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NEW REPORT: Markowski: Titan's Days Are Numbered

|Includes: Titan Machinery Inc. (TITN)

Tractor Pull for Titan Machinery May be Over by Tomorrow
Titan Machinery's (Nasdaq:TITN)

Tractor pull is getting closer to ending as most of the company's tangible book value is comprised of its tractor inventory. The company is reporting its financials for its 9 months ended October 31, 2013, tomorrow morning. Based on its chronic negative operating and free cash flow and flawed business model I predict that the company will be bankrupt by end of 2014 at the latest due to the following reasons:

  • Titan only has $102 million in cash. Based on its consistent generation of negative operating cash flow the amount will not be sufficient for it to survive even four quarters.
  • Titan has exhausted its ability to obtain additional debt financing. According to its recently filed 10Q it currently is using $970 million of its $1.1 billion credit facility.
  • The debt securities of CNH Global NV (NYSE:CNH), the provider of most of its credit facility were downgraded by Moody's on September 4, 2013.
  • Titan has long term debt of $264 million compared to its tangible book value of $358 million.
  • Titan missed on its earning forecasts for the last three quarters. Its not likely that the 150 institutional shareholders who hold 90% of Titan's outstanding shares will want to participate in a secondary offering.
  • Titan's shares which were recently at $16.31 and have been under pressure. Its market cap is not large enough to support a raise of at least $100 million. It's the amount that Titan will need to make it to calendar 2015.

Since 2010, has been issuing EPS Syndrome warnings on Titan and there has been no doubt in my mind that Titan would eventually have to file for bankruptcy. Titan has never had a business model that could sustain itself. Its only been able to generate positive operating cash flow in four of its last 20 quarters. To remain in business Titan has been reliant on the timely raising of capital. Titan is a "poster child" representing those companies who do not have viable business models and are instead only kept alive via debt and equity financings that are provided by Commercial and Investment banks. Previous notable poster children were specialty food manufacturer Suprema Specialties. It un-expectantly filed for bankruptcy in 2001 within six weeks after it raised $60 million in a secondary offering. Solar energy manufacturer AstroPower surprised Wall Street when it filed for bankruptcy in 2004. had also issued numerous EPS Syndrome warnings on it dating back to 2002 when its shares were trading above $20. The shares of both companies were heavily recommended by Wall Street analysts and owned by Institutional investors at the time of their filings. A three minute video which explains the shared common denominators of the three poster children and others is available at Contributed by Michael Markowski, Founder of