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Turnaround Management Association Poll

Forecasts Changes Ahead for Troubled Industries

Financial services and technology likely to improve in 2004; manufacturing, airlines and automotive industries to continue to struggle

CHICAGO, Ill. – December 18, 2003 – Professionals in the turnaround management and corporate renewal industry anticipate a different landscape in the restructuring scene as a result of improved economic conditions and more liquidity in the capital market overall in 2004. These two factors, along with loosening of credit among lenders, were named most frequently by respondents to a recent Turnaround Management Association (TMA) Trend Watch poll asked to identify the anticipated different dynamics in 2004 compared to last year.

Financial services and technology were named by one-third of the respondents and topped the list of industries expected to improve during 2004. One out of five respondents believe the aerospace/defense and pharmaceutical industries will improve their performance in the coming year.

“The consolidation of the financial services sector has helped make it more efficient,” said Randall Eisenberg, CTP, chairman of Turnaround Management Association and senior managing director at FTI Consulting in New York. “The technology industry has had its first good year after several dismal ones, and defense continues to be a major focus of investment in America.”

TMA Trend Watch respondents were less optimistic for manufacturing, airlines and automotive industries, which came in as the top three most likely to experience the greatest financial and/or operations difficulties in 2004. Telecommunications slipped to fourth place after being number two in last year’s poll as the pick for most distressed industries in the year ahead.

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When asked to pick the industries that suffered the most during 2003, about two-thirds named airlines, followed by manufacturing (43 percent) and telecommunications (29 percent).

“It’s not surprising that our members, who have their finger on the pulse of troubled industries, picked the airline industry as one causing significant concern for the third year,” Eisenberg said. “Business travel has not returned to its former levels. Pension and other employee costs remain high. Many large airlines continue struggling to make their business models profitable in a very difficult environment.”

“Although manufacturing showed sharp improvement in October with a surge in new orders, it remains to be seen whether that growth will be sustained through 2004 across the various manufacturing sectors,” said John Rizzardi, TMA president and director of Cairncross & Hempelmann P.S. in Seattle. “The competition, both domestically and foreign, and the weakening financial performance among automobile manufacturers, will make 2004 a challenging market for automobile manufacturers, and due to the trickle-down effect, the automotive suppliers.”

Retail was number two on the list of industries predicted in the 2002 Trend Watch poll to experience the most operational/financial difficulties in 2003 (30 percent of respondents). However, when 2003 respondents answered the question about the most troubled industries this year, retail slipped to fifth position, named by only 15 percent of the respondents.

“Retail, while still under stress, is in far better financial shape than it was three years ago,” said Ward Mooney, incoming president of TMA and president of Fleet Retail Group, Inc., in Boston. “U.S. retailers now realize that there are too many stores to satisfy the demands of the consumer and have stopped expanding and used that money to reduce debt.”

More than half the respondents (57%) still saw economic conditions as a key obstacle to underperforming companies ahead, with one-third naming changes in competition and too much debt holding back companies from recovery during 2004.

Turnaround Management Association (), founded in 1988, is the only international non-profit association dedicated to corporate renewal and turnaround management. With international headquarters in Chicago, TMA’s 6,700 members in 33 regional chapters comprise a professional community of turnaround practitioners, attorneys, accountants, investors, lenders, venture capitalists, accountants, appraisers, liquidators, executive recruiters and consultants.

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Note to media: Charts are available upon request.

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