United Industrial Reports First Quarter Results United Industrial
Operating Income From Continuing Operations Increased 71% in the
First Quarter of 2005 on Revenue Growth of 32% HUNT VALLEY, Md.,
May 9 /PRNewswire-FirstCall/ -- United Industrial Corporation
(NYSE:UIC) (the "Company") today reported its financial results for
the first quarter ended March 31, 2005. Net sales and income from
continuing operations include the results of the Company's Defense
and Energy segments. The Defense segment, which operates through
AAI Corporation ("AAI", a wholly-owned subsidiary of the Company),
and its subsidiaries, has four product lines consisting of Unmanned
Aerial Vehicles ("UAV Systems"), Engineering and Logistics Services
("Services"), Test and Training Systems, and Advanced Programs. The
Energy segment is conducted through Detroit Stoker Company, a
wholly-owned subsidiary of the Company. Results from the Company's
remaining Transportation operations are reported as discontinued
operations. "Our core Defense segment delivered another strong
performance in the first quarter of 2005," said Frederick M.
Strader, the Company's President and Chief Executive Officer. "Our
Shadow 200 Tactical Unmanned Aerial Vehicle ("TUAV") program for
the U.S. Army continued to lead the Company's performance through
the first quarter of 2005 while our recently awarded Biological
Detection System program began to contribute with the ramp-up in
its activity. Also, we are continuing to focus our efforts on
profitability and growth , including evaluating select
acquisitions, and implementing our restructuring plans to reduce
operating costs and streamline operations in the fluid test systems
product area and at Detroit Stoker," Strader concluded. Financial
Results for the First Quarter of 2005 Net sales from continuing
operations for the three months ended March 31, 2005 increased
31.7% to $107.5 million compared to $81.6 million for the three
months ended March 31, 2004. The gross margin percentage for
continuing operations increased to 24.2% in the first quarter of
2005 from 21.4% during the same period in 2004. In January 2005,
the Company recognized a $7.2 million pre-tax gain on the sale of
approximately 26 acres of undeveloped property adjacent to its Hunt
Valley, Maryland facility. Additionally, net interest expense
increased $828,000 primarily as a result of the Company's issuance
of $120 million 3.75% Convertible Senior Notes in September 2004.
Since both the gain on sale of property and net interest expense
were included in non-operating income, the Company believes that
operating income from continuing operations provides a better
measure of performance in 2005 compared to 2004. Operating income
for the first quarter of 2005 increased 70.9% to $12.2 million from
$7.2 million in the first quarter of 2004. Income from continuing
operations for the first quarter of 2005 increased $7.9 million to
$12.6 million, or $0.84 per diluted share, compared to $4.7
million, or $0.35 per diluted share, for the first quarter of 2004.
Income from discontinued operations in the first quarter of 2005
was $48,000, or $0.00 per diluted share, compared to a loss in the
first quarter of 2004 of ($476,000), or ($0.03) per diluted share.
Net income in the first quarter of 2005 increased to $12.7 million,
or $0.84 per diluted share, compared to $4.3 million, or $0.32 per
diluted share, for the first quarter of 2004. First Quarter 2005
Results By Operating Segment - Continuing Operations Net sales for
the Defense segment in the first quarter of 2005 increased 33.9% to
$100.2 million compared to $74.8 million for the first quarter of
2004. This increase was primarily due to higher production and
support in UAV Systems and higher sales in Services mainly due to
the Biological Detection System program awarded in the third
quarter of 2004. The Defense segment gross margin percentage was
23.5% in the first quarter of 2005 and 19.8% during the first
quarter of 2004. The increase was primarily attributable to
production efficiencies and the favorable resolution of technical
risks in the execution of both the TUAV and Joint Service
Electronic Combat Systems Tester programs. Pre-tax income from the
Defense segment increased $12.2 million to $19.4 million compared
to $7.2 million for the first quarter of 2004. The Defense
segment's pre-tax results in the first quarter of 2005 included
$7.2 million from the sale of property. In addition, the Defense
segment continued the reorganization of its fluid test systems
product area and incurred $330,000 of restructuring charges during
the first quarter of 2005. The Company estimates it will incur $2.2
million of remaining costs under this reorganization plan, which is
expected to be completed by the end of 2005. Selling and
administrative expenses in the Defense segment increased to $11.4
million, or 11.3% of sales, in the first quarter of 2005 compared
to $8.0 million, or 10.7% of sales, in the first quarter of 2004.
The $3.4 million increase was primarily due to higher research and
development expenses, and bid and proposal costs. Net sales for the
Energy segment in the first quarter of 2005 were $7.4 million, an
increase of $549,000, or 8.0%, from the first quarter of 2004. The
Energy segment gross margin percentage was 33.6% in the first
quarter of 2005 and 38.9% during the first quarter of 2004. The
decrease was primarily attributable to restructuring activities and
higher raw material prices. The Energy segment's pre-tax income in
the first quarter of 2005 was $175,000 compared to pre-tax income
of $404,000 for the first quarter of 2004. This decrease in the
Energy segment's results for the first quarter of 2005 was
primarily due to the lower product margins. Financial Results for
Discontinued Operations During the first quarter of 2005, Electric
Transit, Inc. ("ETI"), an entity owned 35% by AAI, sold its
remaining inventory of spare parts and was able to favorably
resolve certain operational challenges associated with its last
remaining program. AAI recorded 100%, or approximately $533,000,
net of tax, of ETI's earnings due to the recording of 100% of ETI's
losses in recent prior years. Offsetting this income was
approximately $485,000, net of tax, of general and administrative
expenses consisting primarily of professional fees related to a
recovery claim initiated by the Company. Income from the Company's
discontinued operations for the first quarter of 2005 was $48,000,
or $0.00 per diluted share, compared to a loss of ($475,000), or
($0.03) per diluted share, in the first quarter of 2004. Bookings
and Funded Backlog The Company received $95.8 million of new orders
and/or funding for products and services during the first quarter
of 2005, an increase of $20.3 million, or 26.9%, compared to the
first quarter of 2004. Including $85.5 million of bookings in the
Defense segment and $10.3 million in the Energy segment, funded
backlog for the Company's continuing operations was $376.2 million
at March 31, 2005, a decrease of $11.7 million, or (3.0%), from
December 31, 2004. During the first quarter of 2005, the Company's
UAV Systems was awarded $22.7 million of additional contracts for
ongoing logistical support for TUAV systems deployed worldwide as
well as an award for $2.5 million to completely refurbish Shadow
TUAV equipment that has been deployed in Operation Iraqi Freedom.
UAV Systems also received a $14.4 million award for an additional
Shadow TUAV system to be produced in conjunction with the eight
Shadow TUAV systems ordered in December 2004. Including these
awards, funded backlog for UAV Systems at March 31, 2005 was
approximately $220.2 million. Also in the first quarter of 2005,
Services received initial funding of $4.0 million to provide
repair, material acquisition, storage, and management support for
hydraulic components for U.S. Navy and Marine Corps EA-6B Prowler
and F-14 Tomcat aircraft fleets. The initial contract period will
run four years through 2008, and includes an option that could
extend it an additional four years. The total potential value of
this contract, if all options are executed, is $30.9 million.
Additionally, Services received $8.4 million of incremental funding
under its existing Biological Detection System contract, and $7.5
million in C-17 Maintenance Trainer Device upgrades and logistical
support. Including these awards, funded backlog for Services at
March 31, 2005 was approximately $90.4 million. Test and Training
Systems had a funded backlog of $39.1 million at March 31, 2005,
primarily related to its Joint Service Electronic Combat Systems
Tester program. Contract deliveries are expected to extend through
the fourth quarter of 2005. In the first quarter of 2005, Test and
Training Systems received awards totaling $4.8 million for
additional production and engineering support related to the U.S.
Navy's On-Board Training System program. Advanced Programs, during
the first quarter of 2005, received initial funding of $6.5 million
for the U.S. Army Phase II and III of the Lightweight Machine Gun
and Ammunition program. This incrementally funded contract is
potentially worth $23.9 million. Funded backlog for Advanced
Programs at March 31, 2005 was approximately $11.8 million.
Initiatives to Enhance Shareholder Value In accordance with its
initiatives to enhance shareholder value, the Company is evaluating
select acquisitions, implementing plans, including restructuring of
operations, to further improve profitability, and exploring the
sale of non-core assets. On April 4, 2005, the Company acquired ESL
Defence Limited ("ESL"), an electronic warfare ("EW") systems
company based in the United Kingdom. The purchase price was
approximately $10 million in cash. ESL is a world leader in the
design and production of electro-optic ("EO") test and simulation
products for use on flight lines and in aircraft maintenance
facilities. The simulators are used to assess the operational
readiness of sophisticated missile warning and countermeasures
systems used on military aircraft. ESL's EO simulators are also
used at military test, evaluation, and training ranges to evaluate
the effectiveness of new self-protection systems and to train
pilots for combat readiness. In addition, ESL conducts EW related
research and support for U.K. government agencies and for prime
contractors in the U.K. and the U.S. In October 2003, Imperial
Capital LLC was engaged to assist the Company in exploring
strategic alternatives for Detroit Stoker, including a potential
sale. This process is ongoing and no assurances can be given
regarding whether Detroit Stoker will be sold or the timing or
proceeds from any such sale. Stock Buy-Back Program On March 10,
2005, United Industrial's Board of Directors authorized a new stock
purchase plan for up to $25.0 million. The timing of the buy-back
and the exact number of shares repurchased will depend on market
conditions. As of December 31, 2004, the Company had $3.5 million
available for purchases under the previous plan, which was unused
and expired on March 15, 2005. Since inception of the initial stock
purchase plan authorized in November 2003, the Company has
purchased a total of 917,700 shares for $16.5 million, or an
average of $18.00 per share. In addition, the Company purchased
850,400 shares of its common stock for approximately $24.4 million,
or $28.64 per share, using a portion of the net proceeds from the
issuance of the 3.75% Convertible Senior Notes in September 2004.
Conference Call Webcast The Company will hold a conference call
Monday, May 9, 2005, at 10:00 a.m. (EDT), to discuss its financial
results for the first quarter of 2005. A live webcast of the call
will be accessible for all interested parties in the Investor
Relations section on the Company's website,
http://www.unitedindustrial.com/, or on
http://www.streetevents.com/. Following the call, the webcast will
be archived for a period of two weeks and available at
http://www.unitedindustrial.com/ or at
http://www.streetevents.com/. United Industrial Corporation
designs, produces, and supports defense systems. Its products and
services include unmanned aerial vehicle systems, training and
simulation systems, automated aircraft test and maintenance
equipment, armament systems, logistical and engineering services,
and other leading-edge technology solutions for defense needs. The
company also manufactures combustion equipment for biomass and
refuse fuels. Use of Non-GAAP Measures In addition to disclosing
financial results that are determined in accordance with accounting
principles generally accepted in the United States of America
("GAAP"), management believes that providing Income from Continuing
Operations Before Special Items, a non-GAAP measure, is meaningful
to investors because it provides insight with respect to ongoing
operating results of the Company. Special items include significant
charges or credits that are important to understanding the
Company's ongoing operations. The Company also discloses EBITDA
(earnings before interest, taxes, depreciation, and amortization),
which is likewise a non-GAAP measure. In addition, the Company
discloses Free Cash Flow, a non-GAAP measure, which equals net cash
provided by operating activities less net cash used in acquiring
property and equipment, net of retirements. The Company believes
Free Cash Flow is used by some investors, analysts, lenders and
other parties to measure the Company's performance over time.
Management believes that providing this additional information is
useful to understanding the Company's ability to meet capital
expenditures and working capital requirements and to better assess
and understand operating performance. Because the Company's methods
for calculating such non-GAAP measures may differ from other
companies' methods, such non-GAAP measures presented may not be
comparable to similarly titled measures reported by other
companies. Such measures are not recognized in accordance with
GAAP, and the Company does not intend for this information to be
considered in isolation or as a substitute for GAAP measures.
Reconciliations from non-GAAP reported measures described in this
press release to GAAP reported results are provided in the
financial tables attached to this document. Forward-Looking
Information Except for the historical information contained herein,
information set forth in this news release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Words such as "expects," "anticipates,"
"intends," "plans," "believes," "estimates," and variations of such
words and similar expressions that indicate future events and
trends are intended to identify such forward-looking statements
which include, but are not limited to, projections of revenues,
earnings, segment performance, cash flows and contract awards.
These forward-looking statements are subject to risks and
uncertainties, which could cause the Company's actual results or
performance to differ materially from those expressed or implied in
such statements. The Company makes no commitment to update any
forward- looking statement or to disclose any facts, events, or
circumstances after the date hereof that may affect the accuracy of
any forward-looking statement. For additional information about the
Company and its various risk factors, please see the Company's most
recent Annual Report on Form 10-K as filed with the Securities and
Exchange Commission. United Industrial Corporation &
Subsidiaries Consolidated Earnings Per Share Three Months Ended
March 31 (Unaudited) 2005 2004 Basic earnings (loss) per share:
Income from continuing operations before special items $ 0.67 $0.36
Special items: Restructuring charges (0.02) -- Gain on sale of
property 0.38 -- Income from continuing operations 1.03 0.36 Income
(loss) from discontinued operations 0.00 (0.03) Net income $1.03
$0.33 Weighted average number of basic shares outstanding
12,316,000 13,136,000 Diluted earnings (loss) per share: Income
from continuing operations before special items $ 0.57 $0.35
Special items: Restructuring charges (0.02) -- Gain on sale of
property 0.29 -- Income from continuing operations 0.84 0.35 Income
(loss) from discontinued operations 0.00 (0.03) Net income $ 0.84
$0.32 Weighted average number of diluted shares outstanding
15,818,000 13,407,000 United Industrial Corporation &
Subsidiaries Consolidated Statements of Operations (Dollars in
Thousands) (Unaudited) Three Months Ended March 31 2005 2004 Net
sales $107,548 $81,648 Cost of sales 81,505 64,161 Gross profit
26,043 17,487 Selling and administrative expenses 13,635 10,228
Asbestos litigation expense 90 -- Other operating expenses, net 80
96 Total operating income 12,238 7,163 Non-operating income and
(expense): Interest income 1,051 64 Interest expense (1,828) (13)
Gain on sale of property 7,152 Other income, net 636 134 7,011 185
Income from continuing operations before income taxes 19,249 7,348
Provision for income taxes 6,625 2,626 Income from continuing
operations 12,624 4,722 Income (loss) from discontinued operations,
net of income taxes 48 (475) Net income 12,672 4,247 Add (deduct)
special items, net of tax: Restructuring charges 267 -- Gain on
sale of property (4,649) -- (Income) loss from discontinued
operations (48) 475 Net income before special items and
discontinued operations $8,242 $4,722 United Industrial Corporation
& Subsidiaries Results By Operating Segment (Dollars in
Thousands) (Unaudited) Three Months Ended March 31 2005 2004 Net
sales: Defense $100,157 $74,806 Energy 7,391 6,842 $107,548 $81,648
Pretax income (loss) from continuing operations: Defense $ 19,447
$7,189 Energy 175 404 Other (373) (245) $19,249 $7,348 Bookings:
Defense $85,563 $67,146 Energy 10,269 8,359 $95,832 $75,505 March
31, December 31, Funded backlog: 2005 2004 Defense $366,028
$380,622 Energy 10,174 7,296 $376,202 $387,918 United Industrial
Corporation & Subsidiaries Non-GAAP Results By Operating
Segment (Dollars in Thousands) (Unaudited) Three Months Ended March
31 2005 2004 Non-GAAP income from continuing operations before tax
- excluding special items: Defense $12,625 $7,189 Energy 256 404
Other (373) (245) 12,508 7,348 Add (deduct) special items: Defense:
Restructuring charges (330) -- Gain on sale of property 7,152 --
Energy: Restructuring charges (81) -- GAAP income from continuing
operations before tax $19,249 $7,348 EBITDA (continuing
operations): Defense $21,309 $8,034 Energy 211 478 Other 450 109
21,970 8,621 Add (deduct): Depreciation and amortization (1,944)
(1,324) Interest (expense) income, net (777) 51 Provision for
income taxes (6,625) (2,626) Income from continuing operations
$12,624 $ 4,722 United Industrial Corporation & Subsidiaries
Non-GAAP Results By Operating Segment (Continued) (Dollars in
Thousands) (Unaudited) Three Months Ended March 31 2005 2004 Free
cash flow: Cash provided by operating activities of continuing
operations $16,526 $8,341 Purchases of property and equipment
(7,994) (661) Proceeds from sale of property 7,555 -- Cash used in
discontinued operations (2,738) 584 Free cash flow $13,349 $8,264
United Industrial Corporation & Subsidiaries Consolidated
Balance Sheets (Dollars in Thousands) (Unaudited) March 31 December
31 2005 2004 ASSETS Current assets: Cash and cash equivalents
$121,852 $80,679 Securities pledged to creditors -- 124,626
Deposits and restricted cash 4,798 33,845 Trade receivables, net
50,497 46,658 Inventories 25,016 34,639 Prepaid expenses and other
current assets 8,897 12,465 Assets of discontinued operations
12,293 13,545 Total current assets 223,353 346,457 Deferred income
taxes 11,387 13,930 Other assets 11,572 11,953 Insurance receivable
- asbestos litigation 20,343 20,343 Property and equipment, net
33,751 27,645 Total assets $300,406 $420,328 LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Current portion of
long-term debt $958 $958 Payable under securities loan agreement --
124,619 Accounts payable 21,363 21,664 Accrued employee
compensation and taxes 13,852 13,706 Other current liabilities
11,804 14,942 Liabilities of discontinued operations 14,527 18,566
Total current liabilities 62,504 194,455 Long-term debt 121,688
122,000 Postretirement benefit obligation, other than pension
22,232 22,942 Minimum pension liability 18,777 17,513 Reserve for
asbestos litigation 31,852 31,852 Total liabilities 257,053 388,762
Shareholders' Equity: Preferred stock, par value $1.00 per share;
1,000,000 shares authorized; none issued and outstanding -- --
Common stock, par value $1.00 per share; 30,000,000 shares
authorized; 12,327,151 and 12,291,951 shares outstanding at March
31, 2005 and December 31, 2004, respectively (net of shares held in
treasury) 14,374 14,374 Additional capital 83,964 84,296 Retained
earnings (deficit) 14,938 3,499 Treasury stock, at cost, 2,046,997
and 2,082,197 shares at March 31, 2005 and December 31, 2004,
respectively (39,343) (40,019) Accumulated other comprehensive
loss, net of tax (30,580) (30,584) Total Shareholders' Equity
43,353 31,566 Total liabilities and shareholders' equity $300,406
$420,328 United Industrial Corporation & Subsidiaries
Consolidated Cash Flows (Dollars in thousands) (Unaudited) Three
Months Ended March 31, 2005 2004 CASH FLOWS FROM OPERATING
ACTIVITIES: Net income $12,672 $4,247 Adjustments to reconcile net
income to net cash provided by operating activities: (Income) loss
from discontinued operations, net of taxes (48) 475 Depreciation
and amortization 1,944 1,324 Pension expense 1,265 1,210 Gain on
Sale of Property (7,152) -- Deferred income taxes 2,833 (413)
Income from equity investment in joint venture (14) (15) Other, net
(742) (246) Changes in operating assets and liabilities: (Increase)
decrease in trade receivables (3,839) 2,031 Decrease (Increase) in
inventories 9,623 (9,031) Decrease (Increase) in prepaid expenses
and other current assets 3,278 (255) (Decrease) Increase in
accounts payable, accruals, and other current liabilities (3,294)
9,014 Net cash provided by operating activities from continuing
operations 16,526 8,341 Net cash (used in) provided by discontinued
operations (2,738) 584 Net cash provided by operating activities
13,788 8,925 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of
property and equipment (7,994) (661) Proceeds from sale of
available-for-sale securities 124,619 -- Proceeds from sale of
property 7,555 -- Net cash provided by (used in) investing
activities 124,180 (661) CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (334) -- Repayment of Collateral
received in securities lending transaction (124,619) -- Proceeds
from exercise of stock options 344 1,166 Decrease in deposits and
restricted cash 29,047 -- Purchases of treasury shares -- (7,141)
Dividends paid (1,233) (1,316) Net cash used in financing
activities (96,795) (7,291) Increase in cash and cash equivalents
41,173 973 Cash and cash equivalents at beginning of year 80,679
24,138 Cash and cash equivalents at end of year $121,852 $25,111
DATASOURCE: United Industrial Corporation CONTACT: Stuart F. Gray,
Treasurer of United Industrial Corporation, +1-410-628-8686 Web
site: http://www.unitedindustrial.com/ Company News On-Call:
http://www.prnewswire.com/comp/113559.html
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