Showing posts with label Deere. Show all posts
Showing posts with label Deere. Show all posts

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









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Thursday, May 10, 2018

Time to Short the Most OverPriced Stock in the Market

Titan Machinery has the fundamentals of a PennyStock but trades above $19 a share on NASDAQ.
Insiders Continue to Sell and Officers are getting paid bonuses while the company lays off hundreds of employees in the United States and close nearly 20% of their stores in America.
Company has spent the last years LIQUIDATING INVENTORY at AUCTIONS to generate enough cash to pay themselves and to afford to reward their co-founder and former president a handsome Severance Package after he abruptly resigned.
The Insiders have an equity interest in several outside entities that are being paid via lease agreements with properties that they own.
A CNBC Personality with a huge following who is from the state of Minnesota coincidently appears on twitter with bullish options calls touts on this thinly traded micro-stock that will send stock into a spike higher.
TheStreet website has another guru who also appears to have a crystal ball when predicting this stock's bullish moves is also helpful.
SEC Division of Corporate Finance has made some appearances in TITAN's disclosure filing requesting more transparency from time to time but the SEC and NASDAQ stock trading investigators never seem to take a look at the trading.














SEEKING ALPHA Writer Doesn't See Anything Criminal at Titan Machinery



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Sunday, December 13, 2015

Titan Machinery: New 6 Year Low and Conditions are Getting Worse

TITAN MACHINERY (NASDAQ:  TITN  $9.18 ) Friday traded at a 6 Year intra day low of $8.92. All time low for TITN is $7.50 set in March 2009.

  • 21.5 million shares outstanding
  • $200 million market Capitalization
  • Revenue for 9 months ending October 31,2015 : $1 Billion 
  • Net Income for 9 months ending October 31,2015 : neg -($2.8 million)
DECEMBER 2015 10Q states: 
" a one percentage point decrease in interest rates for the next 12-month period would result in an increase to pre-tax earnings and cash flow of approximately $3.3 million"

TradeCard TITN can be found at CMLVIZ




On December 13,2015 Motley Fool published the following article by author Lee Samaha:

"It's getting worseTitan's third-quarter 2016 revenue came in significantly below analyst estimates, with revenue declining 30% and equipment sales down a whopping 37%. Moreover, its updated full-year guidance reflected a weakening in its end markets"






My Comment to the Motley Fool Article:
Tom Renna
great work. I also thought it was interesting that Meyer said on conference call that Titan would not be profitable for FY2016 which ends January 31,2016. On September conference call he said they would be profitable for year.

To your point that revenue for Q3 missed analyst estimates, to put a number to that: Analyst estimates called for $416 million in revenue and company came in at $344 million. A $72 million miss (or -17%).

Prior to the Q3 call on december 3,2015, all 7 analysts estimated FY2016 to be profitable with significantly higher revenue estimates. I am curious how much longer it will take for analyst to update their research and estimates for FY2016.

Analyst Feltl estimates still read FY2016 net income estimates of $0.26 EPS, that would be $5.6 million net income. And as mentioned in call, Meyer says there will be NO PROFIT.

Not sure if you noticed this spin by management.
SEE ABOVE CHARTS From FY2016 Q3 and FY2015 Q3 and note CONSTRUCTION REVENUE

In the FY2015 Q3 10Q Titan showed Construction sales of $110m Up from $109m in FY14 Q3 and touted the Q3 improvement vs. Fy 2014 Q3 on December 2014 call.  

In the FY2016 Q3 10Q reported this week the $110 million in construction revenue in the Fy2015 Q3 has now been changed to $98m in FY2016 Q3 10Q.

So on the call and on the investor relations slide presentation they show Construction being lower by 11% using the $98 million revenue figure.
But if TITAN used the $110 million construction revenue number that appears in FY2015 Q3 10Q then Construction Revenue actually declined 21%.

Your point about the service profit margins is perfect. If sales of rental, parts and equipment weren't so horrible, the profit margins would have shrunk for the overall business.

CLIFF NOTES: $35 to $9 

 December 5,2015 News Break from FlyOntheWall



09:53 EDTCAT, TITN, DE, CNHI, AGCOTitan Machinery inventory cut negative for CNH Industrial, says Wells Fargo
Titan Machinery's (TITN) inventory reduction forecast this morning appears negative for CNH Industrial (CNHI), said Wells Fargo, noting that Titan is a large CNH distributor. Titan's results and cautious outlook also have a negative read through for AGCO (AGCO), Deere (DE), and Caterpillar (CAT), according to the firm.
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Wednesday, November 25, 2015

Titan Needs Q3 Net Income to Increase 180% To Stay Compliant With Terms of Wells Fargo Bond

Pressure is on Titan Machinery (NASDAQ: TITN $12.31) to report a stellar 3rd quarter financial report for the period ending October 31,2015.

Titan Machinery was on the brink of going out of business in April 2012 when Wells Fargo loaned the company $150 million  (3.75% May 1,2019 maturity) save the day.

Indenture

  • The Notes were issued pursuant to an indenture, dated as of April 24, 2012 (the “Indenture”), between the Company and Wells Fargo Bank, National Association, as trustee.

    The Notes are general unsecured and unsubordinated obligations of the Company, and interest will be payable semiannually at a rate of 3.75% per annum. The Notes mature on May 1, 2019, unless earlier converted, redeemed or purchased by the Company in accordance with their terms. The Notes will be convertible at the option of the holders of the Notes under certain conditions described below. Upon conversion, the Company will pay cash up to the aggregate principal amount of converted notes and pay or deliver, as the case may be, cash, shares of Company common stock or a combination thereof, at the Company’s election, for any conversion obligation in excess thereof, subject to certain limitations described below.  The initial conversion rate for the Notes is 23.1626 shares of Company common stock per $1,000 principal amount of notes, and is subject to certain adjustments as set forth in the Indenture.


On March 9,2015 shares of TITN were halted when the company pronounced  FY2015 numbers and Titan Chairman David Meyer announced earlier this year that the company was non-compliant with the terms of a Wells Fargo covenant on January 31,2015. Titan's corporate bond was at a low of $66.50 with a 14.88% yield.

Suspicious Trading on March 9,2015 during the day. The overall market was up that day and Titan shares traded down 6%. After the close is when the Company pronounced the FY2015 year end warning and announced store closings. I am thinking inside information was leaked to someone who capitalized on the privileged news.

According to the footnotes in the 10K filed on April 15,2015, on April 10,2015 Wells Fargo made a 6th Amendment (4th in 12 months) amending the Bond covenants and revised the terms of the January 31,2015 violation so that Titan would be compliant. Bonds gained 21% by May 17,2015 closing at $80.

Terms of the 6th Amendment states Titan Machinery needs to earn $1 million in net income for the 9 months of FY2016 ending October 31,2015. For the first six months of FY2016 ending July 31,2015, Titan has already reported a loss of -($5.7 million).
TITAN Q3 report is due out anytime within the next three weeks and the company will have to earn a minimum of $6.7 million net income just for the 3rd Quarter alone or else they will be NON-Compliant with the net income covenant terms of the Bond!

A year ago the company reported 3rd quarter net income of $2.4 million. Titan will need to report a net income increase for their most recent Q3, 180% higher than a year ago Q3.

 This morning John Deere announce their most recent quarter and NET INCOME declined 46%.

 Equities Research Remains Bearish Titan Machinery.

 Titan has a $265 million market capitalization @ $12.50.

 In an SEC filing On May 7, 2015 the founder of Titan Machinery was not on the ballot for re-election to the board of directors for the June shareholder meeting. No formal announcement or 8K filing was filed announcing his plans to step down from the board. I found out simply by seeing his name was not on the ballot.

 On May 11,2015 the founder announced he was resigning as president. 

3 of 8 Titan directors have resigned since May.

  October 28,2015 8K Credit Agreement Amendment 

Exhibit 10.1 of 8k  the term "Bankruptcy" appears 15 times
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Friday, April 4, 2014

Titan Machinery Convertible Bond Nears All Time Low

Titan Machinery (NASDAQ: TITN)
Convertible Bond 3.75%  Maturity:2019.
Currently selling for $85.25 w 7.28% yield.
Bond Market is the true tell on weakness of balance sheet

Date of Offering : April 18,2012 
Amount of Debt: $150 million Convertible

Click to Wells Fargo $150 million Indenture disclosure with SEC 
"The effective interest rate of the liability component for the period ended January 31,2013 was equal to 7.00%"





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Monday, August 12, 2013

Titan Machinery Warning




Equities Research  remains bearish on Titan Machinery 

  • Q1 ending April 30th TITN loss -($0.02) vs $0.36 eps Q1 yr ago
  • Company Cash Position decreased drom $124 million to $114 million in the ninety day period from January 31,2013 to April 30,2013.

  •  ttm ending April 30,2013 sales increased by $500 million , while earnings declined by $10million (from $44mil to $34 mil) and free cash flow was negative $134 million.
  • Over the past 13 quarters (aggregate) Titan has generated over $400 million NEGATIVE Free Cash Flow. It will be a Major challenge to service the $1 billion in liabilities on their balance sheet.



  •  what's worse than the weak numbers is that management (who have tiny equity stake) is not accountable to shareholders: 

***note: Titan Machinery is simply a reseller of Machinery Equipment and not a manufacturer. As a reseller the comapny needs to compete with manufacturers Caterpillar, Deere, CNH and other Manufacturers.

***also note: Company leases the property of 48 locations from entities that top executives have ownership interest in.







  
Video shows Inventory from a Spring 2012 Brochure priced at $185,000 and then shows the same inventory in the company's (titan machinery) website on August 11,2013 at a price of $199,000. Trying to figure out how they price their inventory on their Balance Sheet.
This Used Equipment is competing with New Equipment being offered for 0% interest for 60 month financing. 






If Interest Rates go up, here are risks from 10K:

  •  

    Our existing debt agreements contain restrictive covenants that may restrict our ability to adopt any of these alternatives. Any non-compliance by us under the terms of our debt agreements could result in an event of default which, if not cured, could result in the acceleration of our debt.

    CNH Capital
            CNH Capital offers floorplan financing to CNH dealers to finance the purchase of inventory from both CNH and other suppliers. CNH Capital provides this financing in part to enable dealers to carry representative inventories of equipment and encourage the purchase of goods by dealers in advance of seasonal retail demand. CNH Capital charges variable market rates of interest based on the prime rate on balances outstanding after any interest-free periods and retains a security interest in all of our assets, including inventories, which it inspects periodically. The interest-free periods, which CNH offers periodically in the form of additional incentives or special offers, typically average four months for new and used agriculture equipment and new construction equipment. CNH Capital also provides financing for used equipment accepted in trade, repossessed equipment and approved equipment from other suppliers, and receives a security interest in such equipment.

    Approximately 61% of floorplan notes payable were interest bearing at January 31, 2013. As of January 31, 2013, approximately 39% of our floorplan notes payable was non-interest bearing.
    The increase in floorplan interest expense of $5.0 million and other interest expense of $8.1 million, as compared to the prior year, was due to the increase in floorplan notes payable balances and our Convertible Notes issued in April 2012.
    Debt Facilities
            Senior Secured Credit Facility.     We currently have a Credit Agreement with the Wells Fargo Bank Syndicate that provides for a $375.0 million wholesale floorplan line of credit (the "Floorplan Line") and a $75.0 million working capital line of credit (the "Working Capital Line"). The amount available under the Floorplan Line is reduced by adjustments based on borrowing base calculations and various standby letters of credit denominated in Euros and U.S. dollars used to guarantee equipment purchases from CNH by our foreign subsidiaries. The Credit Agreement has a variable interest rate on outstanding balances of LIBOR plus an applicable margin of 1.5% to 2.625% per annum, depending upon our consolidated leverage ratio, has a 0.3% to 0.4% non-usage fee on the average monthly unused amount and requires monthly payments of accrued interest. The Credit Agreement is secured by all our assets and contains certain financial covenants that impose a minimum fixed charge coverage ratio and a maximum debt to tangible net worth ratio, and requires prior approval of acquisitions exceeding certain thresholds. The Credit Agreement also restricts our ability to make certain cash payments without prior approval, including payments for stock repurchases and cash dividends, except that it permits paying cash dividends in an amount not to exceed 50% of consolidated net income for the then trailing four quarters, so long as no default or event of default exists prior to or immediately following such action or otherwise results from such action. The Credit Agreement, as amended, expires March 30, 2016.
    CNH Capital Credit Facility.     We currently have a credit facility with CNH Capital that provides for an aggregate principal balance of up to $450.0 million for floorplan financing, the availability of which is reduced by outstanding floorplan notes payable, rental fleet financing and other acquisition-related financing arrangements with CNH Capital, as described below. Interest rates are currently equal to the prime rate plus 4% on new borrowings, subject to any interest-free periods offered by CNH Capital. The CNH Capital term loans and loans for certain purposes also have interest rates equal to the prime rate plus 4% per annum. Cumulative and unpaid balance of advances under the CNH Capital credit facility accrues interest each month and requires monthly payments. The CNH Capital credit facility automatically renews on August 31 of each year, unless earlier terminated by either party. The CNH Capital credit facility is secured by the financed assets. Repayment terms vary by individual notes, but generally payments are made from sales proceeds or rental revenue from the related inventories. As of January 31, 2013, we had approximately $247.7 million outstanding on the CNH Capital credit facility, of which approximately $243.9 million related to floorplan notes payable. The CNH Capital credit facility contains certain financial covenants that impose maximum levels of adjusted debt to tangible net worth and debt service ratios. It also contains various restrictive covenants that require the prior consent of CNH Capital if we desire to engage in any acquisition of, or consolidation or merger with, any other business entity in which we are not the surviving company; create subsidiaries; move any collateral outside of the U.S.; or sell, rent, lease or otherwise dispose or transfer any of the collateral, other than in the ordinary course of business. CNH's consent is also required for the acquisition of any CNH dealership. In addition, the CNH Capital credit facility restricts our ability to incur any liens upon any substantial part of our asset
      Agricredit Credit Facility.     We currently have a credit facility with Agricredit Acceptance LLC ("Agricredit") that provides for an aggregate principal balance of up to $175.0 million. As of January 31, 2013 we had $96.8 million outstanding on the Agricredit credit facility. The Agricredit credit facility may be used to purchase or refinance new and used equipment inventory. The interest rate on borrowings under the Agricredit credit facility is equal to the three-month LIBOR rate plus an applicable margin of 4.75% to 5.25% per annum, depending upon the our average daily outstanding balance. The Agricredit credit facility allows for increase, decrease or termination of the credit facility by Agricredit on 90 days notice. Under covenants of the Agricredit credit facility, we have agreed, among other things, to maintain various financial ratio levels, to submit certain financial information, and to obtain prior consent from Agricredit if we desire to engage in any acquisition meeting certain financial thresholds. The balances outstanding with Agricredit are secured by the related inventory. Repayment terms vary by individual notes, but generally payments are made from sales proceeds or rental revenue from the related inventories.
    New Accounting Pronouncements
            In March 2013, the FASB amended authoritative guidance on the parent's accounting for the cumulative translation adjustment upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity, codified in ASC 830, Foreign Currency Matters . The amendments require an entity that ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity to apply the guidance in ASC 830-30, Translation of Financial Statements , to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. For an equity method investment that is a foreign entity, the partial sale guidance in ASC 830-30-40, Derecognition , still applies. As such, a pro rata portion of the cumulative translation adjustment should be released into net income upon a partial sale of such an equity method investment. The guidance is effective for derecognition events occurring in fiscal years beginning after December 15, 2013, with early adoption permitted. We will adopt this guidance on February 1, 2014. Its adoption is not expected to have a material effect on our consolidated financial statements.
    52
            In February 2013, the FASB amended authoritative guidance on reporting of amounts reclassified out of accumulated other comprehensive income, codified in ASC 220, Comprehensive Income . The amended guidance did not change existing disclosure requirements, but requires presentation of information about significant reclassifications out of accumulated other comprehensive income in one place within the financial statements, or cross-referenced to related footnote disclosures. The guidance is effective for reporting periods beginning after December 15, 2012, with early adoption permitted. We adopted this guidance on February 1, 2013. Its adoption did not have a material effect on our consolidated financial statements.
            In January 2013, the FASB amended authoritative guidance on disclosures about offsetting assets and liabilities, codified in ASC 210, Balance Sheet . The amended guidance clarified that the scope of the disclosures about offsetting assets and liabilities include derivatives accounted for in accordance with ASC 815, Derivatives and Hedging , including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and certain securities borrowing and securities lending transactions. The guidance is effective for the interim and annual periods beginning on or after January 1, 2013. We adopted this guidance on February 1, 2013. Its adoption did not have a material effect on our consolidated financial statements.
            In July 2012, the FASB amended authoritative guidance on impairment testing for indefinite-lived intangible assets, codified in ASC 350, Intangibles—Goodwill and Other . The amended guidance provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is impaired. If an entity determines that the fair value of the indefinite-lived intangible asset is not more likely than not impaired, then the entity is not required to perform a quantitative assessment. However, if an entity concludes that the fair value of an indefinite-lived intangible asset is more likely than not impaired, it is required to perform the impairment test by comparing the fair value with the carrying amount. An entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. The guidance is effective for the interim and annual periods beginning after September 15, 2012, with early adoption permitted. We adopted this guidance on July 31, 2012 and utilized it in our annual indefinite-lived intangible assets impairment testing as of January 31, 2013. Its adoption did not have a material effect on our consolidated financial statements.
    Interest Rate Risk:     Exposure to changes in interest rates results from borrowing activities used to fund operations. For fixed rate debt, interest rate changes affect the fair value of financial instruments but do not impact earnings or cash flows. Conversely, for floating rate debt, interest rate changes generally do not affect the fair market value but do impact future earnings and cash flows, assuming other factors are held constant. We have both fixed and floating rate financing. Some of our floating rate credit facilities contain minimum rates of interest to be charged. Based upon balances and interest rates as of January 31, 2013, holding other variables constant, a one percentage point increase in interest rates for the next 12-month period would decrease pre-tax earnings and cash flow by approximately $4.3 million. Conversely, a one percentage point decrease in interest rates for the next 12-month period would result in an increase to pre-tax earnings and cash flow of approximately $4.3 million. At January 31, 2013, we had variable rate floorplan notes payable of $689.4 million, of which approximately $421.1 million was interest-bearing, variable notes payable and long-term debt of $12.0 million, and fixed rate notes payable and long-term debt of $79.2 million.



Learn Importance of Free Cash Flow:

Olstein: "Free Cash Flow is Air of Corporations"




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