Titan International Reels In Face of Multiple Financial Blows
2 March 2000
United Steelworkers of America: Titan International Inc. Reels In Face of Multiple Financial Blows
1999 Financial Statement Disastrous
$20 Million Balloon Payment to Pirelli Drains Cash
Payout on New $55 Million Settlement Begins
Moody's Investors Services Lowers Ratings on $275 Million Debt
PITTSBURGH, March 1 -- The following release was issued today
by United Steelworkers of America:
A series of devastating financial reports slammed Titan International Inc.
in just a few days in the last two weeks. First, Titan's 1999
financial statement was released on Feb. 22. The dismal numbers reported in
the statement include:
* Revenues falling from $660 million in 1998 to $588 million in 1999
* 1998 earnings of $8 million or 36 cents/share becoming losses --
($11.4 million) or (55) cents/share in 1999
* Continued bloated selling, general and administrative costs
($52.9 million in 1998 - $51.6 million in 1999)
* Research and development spending decreases from $7 million in 1998
to $6.3 million in 1999
Titan also announced that it would pay out a $20 million balloon payment
that it owes Pirelli Tire Corp. for the purchase of its Des Moines, Iowa,
plant -- even though Titan CEO Morry Taylor told a group of analysts in a
phone interview that he did not want to make the payment, but his lawyers
could not find a way to avoid it.
The day after Titan's financials were released, news reports said that
Titan Tire Corp. (a former Titan International Inc. subsidiary) agreed to pay
a $55 million settlement to the survivors of eight people who died in a fiery
two-truck accident in Texas in 1998. The trucks collided after a tire built at
Titan's Des Moines plant, under Pirelli's name, blew out on one of the trucks.
And in perhaps the most damaging announcement of all, Moody's Investors
Services announced on Feb. 28 that it would downgrade the cash-strapped
company's debt ratings. Moody's lowered the rating on Titan's $175 million
revolving credit line from Ba2 to Ba3. It also lowered the rating on Titan's
senior unsecured debt to B1 and lowered the rating on its $150 million of
senior subordinated notes from B1 to B2. "Titan's senior implied rating is
Ba3 and the outlook is negative," Moody's said in a press release that
announced the ratings cuts. The ratings cuts will probably increase Titan's
cost of borrowing money, analysts say.
"The downgrade in ratings and negative outlook reflect the difficult
operating environment Titan has faced, mainly attributable to soft demand from
its agricultural and earthmoving/construction/OEM customers," the release
continued. "In addition, labor disputes at two of its plants have furthered
hindered the company's operating performance."
"As a result, year-end operating income dropped dramatically and the
company reported a $11 million loss in 1999. Consequently, Titan's leverage
has risen considerably and the company is unable to cover interest expense
from cash flow ... Titan's debt is substantial at $275 million (sic).
Furthermore, the Company is vulnerable to customer concentration and operates
in highly cyclical agricultural, earthmoving/construction and consumer
markets.
While the Moody's statement noted Titan's recent announcement that it
would be selling its new LSW line under the Caterpillar Inc. name with an eye
toward increasing revenues, the financials firm concluded:
"Although the Caterpillar venture is a positive sign, its impact on
Titan's profitability is not yet evident. In addition, improvement in Titan's
operating efficiency may take some time given the labor unrest and newly
constructed workforce. Therefore, until there is some evidence that
operations have stabilized and that sufficient demand for Titan products has
returned, downward pressure on the ratings will remain."
"The financial state of Titan Inc. has been in steady decline ever since
Morry Taylor forced USWA Local 164 of Des Moines, Iowa into an Unfair Labor
Practice Strike on May 1, 1998," said the local's president, John Peno. "Now,
nearly two years later, we see that in his effort to break our union, Taylor
has nearly destroyed the entire company. There is no sign that I can see that
he wants to change his ways. If he doesn't, Titan is done as a profit-making
organization."
"We have asked for state and congressional investigations into Taylor's
corporate behavior here in Mississippi," said USWA Local 303L President Leo T.
Bradley. (Titan forced Bradley's local in Natchez, Miss. into an Unfair Labor
Practice Strike on Sept. 14, 1998 after a complex bankruptcy scheme allowed
the company to take over the Natchez plant). "These numbers -- these horrible
numbers -- show that we must increase our efforts even more if we are going to
save this plant and this company from Taylor's money-losing, destructive way
of doing business."
CONTACT: John Peno, 515-262-8134, or Leo T. Bradley, 601-445-5172, or Tom
Johnson, 412-562-6968, all of United Steelworkers of America