  INSIDER SELLING:
On June 9,2011 Chairman David Meyer appeared on Jim Cramer's MAD MONEY  and touted TITAN MACHINERY's future. 30 days later DAVID MEYER SOLD 300,000 shares @ $27.80 and received proceeds of $8,340.00.00 and CEO Peter Christianson sold 200,000 shares $27.80 for proceeds of $5.56 million. 

TITAN BONDS UP 21% After 6th Amendment

***May 12,2015 Titan Machinery President to Step Down and Resign as Director

n Machinery Announces Management Chang

Titan Machinery (NASDAQ: TITN) $150 million convertible note (Feb. 2019) traded at an all time low on March 13,2015 @ $66.50 yielding 14.88% as the company's fundamentals have deteriorated in recent years.

• In March the company announced that they expected to be in non compliance of the covenants in the $150 million convertible note with Wells Fargo. The company said the terms of the note require the Company to earn a minimum net income for the FY2015 period that ended as of January 31,2015.

On April 15,2015 Titan Machinery filed their 10K annual report with the Securities and Exchange Commission and included a new Footnote: SIXTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT .

Titan's Bonds have since jumped 21% and closed yesterday above $80.

ATTACHED Is the Original Convertible Note with All 6 Amendments Added in Different Colored Fonts. (282 of Pages of NOTES/DELETIONS/Replacements) Good Luck Figuring it out)

SEC NEEDS TO MAKE BOND DISCLOSURE INVESTOR FRIENDLY. 
Investors shouldn't need a Philadelphia Lawyer to Figure Out the Terms of this Note. 

Two Years Ago Today, A Warning That Has Been Cut In Half

NAME	TICKER	4/9/2015	4/9/2013	Perform	2/22/2013	Perform
Titan Machinery	TITN	$13.58	$26.12	-48%	$28.67	-53%
Standard & Poors 500 index	GSPC	$2,091	$1,568	33%	$1,502	39%

On April 9,2013, the day before Titan Machinery (NASDAQ: TITN) reported FY2013 annual financials, Equities Research Warned the public that the stock @ $26.12 was overpriced based on fundamental research.

On February 22,2013 Equities Research Newsletter Subscribers were given the Warning the Febrausry Newsletter @ $28.67

Today @ $13.58 I continue to Warn on Titan Machinery as the company prepares to release FY2015 Annual financials next Wednesday April 15th before the market opens.

March 9,2015 Warning preliminary FY2015 annual financials released

TITAN ANNOUNCED THEY EXPECT YEAR END LOSS OF $32 MILLION AND WARNS COMPANY IS IN NON COMPLIANCE WITH COVENANT OF WELLS FARGO NOTE, BUT CHAIRMAN SETTLES INVESTORS BY SAYING HE ANTICIPATES A 6TH AMENDMENT From the lender. 

The bond (2019) fell to an all time low that week to $66.50 yield 14.88% , but after the Chairman stating he anticipates the lender to amend the covenants, which would be for a 6th time and 4th tim in 1 year, BOND IS NOW TRADING UP 12% since the low less than a month ago.

What's very dangerous for stockholders and bondholders is THE RISK of default if Wells Fargo Does NOT Amend Covenant on the terms of the $150 million convertible Note for a 6th Time.
 The public disclosure that is due out in the 10K regarding how Wells Fargo will handle the company which is  expecting to be in noncompliance with the current minimum income before income tax covenant as of the end of its January 31, 2015 fiscal year.

•  Chairman Meyer stated last month in a press release that "The Company anticipates amending this covenant associated with this credit facility effective as of the end of its January 31, 2015 fiscal year and for future periods, and therefore does not anticipate being in violation of any covenants as of January 31, 2015."

INVESTORS LONG THE STOCK AND BONDS NEED TO HOPE THAT WELLS FARGO MAKES A 6th Amendment like Chairman Meyer Anticipates.

Don't Trust Titan Machinery's Guidance

Titan Bonds Drop After Chairman's Comments

Price of TITAN Bond down 6.1% Wednesday @ $70.43 yield 13.26%

 Titan Machinery Chairman David Meyer stated Monday:

• "The Company is working with the lenders in its bank syndicate with respect to its expected noncompliance with the current minimum income before income tax covenant as of the end of its January 31, 2015 fiscal year. "

Meyer went on to say :

• "The Company anticipates amending this covenant associated with this credit facility effective as of the end of its January 31, 2015 fiscal year and for future periods, and therefore does not anticipate being in violation of any covenants as of January 31, 2015."

The bond Meyer is referring to are the $150 million convertible notes ($43 convertible price) with Wells Fargo in an underwriting completed in April 2012. Since the the underwriting 3 years ago, Titan Machinery balance sheet, income statement and cash flow statement have all deteriorated significantly causing Wells Fargo to amend the covenants on the bond 5 different times. 

• Amendment 5 Wells Fargo $150 million note (Dec 2014)
• Adjustment to $450 million Floor Plan Debt with CNH(Dec 2014)
• Amendment 4 Wells Fargo note September 2014
• Amendment 3 Wells Fargo note April 2014

BIG TROUBLE

THE RISK of default if Wells Fargo Does NOT Amend Covenant for 6th Time.

The Chairman "anticipating" that the lender will amend the Covenant because the company is expected to be in noncompliance.

•  Does the lender, Wells Fargo, feel the same way?
•  Do bond holders and the public deserve to hear what Wells Fargo has to say regarding this non compliance?
•  Will Wells Fargo also comment on this issue?

The boiler plate Forward Looking Statement disclaimer was below Meyer's prepared statements made on Monday afternoon to protect him in case his anticipation does not come to fruition.
Also Included:

•  "The Company’s risks and uncertainties include, among other things, a substantial dependence on a single distributor"
• " the uncertainty and fluctuating conditions in the capital and credit markets,"
• " disruption in receiving ample inventory financing"

Titan Machinery (NASDAQ: TITN) stock closed yesterday at a new year to date low @ $12.21. Shares opened Monday morning @ $14.91 and are now down 18% in last 48 hours.
On Monday after the close the company released preliminary FY2015 annual financials for the year ending January 31,2015. Titan usually reports year end numbers in April, so the early release came as a surprise to Wall Street and shares were halted. Tuesday morning the stock traded at a new year to date low @ $11.19.


I blame The company's poor financial condition on GREED AND RELATED PARTY TRANSACTIONS 

Since the Warning 2 years ago,  the S&P500 Index has advanced over 30% while Titan Machiney Shares have declined 60%

  

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:

•  10.1 footnote  5th Amendment to the Wells Fargo $150 million convertible note 
•  10.2 footnote adjusted covenants Floor Plan debt with CNH Industrial Financing.$450 million

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

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Table of Contents

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.