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Saga Communications Inc. Message Board

froddoislost 5 posts  |  Last Activity: Jun 16, 2014 10:13 AM Member since: Nov 4, 2004
  • froddoislost froddoislost Jun 16, 2014 10:13 AM Flag

    I don't know who would expect to see Titan's margins increase. First and foremost this is an Ag dealership. Their margin percent is already quite impressive for Ag. When I look at corn and bean prices I wouldn't want to be sitting on a bloated inventory at this time.

    If they are reducing their used (trade-in) inventory while increasing new then I can see floor plan dollars increase more than inventory.

    When you're incentivized to sell new models for market share but you let your used inventory build you've got a problem. I thought Titan had some sort of '90 days to auction' system set up for the trade-in equipment. How's that working out? One thing happens when you reduce used inventory aggressively; your margins fall. You cannot help it. You normally hope to make better margin on used than on new. Hence the manufacturers offer incentives and better floor plan terms.

    For Titan, any significant positive cash flow will come from either additional borrowing or inventory reduction, which in turn equates to inventory turns, especially in used. But with a gross turn under two I don't know how they'll ever make it work. I think that metric has improved for Titan, but it will need to climb above three to get where they need to be. Like I say; I see CNH Capital picking up the debt sooner or later.

    As for the officers buying the properties, that is pretty common in private equity situations. Pretty sure that it happens with publicly trades companies too, though there are additional hurdles and pitfalls.

    Self dealing is frowned upon in transactions involving publicly traded outfits. An arms-length real-estate management group would probably have different disclosure requirements than a group consisting entirely of company officers and kin.

  • froddoislost froddoislost Jun 13, 2014 2:30 PM Flag

    Well dog gone. Apparently the proprietors of this establishment do not want anyone to explain the meaning of SOT.

    SOT = sold out of trust. This is where you sell equipment and operate on the cash flow before paying down the floorplan note. This is common among equipment dealers, or at least it happens far more often than the manufacturers are willing to admit.

    Note to moderator; I have not said TItan is SOT. I have not said that they will be. In fact, I have said that CNH Capital will pick up the pieces when Wells Fargo balks at the prospect.

    Having said that, the question remains; what would be the implications of SOT for a publicly traded company? Just curious.

    (See if this reply gets nabbed by the mod too.)

  • froddoislost froddoislost Jun 10, 2014 1:09 PM Flag

    What I find interesting is that Inventories increased 41 million while they paid 17 million down on the floorplan, yet the net floorplan increased by 65 million.

    Anybody? Any explanation for that?

    I thought the goal was to reduce floorplan inventory financing, why is it going up?

    Now you and I both know that Wells Fargo has no leverage here. CNH Capital will step in and take all of the "non-manufacture floorplan". Question is; what does SOT mean for a publicly traded company? Somebody may be losing sleep at night over that question.

    Eventually this will look like another Wolterman. Only really really huge and this time there is no Titan to step in and take the problem off their hands.

    Will Case step in and try to return to a company owned store model at that point? How do they treat Titan's investors at that point? I mean, are the investors in Titan supposed to just hand over the keys and allow CNH to have it in order to protect their marketing interests? How much are those interests worth? What would that do to CNH's stock price?

    "Hey, investors, what we're gonna do is spend a couple hundred million dollars preventing our North American market from falling off a cliff, and its only gonna cost us another 20 million a year beyond that to keep it going. But don't worry, once we're done with that, we'll be right back where we were in 1984 when we bought IH; no equity in the dealership network and company stores that resemble California wildfires. "

    Only this time, when they go to sell those stores to private dealership owners, there won't be any takers.

    I am sure there is a marketing plan here somewhere.

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  • Reply to

    12 or 25

    by billwick Apr 17, 2014 10:15 AM
    froddoislost froddoislost May 5, 2014 11:12 AM Flag

    I don't know that it matters. Its so thinly traded that 25 could be done fairly easily. But the reality is that it WILL hit 12 on the way to points lower.

    Here's a clue; reducing inventory not only hurts sales, it kills gross margin. This will be fun to watch.

    Here's what I see happening; they can't make their inventory reductions so CNH Capital steps in and provides the inventory financing necessary to keep TITN afloat (anyone else see the pun there?).

    More details as this unfolds. But remember the word 'float'. It'll come up again.

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