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Titan, Hit by Costs, Reports Big Loss

August 05, 2004|From Associated Press

Titan Corp. on Wednesday posted a second-quarter loss of $66.6 million, hurt by $34.3 million in charges from the government's ongoing bribery investigation and the San Diego defense contractor's failed merger attempt with Lockheed Martin Corp.

Titan said its legal troubles may end up costing it $47 million.

The company's loss of 79 cents a share contrasts with a profit of 7 cents, or $5.9 million, a year ago. Continuing operations generated a loss of $29.4 million, or 35 cents a share.

Wall Street expected Titan to earn 18 cents, according to analysts surveyed by Thomson First Call.

The company set aside $25.5 million in the quarter for the anticipated costs of settling allegations that it violated the Foreign Corrupt Practices Act. Titan had previously reserved $3 million.

Titan said it spent an additional $8.8 million in the quarter on costs associated with the failed merger and the federal investigation. Most of the money went to company lawyers.

During a conference call Wednesday with analysts, Chairman and Chief Executive Gene Ray refused to discuss the federal investigation, but did say the company was continuing to cooperate with investigators.

Timothy J. Quillin, an analyst who covers Titan for investment bank Stephens Inc., said he believed that the settlement reserve signaled the company was close to putting the probe behind it.

"It's a pretty specific number, which means I think we're pretty close to a resolution there," he said. "That said, they expect pretty significant costs in the second half of the year to get resolution."

The federal probe could tack on an additional $5 million to $10 million in legal bills before year's end, Mark W. Sopp, Titan's chief financial officer, told analysts.

Ray said he did not expect that the Justice Department investigation would hurt its U.S. government contract work, Titan's core business.

The investigation is focusing on criminal allegations that Titan consultants made unlawful payments to government officials in Asia, Saudi Arabia and the African nation of Benin in exchange for business.

The Securities and Exchange Commission is also investigating the bribery allegations, and Titan has said the regulator is likely to recommend civil charges. Titan's failure to resolve the probe led to the collapse of the proposed $1.66-billion merger in June.

Total revenue grew 19% in the second quarter to $514.9 million from $433.9 million, reflecting higher activity from defense contracts related to homeland security, intelligence and translation services, as well as engineering and development work.

Titan's biggest contract -- accounting for 10% of its revenue -- is a 5-year-old contract with the U.S. Army to provide translators. Titan employs about 4,200 people worldwide, with many assisting U.S. forces in Iraq, the Army said. A Titan translator, who has since been fired, was implicated in the Abu Ghraib prison scandal in Iraq.

Titan shares Wednesday rose 25 cents to $12.03 on the New York Stock Exchange.

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