Titan Machinery Q2 Net Income Of $6,000 Increases Market Capitalization By $40 Million

Titan Machinery (NASDAQ: TITN) reportedFY 2016 2nd quarter financials yesterday morning premarket and shares skyrocketed up 20% for the day closing @ $12.39. ($261 million market capitalization).

Fundamental Highlights (including Archives):

• 9/9/15 Sales Decline 25%
• 9/4/15 Keep Your Eyes on the Numbers
• 9/2/15 Closes at New 70 month low
• 9/1/15 Estimates Range
• 8/28/15 New 66 month Low
• 8/20/15 Playbook: Long Gold, Short Titan,Apple,Stratasys

• 6/9/15 10Q Reveals Errors: Inflated Assets/Understated Losses
• 6/9/15 Founder Jumps Out As President With Golden Parachute
• 6/3/15 Shareholders Asked to Give Proxy Vote to Non Director
• 5/29/15 CoFounder Suddenly Resigns as President
• 5/29/15 Local MN Brokerage Upgrade Creates ShortSqueeze
• 5/27/15 History of Underwritings and Related Party Transactions
• 5/27/15 Hyped Guidance, Misses FY2015 by over $2.00 EPS est
• 5/21/15 Will SEC Comment Again?
• 5/17/2015 Chairman's Speculation Sends Bonds Up 21%
• 5/12/2015 Two Directors Suddenly Resign After $31 million loss

• 4/15/15 FY2015 10K : ($1.51) loss
• 4/9/15 A Warning Cut in Half
• 3/13/15 Bond Makes All Time Low
• 3/9/15 Titan Shares HALTED
• 2/12/15 Unusual Volume with No News, ....again
• 1/14/15 Negative $500 Million Negative Cash Flow

• 12/10/14 Q3 Report

• 4/25/2013 MOST OVERPRICED STOCK IN THE MARKET (leads the league in related party transactions)

What the Pros say about Equities Research

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. 

$TITN LOWERS FULL YEAR EPS GUIDANCE to Loss Per Share ($0.02) to ($0.23).

Titan Machinery Inc. Announces Results for Fiscal Third Quarter Ended October 31, 2014

 

$TITN LOWERS FULL YEAR EPS GUIDANCE to Loss Per Share ($0.02) to ($0.23)...YIKES
— tom renna (@StockPicker908) December 10, 2014

$TITN Q3 2015 AGRICULTURAL SALES declined -25% vs Q3 2014 AG SALES......($95 million decline)
— tom renna (@StockPicker908) December 10, 2014

$TITN Q3 2015 SALES declined -16% vs Q3 2014......($95 million decline)
— tom renna (@StockPicker908) December 10, 2014

CLICK TO Archives

TITAN MACHINERY Lowers FY2015 EPS Guidance: $0.00-$0.30

Titan Machinery reported a loss for their third consecutive quarter on Tuesday morning that sent shares down to a new 4 year low @ $11.85, a price that it had previously traded at in March 2010.

    

Aside from lowering their net income guidance dramatically, the company also lowered their cash flow and sales outlook as well.

chart source: (bigcharts.com) click chart to enlarge.


The stock has closed under $14 per share for 21 consecutive days and saw a brief spike yesterday after the CEO bought 90,000 shares @ 13.03. The trade in my opinion is insignificant in light of the most recent prior trade the CEO did when he  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. (more on Hyping of Shares (Unrealistic Guidance) that Directors used to take advantage of Stock Sales can be found here)

 

Management Discloses ERRORS made in 1st Quarter 10Q

In their FY2015 2nd quarter 10Q filed on Tuesday afternoon with the Securities and Exchange Commission the company stated that they realized that they had inflated their assets and understated their losses in their 1st quarter 10Q filed back in June. Although they previously reported an Earnings Per LOSS of ($0.20) for Q1, it came to their attention that had actually loss ($0.31) for the quarter. The company determined that the error on the loss of over 50% was immaterial and that they won't deem it necessary to Refile their FY2015 Q1 10Q. I am wondering if the SEC will think otherwise?

•  "The incorrect classification of the VAT asset as a non-monetary asset coupled with the significant devaluation of the UAH resulted in an overstatement of the Company’s assets (Prepaid expenses and other) as of April 30, 2014 and an understatement of the Company’s loss (Interest income and other income (expense)) for the three months ended April 30, 2014. This correction increased the Company’s Net Loss Attributable to Titan Machinery Inc. by $2.3 million (from the previously reported $4.2 million to $6.5 million) and increased the diluted loss per share by $0.11 (from the previously reported $0.20 loss per share to a $0.31 loss per share). This correction is reflected in the accompanying unaudited Consolidated Statements of Operations for the six-month period ended July 31, 2014.
  
  
  Based on an evaluation of all relevant factors, the Company concluded that this correction was immaterial to the Company’s results for the three months ended April 30, 2014; therefore, the Company determined that an amendment of its previously filed Form 10-Q for the quarterly period ended April 30, 2014 was not necessary, and the correction will be reflected in future 10-K and 10-Q filings."

 $150 million Corporate Bond (2019) @ New All Time Low $76.00 w 10.4% yield

•  FY2015 2nd quarter 10Q included a footnote regarding the covenants of Titan's $150 million indenture with Wells Fargo, specifically the 4th amendment in less than a year. What is interesting to not is that the underwriting only occurred 2 years ago and the investment banker found it seemed fir to make yet a 4th amendment.

Wall Street Money Mangers and Brokerages Are Looking the Other Way

The biggest mystery to the Titan Machinery trading activity is that 85% of the shares (according to Morningstar) are held by institutions. 

The trailing twelve months ending July 31,2014 Titan has total net income of $690,000 and the stock @$13 a share values the company at $275 million. (or a PE of 398 on ttm basis)

With FY 2015 EPS Guidance now at $0.00 to $0.30 per share , if use the mid range of $0.15 eps, the shares are currently trading at PE of nearly 100!

Why is there such a disconnect with the fundamentals of this underlying business and the price of its stock market valuation? I am seriously thinking that these shares may be being manipulated. One director on the board who is also a founder of the company is the general partner of an underwriting firm for the company and may know more about why shares trade at such a huge premium. 

Management of Titan can blame price of corn, the weak construction & agricultural economy,  poor farming, the unrest with their footprint in the UKRAINE, but I blame The company's poor financial condition on GREED AND RELATED PARTY TRANSACTIONS

TITAN Machinery Reports Disastrous Q2 Financials Pre Market, Shares Lower

T I T N down to $11.95 pre-market

Hats off to @StockPicker908 for sticking w/his warnings on $TITN all the way down http://t.co/NMAM2lzW9c

— Herb Greenberg (@herbgreenberg) September 9, 2014

$TITN FY2015 Q2 loss ($0.03) vs. FY2014 Q2 $0.18

— tom renna (@StockPicker908) September 9, 2014

$TITN OUTLOOK LOWERED , cut in half. expects net income to be in range $6.4 mil- $12.7 million, vs previous range of $14.8 mil to $21.1 mil

— tom renna (@StockPicker908) September 9, 2014

$TITN reports third consecutive quarterly loss

— tom renna (@StockPicker908) September 9, 2014

$TITN Net Income for TRAILING TWELVE MONTHs ending July 31,2014 : $690,000 that's 690 thousand dollars. Mkt Cap $275 million, PE is 398 ttm

— tom renna (@StockPicker908) September 9, 2014

$TITN Lowered Guidance Again TODAY as Expected Equities Research: Warning: Don't Buy Titan Machinery Guidance http://t.co/HXsFqt7SPd

— tom renna (@StockPicker908) September 9, 2014

$TITN FloorPlan Payable increased from $798 million in Q1 to $850 million in Q2

— tom renna (@StockPicker908) September 9, 2014

$TITN CURRent LIABILITES increased from $940 million in Q1 to $972 million in Q2 3.4% increase

— tom renna (@StockPicker908) September 9, 2014

Tweets by @StockPicker908

Awaiting Titan Machinery Q2 Results

Titan Machinery (NASDAQ: TITN) Fiscal Year 2015 2nd quarter ended July 31,2014. Over the last several years Titan has reported Q2 financials within the first 10 days of September. Titan has not yet announced when they will be reporting Q2  financials.

Don't Be Surprised if Titan Machinery Pre-Announces Q2  Financials in August

Investors should note that in 2013 Titan shares were halted after the close on May 23,2013 when the company uncharacteristically announced preliminary  FY2014 Q1 financials (approximately 2 weeks before they normally released Q1 numbers). In the press release and on the conference call the following morning, the company  significantly lowered expected Q1 financials and cut their year end FY2014 outlook dramatically.

FY2013 Q1 May 23,2013 Titan Machinery Press Release:

• "First quarter fiscal 2014 revenue is expected to be approximately $50 million less than the Company previously anticipated;"
•  "Preliminary loss per diluted share for the first quarter of fiscal 2014 is expected to be in the range of $(0.01) to $(0.03) on approximately 20.9 million weighted average diluted common shares outstanding, compared to net income of $0.36 on approximately 21.0 million weighted average diluted common shares outstanding in the first quarter last year."
•  "believe we will see improvements in our construction segment in the second quarter and throughout the remainder of fiscal 2014."

FY2013 Q2 reported on September 5,2013 Company  press release



FY2013 Q2 Financials Examined by Equities Research LLC,

•  Thursday, September 5, 2013

  Titan Machinery EPS Falls 73%

  Titan Machinery Lowered Guidance for FY2014 from  $1.70-$2.00 down to $1.20-$1.50
  Q2 Operational Cash flow NEGATIVE $42 million
  
  
  
  
  
  EPS declined 73% 6 months
  FY2013 6 months : $0.60
  FY2014 6 months : $0.16
  
  
  EPS declined 28% Q2 vs Q2
  FY2013 Q2 : $0.25
  FY2014 Q2 : $0.18
  
  
  CASH declined $22 million
  January 31,2013 : $124 million (Accounts Payable $28 million)
  July 31,2013 :       $102 million (Accounts Payable $39 million)
  Total Current Liabilities
  January 31,2013 : $804 million
  July 31,2013 :       $969 million
  Total Long Term Liabilities 
  January 31,2013: $239 million
  July 31,2013 :      $264 million
  Net Income vs Operational Cash Flow
  Trailing 10 quarters ending July 31,2013 Net Income:                 $89 million
  Trailing 10 quarters ending July 31,2013 OP. Cash Flow:        -($345 million)

 

Posts of Titan Machinery's Decline from $30 to $14

Friday, August 24, 2012

Weakening Cash Flow at DICK'S & TITAN 

Monday, September 10, 2012

Titan Reports, Misses, Cuts, ....Drops

Tuesday, April 9, 2013

Titan Machinery Reports in Morning

Thursday, April 25, 2013

Most OverPriced Stock Titan Machinery Files Proxy Statement

Thursday, May 16, 2013

March Newsletter Performance 9 out 10 Picks " In The Money"

Thursday, May 16, 2013

13 out 15 February Newsletter Picks "In the Money"


Tuesday, June 4, 2013
TITAN STOCKHOLDERS Did NOT APPROVE PROPOSAL 3


Monday, August 12, 2013

Titan Machinery Warning


Wednesday, September 4, 2013
Don't Trust Titan Machinery's Guidance


Thursday, September 5, 2013

Titan Machinery EPS Falls 73%

Wednesday, December 4, 2013

Greg Harmon Technical Chart of Titan Machinery

Friday, December 6, 2013

Equities Research Gets Recognized For Titan Machinery Warning
Wednesday, December 11, 2013

Reseller Can't Compete with Manufacturers


Tuesday, March 11, 2014

Top Short Pick: TITAN MACHINERY


Friday, April 4, 2014

Titan Machinery Convertible Bond Nears All Time Low


Monday, April 7, 2014

A Review of Securities & Exchange Commissions Comments regarding Titan Machinery Disclosure


Friday, April 11, 2014

Warning: Don't Buy Titan Machinery Guidance


Sunday, April 13, 2014

10K FootNote: Wells Fargo Tightens Debt Agreement (again) on Titan Machinery


Thursday, June 5, 2014

Titan Machinery Reports Q1 Loss of ($0.20)


Thursday, June 12, 2014

Don't Assume Titan Machinery Will Be Profitable because Management Says So


Thursday, June 19, 2014

New Credit Agreement Requirements Makes Titan Highly Speculative



archived statistics with Stockdiagnostics Charts of Titan Machinery

http://www.equitiesresearch.com/news.asp?Title=titn

Titan Machinery's Inventory Reduction Guidance will Lower Future Sales Significantly

Creditors Forcing Titan To Switch Gears

report by Michael Markowski, www.OnlinefinancialSector.com

When Titan Machinery released its fiscal 2014 year end results on April 10, 2014, it forecasted or provided guidance for its operating cash flow.  Titan stated that it was going to generate $60 million to $80 million in positive non GAAP operating cash flow for its current fiscal year ending January 31, 2015.  It further stated that the method that it would utilize for the Company to generate positive operating cash flow in a fiscal year for the first time in at least six years was its liquidation or its reduction of its equipment inventories by $250 million.  Under Titan’s inventories reduction guidance total inventories would decline from $1.08 billion as of January 31, 2014 to $758 million by January 31, 2015. 

We are highly confident that the decision by Titan’s management to reduce its inventories to $758 million will result in a decline in the Company’s revenue and profits for fiscal 2016 as compared to fiscal 2015.  Fiscal 2016, would be the second consecutive year that Titan’s revenues decline.  Titan, based on its own guidance that it has already given, will depart fiscal 2015 by reporting its first annual revenue decline since it’s been a public company. 

Those who are invested in Titan’s shares are having a great time at the grand party that started as soon as its management concluded their conference call.  During the call, which included a 23 page presentation, Titan’s management provided details and highlights for its fiscal 2014 earnings report.  It also provided guidance for fiscal 2015. 

Every great party always ends with a hangover.  As Titan moves through fiscal 2015, the analysts making of and publishing their projections for its next fiscal year (2016) beginning on February 1, 2015, will become increasingly paramount.   As the analysts and Titan’s institutional investors begin to do their homework we have no doubt that they will come to the same conclusion that we have come to.  Doubts as to whether or not Titan can continue to be a growth company or even meet its EPS projections for 2015 will begin to surface.  During 2013, Titan’s management lowered it EPS guidance for its 2014 fiscal year three consecutive times.  . 

Titan Machinery’s EPS Guidance for Fiscal Year (FY) January 31, 2014

Date of Guidance EPS Estimate FY 2014 Final EPS  FY 2014 04/10/13 $2.00-$2.30 $0.78 05/23/13 $1.70-$2.00 $0.78 09/05/13 $1.20-$1.50 $0.78 12/05/13 $0.55-$0.75 $0.78

There was one highlight at the bottom of page 19 of the presentation which Titan’s management provided to analysts and investors on April 10, 2014 that raised our eyebrows.  It was that the company had “$410.7 Million Available on $1.2 Billion Floorplan lines of Credit”.  On November 14, 2013, Titan’s Credit Agreement with Wells Fargo had been amended.  Under the amended terms and conditions Titan’s Net Leverage Ratio (Total Liabilities/Tangible Equity) was permitted to be a maximum of 3.5 for any fiscal period on or after January 31, 2014.  

According to the Balance Sheet data which Titan published in its April 10^th press release its Total Liabilities were $1.15 billion on January 31, 2014.  Titan’s permitted Total Liabilities under the Credit Agreement that was amended on November 14, 2013 was $1.31 billion.  The maximum net amount that Titan could have increased its Total Liabilities by as of January 31^st was $160 million and not the $410.7 million that the company claimed was available via its unused portion of its Floorplan lines of Credit.  The difference between the two amounts is $250.7 million.  

On April 3, 2014, which was one week before Titan announced its earnings, the company’s Credit Agreement with Wells Fargo was again amended.  Under the new terms the Company’s Consolidated Net Leverage Ratio was decreased from 3.5 to 3.25 by October 31, 2014 and to 3.0 by January 31, 2015.  The Total Liabilities permitted under the amended terms was $1.22 billion for fiscal quarters ending July and October 31^st and $1.12 billion on January 31^st.  This assumes no change in Titan’s tangible book value.  In its guidance Titan indicated that the company would take a $4.2 million pre-tax charge associated with the company’s realignment that it expects to be realized in the first quarter of fiscal 2015.  This charge could lower Titan’s tangible book value and reduce it permitted Total Liabilities. 

Based on the recently amended Wells Fargo Credit Agreement, Titan’s Total Liabilities for its fiscal quarters ending on July 31, 2014 and October 31, 2014, can only increase by $70 million as compared to what its Total Liabilities were on January 31, 2014.  By January 31, 2015, Titan’s Total Liabilities will have to decline by $30 million as compared to January 31, 2014 for the company to remain under its ratio of 3.0.  The unused portion ($410.7 million) of its Floorplan line of credit will be un-utilizable.

Obviously, the decision that management made to reduce its inventories for the purpose of Titan to begin to generate positive operating cash flow was based on necessity.   However, Titan’s management overreacted in their including a $250 million reduction of inventories by January 31, 2015, in their guidance for Fiscal 2015.  Titan’s management did not do their homework.  They have not seriously considered the ramifications or repercussions from their reducing inventories by 25%. 

There are two issues that Titan’s management should have considered before they calculated the amount of that they were reducing their inventories by for their fiscal 2015 guidance.  If these issues had been considered we believe that they would have made the decision to reduce Titan Machinery’s Inventories by an amount that was much less than $250 million.   

The first issue that they did not address is that there is a strong historical correlation between Titan’s revenue and its Inventories growth rates.  The table below illustrates and compares the growth rates of Titan’s inventories and revenue for its fiscal years 2010 through 2014.  The decline in the growth rate of its inventories for 2014 to 8.5% from 24.2% resulted in a sharp decline in its revenue growth rate to 1.3% from 32.5%.  

Growth Rates for Titan Machinery’s Inventory and Revenue for Fiscal Years 2010 through 2014

Fiscal Year Inventories Growth Rate Revenue Growth Rate 2014 08.5% 01.3% 2013 24.2% 32.5% 2012 74.0% 52.3% 2011 23.5% 20.4% 2010 44.4% 21.4%

The second issue that Titan’s management failed to consider is the company’s historical Revenue/Inventories ratio.  The table below further illustrates the relationship or ratio between Titan’s revenue and its inventories.  The ratio or multiple of Revenue that Titan has generated has ranged between 2.06 and 2.53 times its inventories since 2010. 

Titan Machinery’s Revenue/Inventories Ratios, Fiscal Years 2010 through 2014

Fiscal Year Revenue Inventories Rev/Inv Ratio 2014 2.23B 1.08B 2.06 2013 2.20B 929M 2.37 2012 1.66B 748M 2.22 2011 1.09B 430M 2.53 2010 838M 348M 2.41

Titan has forecasted that it will reduce its inventories from $1.08 billion to $758 million by January 31, 2015.  It’s the one and only forecast in Titan’s guidance that will be easy for them to achieve.

Since Titan’s $250 million reduction in its Inventories is all but guaranteed it’s much easier for even a novice to project future revenue for the company.  Projecting the minimum and maximum ranges of future annual revenue for Titan is as simple as multiplying the projected amount of inventories by the company’s lowest and highest revenue/inventories ratios over its prior five years.  With the reduction in Titan’s inventories we are projecting its revenue range for fiscal 2016 to be $1.56 billion at the low end and $1.91 billion at the high end.  Our top end number for 2016 is below Titan’s low end revenue number of $1.95 billion for fiscal 2015. 

Titan’s management in providing guidance on its operating cash flows and reduction in inventories has painted itself into a corner.  Its due to them not considering the downside regarding the reduction of inventories by 25% in fiscal 2015 as compared to fiscal 2014.  Its extremely difficult for any company to make the argument that they can continue to increase revenue while significantly decreasing inventories.  We have no doubt that savvy investors and analysts will confront Titan’s management with the same mathematical argument that we are making.  Titan’s severe inventory reductions will result in its generating significantly lower revenue and EPS for both its 2015 and 2016 fiscal years.       

As soon as the stock market starts to price in or discount the increasing probability that Titan Machinery will have lower revenue in fiscal 2016 as compared to fiscal 2015, its share price will begin to head lower and go to a single digit price to earnings (PE) multiple or ratio.  Either actual or projected consecutive annual revenue declines will relegate Titan Machinery to being a cyclical tractor dealership play.  Based on Titan’s minimum non GAAP earning per share projection of $.70 and maximum of $1.00, and its history of guiding forecasts down during prior fiscal years we are projecting that its share price will be trading below $10 by the end of 2014.