EXHIBIT 99.1
UNITED INDUSTRIAL CORPORATION
CONTACT: JAMES H. PERRY
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
(410) 628-8786
UNITED INDUSTRIAL REPORTS FOURTH QUARTER AND YEAR-END RESULTS
- BOARD AUTHORIZES ADDITIONAL STOCK BUY-BACK
- AGREEMENT IN PRINCIPLE REACHED TO EXPEDITE COMPLETION OF DISCONTINUED
TRANSPORTATION OPERATIONS
HUNT VALLEY, MD, March 11, 2004 - United Industrial Corporation (NYSE: UIC)
today announced its financial results for the fourth quarter and full year ended
December 31, 2003. Revenue and income figures from continuing operations include
the results of the Company's Defense and Energy segments. Results of the
Company's remaining transportation operations are reported as discontinued
operations. The Company also announced that the Board had authorized an
additional stock buy-back program and that an agreement in principle had been
reached to expedite completion of the discontinued transportation operations.
Fourth Quarter Results
- ----------------------
For the fourth quarter of 2003, revenues from continuing operations grew 19.8%
to $83.2 million, compared to revenues in the year-ago quarter of $69.5 million.
Income from continuing operations during the fourth quarter of 2003 was $6.5
million, net of tax, or $0.47 per diluted share, compared with a loss of $3.3
million, net of tax, or a net loss of $0.25 per diluted share, in the fourth
quarter of 2002.
The fourth quarter 2003 results include a pre-tax charge associated with the
closing of the New York City office of $409,000 and a pre-tax net pension
expense of $1.7 million. The 2002 fourth quarter's results include an
asbestos-related pre-tax provision of $11.5 million, as well as a pre-tax net
pension expense of $771,000. Excluding the pension expense in both years, the
New York City office charge in 2003, and the asbestos provision in 2002, income
from continuing operations for the 2003 fourth quarter would have been $7.9
million, net of tax, or $0.56 per diluted share, compared to $4.5 million, net
of tax, or $0.35 per diluted share, in the fourth quarter of 2002.
Although the total gross profit amount for the Company and the defense segment
increased in the fourth quarter of 2003 compared to 2002, the gross profit as a
percentage of sales in the defense segment decreased. This was primarily due to
increased costs on a particular government program as well as higher pension
plan expense.
1
United Industrial's discontinued transportation operations posted a pre-tax loss
for the fourth quarter of 2003 of $3.0 million, or $1.9 million net of tax, or a
net loss of $0.14 per diluted share, compared to a pre-tax loss of $25.3
million, or $16.4 million, net of tax, or $1.26 per diluted share, in the
year-ago quarter. The 2003 results primarily include $2.5 million, pre-tax,
related to operating expenses incurred by the Company and $490,000, pre-tax,
related to operating expenses incurred by Electric Transit, Inc. (ETI), in which
the Company's AAI subsidiary is a 35% stockholder. The discontinued
transportation operation's 2002 fourth quarter includes approximately $2.8
million, pre-tax, related to operating expenses of the Company, and $4.9
million, pre-tax, in estimated costs to complete the Company's subcontract to
support ETI in its one remaining contract to deliver electric trolley buses to
the San Francisco Municipal Railway (MUNI), and a $17.6 million, pre-tax,
provision related to the loss associated with ETI.
Currently, ETI virtually completed production of the electric trolley buses
under its one remaining contract for MUNI, with 271 of the 273 electric trolley
buses required under this contract now delivered, leaving primarily retrofit and
warranty obligations.
Frederick M. Strader, President and Chief Executive Officer, said, "The fourth
quarter represented a strong finish to what has been a solid year of performance
for United Industrial's core defense segment. The increases we achieved in
revenue and income were driven by the continued growth of our core defense
businesses and, most notably, by our Shadow 200 Tactical Unmanned Aerial Vehicle
(TUAV) and Joint Service Electronic Combat Systems Tester (JSECST) programs. We
have placed a foremost priority on expanding our leadership across critical
niche defense markets of the twenty-first century and continue to invest in the
long-term success of our Company. Reflecting the strong pipeline of business we
have in place, we recorded new bookings during the quarter of $116.4 million,
ending the year with funded backlog of $323.2 million, up 7.2% from $301.4
million at year-end 2002.
"Our focus going forward remains on enhancing value for United Industrial
shareholders. We are enthusiastic about the prospects for our business and are
reaping the benefits of cost reduction measures we have implemented. We have
been active purchasers of United Industrial stock under the buy-back program
initiated in November 2003 and essentially completed in January 2004, and we
continue to explore opportunities for the sale of non-core assets. Our team
looks forward to building on our progress in the upcoming year."
Operating Highlights
- --------------------
Mr. Strader continued, "Through our emphasis on forward-looking Department of
Defense (DoD) programs and cutting-edge technologies, we continue to build upon
our expertise and expand our business base. The defense segment recorded $110.4
million in new bookings during the fourth quarter, ending the year with a funded
backlog of $318.3 million at December 31, 2003.
"A key factor in the Company's performance continues to be the significant
growth of the global Unmanned Aerial Vehicle (UAV) market. Militaries across the
world increasingly recognize that UAVs can save soldiers' lives by being
deployed for vital surveillance, reconnaissance and target acquisition tasks.
United Industrial has been developing UAVs for decades, and today, our UAV
business is well-positioned to capitalize on this accelerating demand.
2
"For example, under our TUAV program for the U.S. Army, we have developed the
Army's next-generation of military UAVs, now in full production. We are proud
that our TUAV systems have been deployed in Iraq since March 2003, and have
remained actively involved in America's post-war efforts there. Most recently,
we received two related orders from the U.S. Army for a total 11 additional
Shadow 200 TUAV systems with a combined value of $97 million. The U.S. Army
committed approximately $48 million with these orders with the balance expected
later this year. This initial funding brings our TUAV program to a current
backlog of $127.7 million.
"In Test Systems, we are continuing our work across a number of contracts in
connection with the JSECST, another program that we have targeted as a
high-growth opportunity for our Company. Including contracts valued at over $5
million received last quarter, the current JSECST backlog is now $51.1 million.
"Elsewhere in Training Systems, our leadership in Advanced Moving Target
Simulators (AMTS) has won our Company major new customers overseas. In October,
we received a $2.5 million contract for next-generation AMTS systems to be used
for air defense training by the Italian Army. In December, we received a $2.2
million order for an AMTS unit for use in the Australian Army's air defense
training. We received these orders from private sector contractors in both of
these respective countries, which we believe may lead to further opportunities
in the future.
"In addition, our technologies today provide the permanently installed radar
stimulator/ simulators for all ships in the U.S. Navy's Battle Force Tactical
Training (BFTT) system as well as portable Carry-on Combat Systems Trainers
(COCST) that are configurable to any combat ship. Our expertise in this area has
also been recognized abroad; we are currently developing onboard training
systems for the Royal Australian Navy's upgraded FFG-7 class ships.
"Our Engineering and Maintenance Services (ESI) business is continuing to make
progress on a recent $37.7 million contract, awarded in the 2003 third quarter,
for production and delivery of additional maintenance training devices and
engineering support for the U.S. Air Force's C-17 aircraft. A high-growth
platform for our Company, the C-17 program currently has a backlog of $66.3
million.
Full Year Results
- -----------------
Revenues from continuing operations for the full year 2003 increased 20.2% to
$310.9 million from $258.8 million for the previous year.
For the full year 2003, income from continuing operations rose 290.9% to $15.1
million, or $1.10 per diluted share, compared to $3.9 million, or $0.28 per
diluted share, for the previous year.
3
Income from continuing operations in 2003 included, pre-tax charges associated
with closing the New York City office of $901,000, a pre-tax net pension expense
of $6.1 million, and pre-tax asbestos-related consulting and legal fees of
$717,000. Results for the 2002 full year included restructuring pre-tax charges
of $4.7 million associated with the closing of the foundry operations of the
Company's Detroit Stoker subsidiary, an asbestos-related pre-tax provision of
$11.5 million, and a pre-tax net pension expense of $1.3 million. Excluding the
pension and asbestos-related items in both years, the New York City office
charge in 2003 and the foundry restructuring charges and insurance recovery in
2002, income from continuing operations would have been $20.0 million, net of
tax, or $1.45 per diluted share, in 2003, compared to $15.1 million, net of tax,
or $1.12 per diluted share, in 2002.
Although the total gross profit amount for the Company and the defense segment
increased during 2003 compared to 2002, the gross profit as a percentage of
sales in the defense segment decreased. During 2002, the program mix in the
defense segment included higher profit international sales. However, during
2003, the defense segment did experience improved profit on domestic programs.
Also, higher pension expense in 2003 negatively impacted gross profit for the
Company and the defense segment.
For the full year 2003, the Company's discontinued transportation operations
posted a pre-tax loss of $32.2 million, or $20.9 million, net of tax, or a net
loss of $1.53 per diluted share, compared to a pre-tax loss of $66.1 million, or
$42.9 million net of tax, or a net loss of $3.13 per diluted share, in 2002. The
2003 results include a pre-tax loss of $24.9 million related to the estimated
loss to be incurred by ETI to complete the production and warranty phases of its
San Francisco MUNI contract. Also included in the 2003 loss is $7.3 million,
pre-tax, of operating expenses. The 2002 results include $6.6 million, pre-tax,
in estimated costs to complete the Company's MUNI subcontract, a $26.6 million
pre-tax provision related to a loss associated with ETI, a $21.5 million pre-tax
provision recorded in connection with the sale of the Company's transportation
overhaul contracts with the New Jersey Transit Corporation and the Maryland
Transit Administration, and approximately $10.2 million, pre-tax, of operating
expenses.
Stock Buy-Back Program
- ----------------------
The Board of Directors of United Industrial Corporation authorized the
continuation of its stock buy-back program. This authorization allows the
Company to repurchase up to an additional $10 million of United Industrial's
common stock. The timing of the buy-back and the exact number of shares
repurchased will depend on market conditions.
This action follows the Board's previous authorization in November 2003, to
repurchase of up to $10 million of United Industrial's common stock. As of
December 31, 2003, a total of 357,600 shares had been repurchased, for an
aggregate amount of $6,036,000 at an average price of $16.88 per share. In
January 2004, the purchases under this plan were essentially completed. At that
date, the Company had repurchased 576,100 shares at an average price of $17.36
per share.
4
Mr. Strader said, "We are pleased with the progress of our stock buy-back
program and remain committed to this effort as a means to enhance shareholder
value. Based on the outlook for our business and strong financial position, we
continue to believe United Industrial shares, at current valuations, represent
an attractive investment opportunity.
Agreement in Principle to Expedite Completion of Discontinued Transportation
- ----------------------------------------------------------------------------
Operations
- ----------
In February 2004, an agreement in principle was reached among ETI, AAI and MUNI
to settle ETI's contract disputes with MUNI. Pursuant to the proposed
settlement, MUNI would relieve ETI of its warranty and bonding obligations, as
well as other obligations under the contract, except for delivery of all
electric trolley buses ordered and performance of a defined scope of work
related to the deliveries. In exchange, MUNI would receive a release from any
claims that ETI might assert, a cash payment (to be offset by MUNI from payments
remaining due under the contract), and certain other consideration. AAI would
agree to guaranty certain obligations of ETI, make a cash payment to MUNI, and
provide other consideration, in exchange for a release from its warranty and all
further obligations under its subcontract with ETI. As a result of the release
of ETI from its performance bonding obligation, AAI would be released from its
indemnification of the surety. The proposed settlement is subject to the
approval of the Board of Directors of San Francisco's Municipal Transportation
Agency and the Company's Board of Directors. Management believes that these
agreements, if executed, will not have a material adverse effect on the
Company's liquidity or results of operations. No assurances can be given as to
whether the settlement will be executed or its timing.
Mr. Strader concluded, "We are hopeful that this proposed settlement will be
finalized shortly and believe it offers a satisfactory solution to all parties.
MUNI will receive final deliveries of a quality product, and the financial
obligations of both AAI and our affiliate, ETI, will be capped."
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
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 non-cash 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 the Company does not
intend for this information to be considered in isolation or as a substitute for
GAAP measures.
5
The Company will hold a conference call on Friday, March 12, 2004, at 10:00 a.m.
(ET) to discuss its financial results for the fourth quarter and full year 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 training 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 within the meaning of
the Private Litigation Reform Act of 1995, 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. Forward-looking
statements may be identified by the use of words like "plan," "expect," "aim,"
"believe," "project," "anticipate," " intend," "estimate," "will," "should,"
"could," and other expressions that indicate future events and trends. The
Company makes no commitment to update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise. 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.
FOR MORE INFORMATION, PLEASE VISIT UNITED INDUSTRIAL'S WEBSITE AT
WWW.UNITEDINDUSTRIAL.COM
- ------------------------
* * * * *
6
FINANCIAL HIGHLIGHTS:
- ---------------------
(Dollars and Share Amounts in Thousands Except Per Share Amounts)
Three Months Ended Twelve Months Ended
December 31 December 31
---------------------------- -----------------------------
2003 2002 2003 2002
(unaudited)
Net Sales From
Continuing Operations $ 83,195 $ 69,463 $ 310,947 $ 258,767
========== ========== ========== ==========
Income From
Continuing Operations $ 6,473 $ (3,312) $ 15,106 $ 3,864
========== ========== ========== ==========
Loss From
Discontinued Operations $ (1,936) $ (16,407) $ (20,947) $ (42,941)
========== ========== ========== ==========
Net Income (Loss) $ 4,537 $ (19,719) $ (5,841) $ (39,077)
========== ========== ========== ==========
Basic Earnings per share:
Income From
Continuing Operations $ 0.48 $ (0.25) $ 1.14 $ 0.30
========== ========== ========== ==========
Loss From
Discontinued Operations $ (.14) $ (1.26) $ (1.58) $ (3.30)
========== ========== ========== ==========
Net Income (Loss) $ 0.34 $ (1.51) $ (0.44) $ (3.00)
========== ========== ========== ==========
Diluted Earnings per share:
Income From
Continuing Operations $ 0.47 $ (0.25) $ 1.10 $ 0.28
========== ========== ========== ==========
Loss From
Discontinued Operations $ (0.14) $ (1.26) $ (1.53) $ (3.13)
========== ========== ========== ==========
Net Income (Loss) $ 0.33 $ (1.51) $ (0.43) $ (2.85)
========== ========== ========== ==========
Weighted average shares outstanding:
Basic 13,402 13,066 13,219 13,021
========== ========== ========== ==========
Diluted 13,690 13,610 13,662 13,698
========== ========== ========== ==========
7
United Industrial Corporation and Subsidiaries
Consolidated Condensed Balance Sheet
(Dollars in Thousands)
DECEMBER 31 DECEMBER 31
2003 2002
ASSETS
Current Assets
Cash and cash equivalents $ 24,138 $ 3,635
Trade receivables 33,377 37,688
Inventories 16,968 20,951
Federal income taxes receivable - 15,509
Assets of discontinued operations 6,139 15,092
Other current assets 9,417 5,879
--------- ---------
Total Current Assets 90,039 98,754
Insurance receivable - asbestos litigation 20,317 20,343
Property & equipment - net 22,216 21,196
Other non-current assets 18,596 18,952
--------- ---------
Total Assets $ 151,168 $ 159,245
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Other current liabilities $ 31,824 $ 35,697
Liabilities of discontinued operations 16,611 12,563
Other long-term liabilities 23,436 23,226
Minimum pension liability 6,755 8,276
Reserve for asbestos litigation 31,595 31,852
--------- ---------
Total Liabilities 110,221 111,614
Shareholders' Equity 40,947 47,631
--------- ---------
Total Liabilities and
Shareholders' Equity $ 151,168 $ 159,245
========= =========
8
United Industrial Corporation and Subsidiaries
SEGMENT DATA
(Dollars in Thousands)
Three Months Ended Twelve Months Ended
December 31 December 31
--------------------------- ---------------------------
2003 2002 2003 2002
---- ---- ---- ----
(unaudited)
Net Sales:
Defense $ 76,293 $ 63,060 $ 282,425 $ 229,215
Energy 6,902 6,403 28,522 29,552
---------- ---------- ---------- ----------
Total $ 83,195 $ 69,463 $ 310,947 $ 258,767
========== ========== ========== ==========
Segment profit (loss)
Defense $ 9,864 $ 5,577 $ 21,980 $ 17,113
Energy 1,196 (10,042) 3,897 (10,108)
Other (933) (2,241) (2,360) (2,567)
---------- ---------- ---------- ----------
Total $ 10,127 $ (6,706) $ 23,517 $ 4,438
========== ========== ========== ==========
(Expenses) income included in Segment
profit (loss) above:
Defense
Pension expense $ (1,818) $ (1,152) $ (6,662) $ (2,952)
Insurance recovery - - - 271
Energy
Restructuring costs - - - (4,707)
Asbestos related expense (50) (11,509) (717) (11,509)
Pension income 137 381 543 1,631
Other
New York City office closure costs (409) - (901) -
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United Industrial Corporation and Subsidiaries (UIC)
- ----------------------------------------------------
GAAP AND PRO FORMA RESULTS
THE FOLLOWING TABLE PROVIDES RECONCILIATION OF UIC'S GAAP TO PRO FORMA pre-tax
EARNINGS FROM CONTINUING OPERATIONS
(Dollars in Thousands)
Three Months Ended Twelve Months Ended
December 31 December 31
----------------------- -----------------------
2003 2002 2003 2002
-------- -------- -------- --------
(unaudited)
GAAP earnings from continuing operations
before income taxes $10,127 $(6,706) $23,517 $4,438
Plus: Asbestos related expense 50 11,509 717 11,509
Plus: New York City office closure costs 409 - 901 -
Plus: Restructuring charge - - 4,707
Plus: Pension expense 1,818 1,152 6,662 2,952
Less: Pension income (137) (381) (543) (1,631)
Less: Income from insurance recovery - - - (271)
-------- -------- -------- --------
Pro forma earnings from continuing operations
before income taxes (non-GAAP measure) $12,267 $5,574 $31,254 $21,704
======== ======== ======== ========
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 Twelve Months Ended
December 31 December 31
----------------------- -----------------------
2003 2002 2003 2002
-------- -------- -------- --------
(unaudited)
GAAP earnings per diluted share from
continuing operations $0.47 $(0.25) $1.10 $0.28
Plus: Asbestos related expense - 0.56 0.03 .56
Plus: New York City office closure costs 0.02 - 0.04 -
Plus: Restructuring charge - - - 0.23
Plus: Pension expense 0.08 0.06 0.31 0.14
Less: Pension income (0.01) (0.02) (0.03) (0.08)
Less: Income from insurance recovery - - - (0.01)
-------- -------- -------- --------
Pro forma earnings per diluted share from
continuing operations (non-GAAP measure) $0.56 $0.35 $1.45 $1.12
======== ======== ======== ========
10
United Industrial Corporation and Subsidiaries
Reconciliation of Net Cash from Operating Activities from Continuing Operations
to EBITDAP from Continuing Operations
(Dollars in Thousands)
Twelve Months Ended
December 31
---------------------
2003 2002
---- ----
Net cash provided by operating
activities from continuing operations $40,835 $ 22,866
Equity in income of investee company 57 99
Other cash flow changes related to
operating activities 3,392 (4,310)
Continuing operations tax refund,
resulting from discontinued operations
losses (16,822) -
Income taxes 8,411 574
Interest (income) expense, net (371) 716
Restructuring charge (822) (4,707)
---------- ----------
EBITDAP* from continuing operations (non-GAAP measure) $34,680 $15,238
* Earnings before interest, taxes, depreciation, amortization and non-cash
pension results
11