EXHIBIT 99.1
UNITED INDUSTRIAL CORPORATION
Contact: James H. Perry
Vice President and Cheif Financial Officer
(410) 628-8786
United Industrial Reports Third Quarter Results
-----------------------------------------------
- Board Declares Dividend and Authorizes Stock Buy-Back Program -
HUNT VALLEY, Md., Nov. 12 /PRNewswire-FirstCall/ -- United Industrial
Corporation (NYSE: UIC) today announced its financial results for the third
quarter and nine months ended September 30, 2003. Revenue and income amounts
from continuing operations include the results of the Company's Defense, Energy
and Other segments only. The results of the Company's remaining transportation
operations are reported as discontinued operations.
Third Quarter Results
---------------------
Revenues from continuing operations for the third quarter increased $2.2
million or 3.2% to $69.3 million from $67.1 million in the year-ago quarter.
For the third quarter of 2003, the Company's net income from continuing
operations was $2.8 million, or $0.21 per diluted share, compared to $4.5
million, or $0.32 per diluted share, in the third quarter last year.
The third quarter 2003 results include pension expense of $944,000, net of
tax, or $0.07 per diluted share and a severance charge resulting from the
closure of the New York office of $314,000, net of tax, or $0.02 per diluted
share. The third quarter 2002 results include pension expense of $122,000, net
of tax, or $0.01 per diluted share. The increase in pension-related expense is
primarily due to the downward trend in the securities markets and interest rates
as of the pension plan's most recent measurement date of December 31, 2002.
Excluding the pension performance in both years and the charge related to the
closure of the New York office in 2003, income from continuing operations in the
2003 third quarter would have been $4.1 million, net of tax, or $0.30 per
diluted share, compared to $4.6 million, net of tax, or $0.33 per diluted share,
in the third quarter of 2002.
Although the total gross profit amount in the Defense segment increased
during the third quarter of 2003 compared to 2002, the gross profit as a percent
of sales decreased. During the third quarter of 2002, the program mix in the
Defense segment included higher margin international sales that favorably
impacted earnings. However, during the third quarter of 2003 the Defense segment
experienced improved margins on domestic programs.
In its discontinued transportation operations, the Company reported a net
loss in the third quarter of 2003 of $16.8 million, or a loss of $1.23 per
diluted share, compared to a net loss of $1.8 million, or a loss of $0.13 per
diluted share, in the third quarter last year. The 2003 results primarily
include a loss of $15.3 million, net of tax, related to the estimated loss
incurred by Electric Transit, Inc. (ETI), in which the Company's AAI subsidiary
is a 35% stockholder, to complete the production and warranty phases of its one
remaining contract to provide electric trolley buses to the San Francisco
Municipal Railway (MUNI). Also included in the 2003 loss is $888,000, net of
tax, of costs related to idle capacity that cannot be allocated to the Company's
now substantially completed MUNI subcontract and $240,000, net of tax, of
general and administrative expenses. The 2002 loss includes approximately
$870,000, net of tax, of general and administrative expenses, $530,000, net of
tax, of costs related to idle capacity that cannot be allocated to the Company's
MUNI subcontract, $378,000, net of tax, in estimated costs to complete the
Company's MUNI subcontract, and a $66,000, net of tax, provision related to a
loss associated with ETI.
1
Frederick M. Strader, President and Chief Executive Officer, said, "Overall,
we're pleased with the continuing performance of our core defense businesses.
Operationally, our key product lines turned in solid results. We're very proud
in particular of the performance of our Shadow 200 Tactical Unmanned Aerial
Vehicle (UAV) systems and Pioneer UAV systems in Iraq, and especially proud of
the logistical support teams on the ground providing crucial support to U.S.
soldiers and marines."
"In our discontinued transportation business, our AAI subsidiary has
successfully completed its production deliveries under its MUNI electric trolley
bus subcontract from ETI. However, ETI itself has taken additional reserves in
reassessing its remaining obligations with respect to its MUNI contract and the
Company has recorded an additional loss to reflect the funding for ETI's
reserves that we anticipate we will be required to provide to ETI. I am not
happy with the need to take this action, but our transportation team is working
hard to assist ETI in resolving this contract quickly and efficiently, and I
believe this perseverance will pay off. Despite this setback, we are moving
quickly to implement plans that will improve shareholder value. While many of
our growth initiatives are only in early stages of development, we are focusing
a significant portion of time to these efforts."
"In addition, the Board of Directors of United Industrial Corporation
authorized the repurchase of up to $10 million of United Industrial's common
stock. It is our belief that, given the current stock price, the shares
represent an attractive investment opportunity for our company. With our strong
cash position, the success that we have seen in our core defense business, and
the confidence we have in our future, the repurchase program is an excellent way
for us to invest in the continuing growth and success of United Industrial."
Operating Highlights
--------------------
The Company is continuing to win new customers and contracts globally while
reinforcing its industry leadership across key niche defense markets. During the
third quarter, the Defense segment recorded new bookings of $95.0 million and
ended the quarter with $283.0 million of funded backlog.
The flagship program of the Defense segment continues to be the Shadow 200
Tactical Unmanned Aerial Vehicle (TUAV) program for the U.S. Army. During the
third quarter of 2003 this program was awarded an additional $26.7 million in
funding for a range of services such as logistics, test support, and training as
well as continuing operations overseas in support of Operation Iraqi Freedom
where Shadow 200 TUAVs have now flown over 2,800 hours. This award brings the
funded backlog in the unmanned aerial vehicle line of business to $98.0 million
at quarter end. In addition, full rate production for TUAV air vehicles is
running two months ahead of schedule in the Company's effort to support U.S.
Army demand that remains strong. In fact, Major General Odierno of the 4th
Infantry Division requested an immediate deployment of another Shadow TUAV
system from the Army and stated, "The Shadow 200 is a winner that is providing
critical intelligence needed to prosecute our fight."
2
Also, in this quarter, the Company was awarded a $4.6 million contract to
provide Joint Service Electronic Combat Systems Tester (JSECST) Test Program
Sets and other equipment to the Air Force, as well as $500,000 in additional
funding in support of JSECST-related logistics and engineering services to the
Navy. At September 30, 2003 the JSECST program had a funded backlog of $53.8
million. In shipboard systems, another Defense segment mainstay, the Company was
awarded a $400,000 contract modification by the U.S. Navy to begin systems
engineering for the On-Board Trainer (OBT) system for the Navy's FFG Class
ships. Importantly, a total of 21 ships are expected to receive OBT systems over
the next three years for a total anticipated value of $14-16 million.
During the third quarter, the Defense segment's Engineering and Maintenance
Services business (ESI) received a $37.7 million order for production and
delivery of additional maintenance training devices and engineering support for
the U.S. Air Force's C-17 Globemaster III transport. The current backlog on this
program is $75.9 million. ESI, as a subcontractor to Vertex, was awarded $5.45
million in August for the Navy's T-45 Ground Based Training Systems contractor
logistics support program. Four additional option years are expected to follow
for a total value of $27.5 million.
Detroit Stoker, the Company's Energy segment subsidiary, experienced an up
tick in order demand both at home and abroad through a number of significant
contract orders during the third quarter. The combination of an effective
restructuring last year and continuing global demand for renewable energy
sources has placed Detroit Stoker in a favorable market position going forward.
Nine Months Results
-------------------
Revenues from continuing operations for the 2003 nine-month period increased
$38.4 million or 20.3% to $227.8 million from $189.3 million in the first nine
months of 2002.
For the first nine months of 2003, the Company's net income from continuing
operations increased 20.3% to $8.6 million, or $0.63 per diluted share, from
$7.2 million, or $0.52 per diluted share, in the first nine months of 2002. The
2003 nine-month results include pension expense of $2.9 million, net of tax, or
$0.21 per diluted share, asbestos related consulting and legal fees of $430,000,
net of tax, or $0.03 per diluted share and a charge resulting from the closure
of the New York office of $317,000 net of tax, or $0.02 per diluted share. The
2002 nine-month results include pension expense of $354,000, net of tax, or
$0.02 per diluted share. Also included in the 2002 results was a charge of $2.5
million, net of tax, or $0.18 per diluted share, related to the closing of the
Company's foundry operations at its Detroit Stoker subsidiary and an insurance
recovery of $174,000, net of tax, or $0.01 per diluted share. Excluding the
asbestos related items and the New York office closure costs in 2003, the
pension performance in both years, and the foundry closing costs and insurance
recovery in 2002, income from continuing operations in the first nine months of
2003 would have been $12.2 million, net of tax, or $0.90 per diluted share, an
increase of 24.4% from $9.8 million, net of tax, or $0.72 per diluted share, in
the comparable period of 2002.
Although the total gross profit amount in the Defense segment increased
during the first nine months of 2003 compared to 2002, the gross profit as a
percent of sales decreased. During the first nine months of 2002, the program
mix in the Defense segment that included higher margin international sales
favorably impacted earnings. However, during the first nine months of 2003 the
Defense segment experienced improved margins on domestic programs.
3
The Company's discontinued transportation operations reported a net loss in
the nine-month period of 2003 of $19.0 million, or a loss of $1.39 per diluted
share, compared to a net loss of $26.5 million, or a loss of $1.93 per diluted
share, in the same period last year. The 2003 results primarily include a loss
of $15.7 million, net of tax, related to the estimated loss incurred by ETI to
complete the production and warranty phases of its one remaining contract to
provide electric trolley buses to MUNI. Also included in the 2003 loss are $2.3
million, net of tax, of costs related to idle capacity that cannot be allocated
to the Company's now substantially completed MUNI subcontract and $838,000, net
of tax, of general and administrative expenses. The 2002 results include a
provision of $13.8 million, net of tax, related to the sale of the Company's
overhaul contracts. Also included in the 2002 loss was approximately $1.9
million, net of tax, in estimated costs to complete the Company's remaining
transportation contracts, $1.9 million, net of tax, of general and
administrative expenses, $2.8 million, net of tax, of other costs related to the
disposal of the conveyed contracts, and a $5.8 million, net of tax, loss related
to ETI.
During the completion of the discontinued transportation operations, the
Company anticipates that the amount of overhead to be absorbed by its now
substantially completed MUNI subcontract will not be sufficient to cover the
total overhead incurred. The Company's discontinued transportation operations
will expense the unabsorbed overhead as incurred. These charges are expected to
be approximately $3,000,000 to $3,500,000 from October 1, 2003 through the third
quarter of 2004. Further, general and administrative expenses related to the
discontinued transportation operations that likewise will be expensed as
incurred from October 1, 2003 through the third quarter of 2004 are expected to
be about $1,300,000. In addition, upon completion of the discontinued
transportation's production operations the Company contemplates a charge
associated with the idle facility, primarily future operating lease costs, of
approximately $1,000,000. Subleasing the facility space may mitigate these
costs. Including the unabsorbed overhead, general and administrative expenses,
and operating lease costs described above, the Company expects that it may fund
the discontinued transportation operations about $18 million over the next ten
years. No assurances can be given, however, as to the actual amount of the
Company's liability concerning ETI's obligation to complete its one remaining
contract to deliver electric trolley buses to MUNI, and exit the discontinued
operations.
Business Initiatives
--------------------
In September the Company announced that, among other efforts, it intended to
close its New York office, sell non-core assets, and consider a stock buy- back
program in order to maximize shareholder value. In accordance with those
recently announced strategic initiatives the Company closed its New York office
on October 31, 2003. Consequently, all functions have been relocated to United
Industrial Corporation's headquarters at Hunt Valley, Maryland which is also the
headquarters of the Company's AAI Corporation Defense segment subsidiary. During
the third quarter of 2003, the Company recorded a $314,000, net of tax severance
charge related to the former employees of the New York office. In the fourth
quarter of 2003, the Company anticipates a charge of about $287,000, net of tax
related to the closure of the New York facility. Further, in October 2003 the
Company engaged Imperial Capital LLC to assist the Company in a potential sale
of its Detroit Stoker Energy segment.
Stock Buy -- Back Program
-------------------------
The Board of Directors of United Industrial Corporation authorized the
repurchase of up to $10 million of United Industrial's common stock. The timing
of the buy-back and the exact number of shares provided will depend on market
conditions.
4
Dividend Declaration
--------------------
The Company announced that its Board of Directors has declared a dividend of
$0.10 a share on its common stock, payable December 3, 2003 to stockholders of
record at the close of business on November 21, 2003.
USE OF NON-GAAP MEASURES
In addition to disclosing financial results that are determined in
accordance with generally accepted accounting principles (GAAP), Management
believes that providing Pro forma Earnings from Continuing Operations, a non-
GAAP measure, is meaningful to investors because it provides insight with
respect to ongoing operating results of the Company. Special items included in
the Pro forma results represent significant charges or credits that are
important to understanding the Company's ongoing operations. The Company also
discloses EBITDAP (earnings before interest, taxes, depreciation, amortization,
and pension results) which likewise is a non-GAAP measure. 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 the Company's operating performance. Such
measurements are not recognized in accordance with GAAP and United Industrial
Corporation does not intend for this information to be considered in isolation
or as a substitute for GAAP measures.
The Company will hold a conference call Thursday, November 13, 2003, at
10:00 a.m. (ET) to discuss its financial results for the third quarter of 2003.
A live webcast of the call will be accessible for all interested parties on the
Company's website, www.unitedindustrial.com, in the Investor Relations section,
or on www.streetevents.com. Following the call, the webcast will be archived for
a period of two weeks and available at www.unitedindustrial.com, or at
www.streetevents.com.
United Industrial Corporation is a company focused on the design and
production of defense systems. Its products and services include unmanned aerial
vehicles, test and simulation systems, automated aircraft test and maintenance
equipment and logistical/engineering services. The Company also manufactures
combustion equipment for biomass and refuse fuels.
Except for the historical information contained herein, information set
forth in this news release may contain forward-looking statements 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, reference
is made to the Company's most recent Annual Report on Form 10-K, and Quarterly
Report on Form 10-Q as filed with the Securities and Exchange Commission.
###
5
FINANCIAL HIGHLIGHTS:
---------------------
(Dollars and Share Amounts in Thousands Except Per Share Amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
September 30 September 30
------------------- -----------------
2003 2002 2003 2002
(unaudited)
Net Sales From
Continuing Operations $69,273 $67,109 $227,752 $189,304
========== ========== ========== ==========
Income From
Continuing Operations $2,801 $4,462 $8,633 $7,176
========== ========== ========== ==========
Loss From
Discontinued Operations $(16,751) $(1,844) $(19,011) $(26,535)
========== ========== ========== ==========
Net Income (Loss) $(13,950) $2,618 $(10,378) $(19,359)
========== ========== ========== ==========
Basic Earnings per share:
Income From
Continuing Operations $0.21 $0.34 $ 0.66 $0.55
========== ========== ========== ==========
Loss From
Discontinued Operations $(1.26) $(0.14) $(1.44) $(2.04)
========== ========== ========== ==========
Net Income (Loss) $(1.05) $0.20 $(0.79) $(1.49)
========== ========== ========== ==========
Diluted Earnings per share:
Income From
Continuing Operations $0.21 $0.32 $0.63 $0.52
========== ========== ========== ==========
Loss From
Discontinued Operations $(1.23) $(0.13) $(1.39) $(1.93)
========== ========== ========== ==========
Net Income (Loss) $(1.03) $0.19 $(0.76) $(1.41)
========== ========== ========== ==========
Weighted average shares
outstanding:
Basic 13,267 13,065 13,159 13,021
========== ========== ========== ==========
Diluted 13,597 13,736 13,653 13,729
========== ========== ========== ==========
6
United Industrial Corporation and Subsidiaries
Consolidated Condensed Balance Sheet
(Dollars in Thousands)
September 30 December 31
2003 2002
(unaudited)
Assets
Current Assets
Cash and cash equivalents $12,373 $3,635
Trade receivables 49,272 37,688
Inventories 16,144 20,951
Federal income taxes receivable - 15,509
Assets of discontinued operations 12,106 14,042
Other current assets 7,808 5,879
------- -------
Total current assets 97,703 97,704
Insurance receivable -- asbestos litigation 20,324 20,343
Property & equipment -- net 21,669 21,196
Other non-current assets 19,160 18,952
------- -------
Total assets $158,856 $158,195
======= =======
Liabilities and Shareholders' Equity
Other current liabilities $40,135 $35,697
Liabilities of discontinued operations 15,489 11,513
Other long-term liabilities 23,012 23,226
Minimum pension liability 12,596 8,276
Reserve for asbestos litigation 31,647 31,852
------- -------
Total Liabilities 122,879 110,564
Shareholders' equity 35,977 47,631
------- -------
$158,856 $158,195
======= =======
7
United Industrial Corporation and Subsidiaries
SEGMENT DATA
(Dollars in Thousands)
Three Months Ended Nine Months Ended
September 30 September 30
2003 2002 2003 2002
(unaudited) (unaudited)
Net Sales:
Defense $62,242 $59,126 $206,132 $166,155
Energy 7,031 7,983 21,620 23,149
--------- --------- --------- ---------
Total $69,273 $67,109 $227,752 $189,304
========= ========= ========= =========
Segment profit (loss)
Defense $3,809 $5,129 $12,116 $11,536
Energy 1,145 1,726 2,701 (66)
Other (563) 188 (1,427) (326)
--------- --------- --------- ---------
Total $4,391 $7,043 $13,390 $11,144
========= ========= ========= =========
(Expenses) income included in
Segment profit above:
Defense
Pension expense $(1,615) $(600) $(4,844) $(1,800)
Insurance recovery - - - $271
Energy
Restructuring costs - $(4) - $(3,845)
Asbestos related
expense - - (667) -
Pension income $135 $408 $406 $1,250
Other
New York office
closure costs $(492) - $(492) -
8
UNITED INDUSTRIAL CORPORATION AND SUBSIDIARIES (UIC)
GAAP AND PRO FORMA RESULTS
The following table provides a reconciliation of UIC'S GAAP to pro forma
earnings per diluted share from continuing operations
(Dollars in Thousands) Three Months Ended Nine Months Ended
September 30 September 30
------------------- ------------------
2003 2002 2003 2002
---- ---- ---- ----
(unaudited) (unaudited)
GAAP earnings from
continuing operations
before income taxes $4,391 $7,043 $13,390 $11,144
Plus: Asbestos related
expense - - 667 -
Plus: New York office
closure costs 492 - 492 -
Plus: Restructuring
charge - 4 - 3,845
Plus: Pension expense 1,615 600 4,844 1,800
Less: Pension income (135) (408) (406) (1,250)
Less: Income from
insurance recovery - - - (271)
Pro forma earnings from
continuing operations
before income taxes
(non-GAAP measure) $6,363 $7,239 $18,987 $15,268
======= ======= ======= =======
UNITED INDUSTRIAL CORPORATION AND SUBSIDIARIES (UIC)
GAAP AND PRO FORMA RESULTS
The following table provides a reconciliation of UIC's GAAP to pro forma
earnings per diluted share from continuing operations
Three Months Ended Nine Months Ended
September 30 September 30
------------------- ------------------
2003 2002 2003 2002
---- ---- ---- ----
(unaudited) (unaudited)
GAAP earnings per diluted
share from continuing
operations $0.21 $0.32 $0.63 $0.52
Plus: Asbestos related
expense - - 0.03 -
Plus: New York office
closure costs 0.02 - 0.02 -
Plus: Restructuring
charge - - - 0.18
Plus: Pension expense 0.08 0.03 0.23 0.08
Less: Pension income (0.01) (0.02) (0.02) (0.06)
Less: Income from
insurance recovery - - - (0.01)
Pro forma earnings per
diluted share from
continuing operations
(non-GAAP measure) $0.30 $0.33 $0.90 $0.72
===== ===== ===== =====
9
United Industrial Corporation and Subsidiaries
Reconciliation of Net Cash from Operating Activities from Continuing
Operation to EBITDAP from Continuing Operations
(Dollars in Thousands)
Nine Months Ended
September 30
------------------
2003 2002
---- ----
(unaudited)
Net cash provided by operating
activities from continuing operations $27,341 $ 4,349
Equity in income of investee company 54 67
Other cash flow changes related to
operating activities 6,896 11,125
Continuing operations tax refund,
resulting from discontinued
operations losses (16,822) -
Income taxes 4,757 3,968
Interest (income) expense, net (44) 516
Restructuring charge (492) (425)
--------- --------
EBITDAP from continuing operations
(non-GAAP measure) $21,690 $19,600
10