EXHIBIT 99.1
UNITED INDUSTRIAL CORPORATION
CONTACT: JAMES H. PERRY
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
(410) 628-8786
UNITED INDUSTRIAL REPORTS FIRST QUARTER RESULTS
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HUNT VALLEY, MD, MAY 7, 2004 - United Industrial Corporation (NYSE: UIC) today
announced its financial results for the first quarter ended March 31, 2004.
Revenue and income figures from continuing operations include the results of the
Company's Defense and Energy segments. Results from the Company's remaining
transportation operations are reported as discontinued operations.
First Quarter Results
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For the first quarter of 2004, revenues from continuing operations increased
12.7% to $81.6 million from $72.4 million in the first quarter of 2003.
The Company's income from continuing operations before tax for the first quarter
of 2004 was $7.2 million or $4.6 million, net of tax, or $0.34 per diluted
share, an increase of 188% from income from continuing operations before tax of
$2.5 million or $1.6 million, net of tax, or $0.12 per diluted share, in the
year-ago period.
Selling and administrative expenses for continuing operations declined 15.5% for
the first quarter of 2004 to $9.6 million before tax from $11.4 million before
tax in the first three months of 2003. During the first quarter of 2004, certain
proposal opportunities were delayed resulting in a shift of research and
development and bid and proposal costs to later in 2004. In 2003, a significant
amount of research and development, and bid and proposal costs incurred during
the year were expended in the first quarter in pursuit of a significant proposal
opportunity.
In 2004, the Company began accruing anticipated award fee revenue and income
related to its C-17 maintenance trainer program over the contractual award fee
period because performance targets can now be reliably predicted. Prior to 2004,
the Company recorded such revenue and income upon notification of the award
evaluation, generally during the Company's third or fourth quarter, because it
could not reasonably estimate the amount of fee to be awarded. Management
believes that historical performance and awarded fees are now a reasonable basis
to estimate future revenue and income on certain contracts. In the first quarter
of 2004, the Company recorded $1.5 million of award fee revenue and income
regarding its C-17 program. This amount included $0.7 million related to current
quarter performance under contracts whereby performance targets can now be
reliably predicted, $0.4 million related to prior year performance, and $0.4
million related to a contract for which performance targets could not be
reliably predicted, but notification of award evaluation was received during the
current quarter. The first quarter in 2003 did not include any award fee revenue
or income.
In addition to the $1.1 million of accrued estimated award fee income associated
with the C-17 program, results from the first quarter of 2004 include a pre-tax
pension expense of $1.2 million. 2003 first quarter results include pre-tax
pension expense of $1.5 million, and pre-tax, asbestos-related consulting and
legal fees of $0.2 million. Excluding these items, pre-tax income from
continuing operations for the 2004 first quarter would have been $7.3 million or
$4.7 million, net of tax, or $0.34 per diluted share, compared to pre-tax income
from continuing operations of $4.2 million, or $2.7 million, net of tax, or
$0.20 per diluted share, in the year-ago period.
Discontinued Transportation Operations
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The Company's discontinued transportation operations posted a pre-tax loss of
$0.7 million, or $0.5 million net of tax, or a net loss of $0.03 per diluted
share, compared to a pre-tax loss of $1.5 million, or $1.0 million net of tax,
or $0.07 per diluted share, in the first quarter of 2003. These results
primarily include costs incurred by Electric Transit, Inc. (ETI), in executing
its last remaining production contract with the San Francisco Municipal Railway
("MUNI") that called for delivery of 273 electric trolley buses, all of which
have been delivered, and administrative expenses of the AAI transportation
division. ETI is 35% owned by AAI Corporation ("AAI"), a wholly owned subsidiary
of the Company.
As of April 22, 2004, ETI and MUNI finalized an agreement, under which MUNI has
relieved ETI of its warranty, performance and warranty bonding obligations, as
well as other obligations under its electric trolley bus contract with MUNI,
except for the performance of a defined scope of work related to modifications
of electric trolley bus hardware. AAI had agreed to indemnify the surety under
the bonding obligations, and as a result, AAI's indemnification obligations have
been cancelled. In a related action, AAI finalized a guaranty agreement with
MUNI that assures performance of specific obligations of ETI arising under its
agreement, required a $0.5 million cash payment to MUNI and provided other
consideration, in exchange for a release from AAI's subcontractor warranty and
all further obligations under its subcontract with ETI.
The Company believes that its obligations related to these agreements have been
adequately provided for within existing loss reserves. Moreover, the cash
required to completely exit the discontinued transportation operations
subsequent to March 31, 2004, including the settlement agreements with MUNI is
expected to be approximately $14.0 million through 2008 of which $10.0 million
is expected to be expended during the last three quarters of 2004. No assurances
can be given, however, as to the actual amount of the Company's liability to
exit the discontinued transportation operations.
2
Frederick M. Strader, President and Chief Executive Officer, commented, "These
agreements represent an important milestone in completing the wind-down of our
discontinued transportation operations and alleviating the losses associated
with this business. With it behind us, we will be able to better focus our
attention and resources in taking advantage of the attractive opportunities in
our core defense operations." "United Industrial's core defense segment had a
strong performance for the first quarter. Our strategy of focusing on critical
niche defense technologies and systems of the future, combined with the steps we
have taken over the past few years to align ourselves closely with Department of
Defense (DoD) needs for the twenty-first century, continue to reap returns for
our Company and its shareholders. Financial results for the quarter were driven
forward primarily by our Unmanned Aerial Vehicle (UAV) business, coupled with
our ongoing production work on the Air Force's C-17 Maintenance Trainer program.
"Our top priority remains that of building value for our shareholders, and we
believe that we are well positioned to continue to do so. We see excellent
opportunities in our core defense businesses and ended the quarter with funded
backlog of $310.6 million. Our share repurchase program remains active, and we
are continuing to explore the potential sale of non-core assets," said Mr.
Strader.
Operating Highlights
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Mr. Strader continued, "Our UAV business - our Company's leading growth platform
- - continues to be driven forward by our Tactical Unmanned Aerial Vehicle (TUAV)
program for the U.S. Army. Our Shadow TUAV units continue to play a vital role
in surveillance, reconnaissance and other operations in Iraq, which, in turn,
has expedited activities under our TUAV full-rate production contract with the
DoD. This quarter, we received a not-to-exceed $27 million contract that
committed an initial $13 million for three additional Shadow TUAV systems under
our full-rate production contract; $18.5 million for continuing research and
development support; $10.4 million for a range of TUAV engineering support
services; $6.8 million for on-site service personnel and spare parts, including
support of Operation Iraqi Freedom; and an order from Pioneer UAV, Inc. valued
at $6.5 million for two new ground control stations for the U.S. Marine Corps'
UAV system. Based on these awards, the value of our TUAV production program now
stands at $328.3 million with a funded backlog of $132.3 million at the end of
the first quarter of 2004, and we continue to see exciting opportunities for
this business.
"In Simulation and Test Systems, our Joint Services Electronic Combat Systems
Tester (JSECST) program remains a primary contributor to our growth, with a
total contract value of $110.9 million and a funded backlog of $30.2 million. In
other areas of Simulation and Test Systems, we were awarded, during the quarter,
an initial contract valued at $1.8 million for the design and production of
three Radar Environmental Simulator (RES) units for the U.S. Marine Corps, which
includes options for nine additional RES units that could bring the award value
to $4.1 million. In addition, we have completed hardware assembly, integration
and testing of the train and track system of a LHD-8 Cargo Monorail System for
Ingalls Shipbuilding. We are currently awaiting contract modifications that will
include installation and spare parts, as well as additional field installation
support.
3
"ESI, our engineering and maintenance services business, continues to build upon
its flagship C-17 Maintenance Trainer program for the U.S. Air Force, with new
bookings during the quarter of $1.7 million, for a total contract value of
$270.1 million with a funded backlog of $63.0 million. At the same time, ESI is
expanding its activities in a broad range of UAV support services, for UAV
systems made by our Company - such as our Shadow TUAV system - and for those
manufactured by others - such as the Raven UAV system. These efforts underscore
the important role that ESI can play across the UAV market, as interoperability,
standardization and ongoing support services continue to increase in importance.
Also during the quarter, ESI received a contract award for field support of the
Compass Call Mission Crew Simulator from BAE, continuing our 20-year support of
this system," Mr. Strader concluded.
Stock Buy-Back Program
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In November 2003, the Company's Board of Directors authorized the repurchase of
up to $10 million of common stock. By the end of January 2004, the purchases
under this plan had been completed, and on March 10, 2004, the Board authorized
the repurchase of an additional $10 million of United Industrial common stock.
During the first quarter of 2004, 391,700 shares had been repurchased at an
average cost of $18.23 per share. Since the inception of the program in November
2003, the Company has repurchased a total of 749,300 shares at an average cost
of $17.59 per share.
At March 31, 2004, the Company had $25.1 million in cash, an increase of $1.0
million from $24.1 million at December 31, 2003. Additionally, the Company
continues to be debt free. Further, shareholders' equity decreased by $3.1
million to $37.8 million at March 31, 2004, from $40.9 million at December 31,
2003. This decline includes a cash dividend payment of $1.3 million and the
purchase of the Company's common stock pursuant to the Stock Buy-Back program
discussed above of $7.1 million.
Strategic Initiatives
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On April 15, 2004, the Company entered into a contract to sell approximately 26
acres of undeveloped property adjacent to its Hunt Valley, Maryland, facility
for $8.0 million. Subject to a feasibility study period that includes the
investigation of title and environmental matters, closing is expected to occur
no later than January 14, 2005. After the feasibility study period, AAI can
retain the $150,000 deposit it received upon contract signing and elect to
accelerate the closing. No assurances can be given, however, as to whether the
contract will be closed or the timing of the closing.
In accordance with its previously disclosed strategic initiatives, the Company
intends to sell non-core assets, maximize efficiency, evaluate a
recapitalization, and consider select acquisitions to grow its core defense
businesses. Accordingly, in October 2003 the Company engaged Imperial Capital
LLC to assist the Company in a potential sale of the Detroit Stoker energy
segment. No assurances can be given regarding whether Detroit Stoker will be
sold nor as to the timing or proceeds from any such sale.
4
USE OF NON-GAAP MEASURES
In addition to disclosing financial results that are determined in accordance
with generally accepted accounting principles in the United States of America
(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. 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 is likewise 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 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 today, May 07, 2004 at 10:00 a.m. (ET)
to discuss its financial results for the first quarter of 2004. 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.vcall.com. Following the call, the webcast will be archived for a period of
two weeks and available at www.unitedindustrial.com, or at www.vcall.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 within the meaning of
the Private 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.
For more information, please visit United Industrial's web site at
http://www.unitedindustrial.com.
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5
United Industrial Corporation and Subsidiaries
FINANCIAL HIGHLIGHTS:
Three Months Ended
March 31
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(unaudited)
2004 2003
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Net Sales From
Continuing Operations $ 81,648,000 $ 72,442,000
Income From
Continuing Operations $ 4,617,000 $ 1,638,000
Loss From
Discontinued Operations $ (475,000) $ (974,000)
Net Income $ 4,142,000 $ 664,000
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Basic Earnings Per Share:
Income From
Continuing Operations $.35 $.13
Loss From
Discontinued Operations ($.03) ($.08)
Net Income $.32 $.05
Diluted Earnings Per Share:
Income From
Continuing Operations $.34 $.12
Loss From
Discontinued Operations ($.03) ($.07)
Net Income $.31 $.05
Weighted average shares outstanding:
Basic 13,136 13,068
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Diluted 13,407 13,685
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6
United Industrial Corporation and Subsidiaries
Consolidated Condensed Balance Sheet
(Dollars in Thousands)
MARCH 31 DECEMBER 31
2004 2003
ASSETS (UNAUDITED)
Current Assets
Cash and cash equivalents $ 25,111 $ 24,138
Trade receivables 31,346 33,377
Inventories 25,999 16,968
Assets of discontinued operations 5,089 5,089
Other current assets 9,659 9,417
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Total Current Assets 97,204 88,989
Insurance receivable - asbestos litigation 20,317 20,317
Property & equipment - net 21,607 22,216
Other non-current assets 19,010 18,596
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Total Assets $158,138 $150,118
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LIABILITIES AND SHAREHOLDERS' EQUITY
Other current liabilities $ 40,838 $ 31,824
Liabilities of discontinued operations 16,621 15,561
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Total Current Liabilities $ 57,459 $ 47,385
Other long-term liabilities 23,377 23,436
Minimum pension liability 7,965 6,755
Reserve for asbestos litigation 31,541 31,595
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Total Liabilities 120,342 109,171
Shareholders' Equity 37,796 40,947
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Total Liabilities and Shareholders' Equity $158,138 $150,118
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7
United Industrial Corporation and Subsidiaries
SEGMENT DATA
(Dollars in Thousands)
THREE MONTHS ENDED
MARCH 31
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2004 2003
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(UNAUDITED)
Net Sales:
Defense $ 74,806 $ 65,475
Energy 6,842 6,967
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Total $ 81,648 $ 72,442
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Segment profit (loss)
Defense $ 6,679 $ 2,190
Energy 809 771
Other (245) (448)
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Total $ 7,243 $ 2,513
========= =========
(Expenses) income included in Segment
profit (loss) above:
Defense
Pension expense $ (1,335) $(1,595)
Award fee income 1,155 -
Energy
Asbestos related expense - (242)
Pension income 125 136
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
March 31
2004 2003
---- ----
(unaudited)
GAAP earnings from continuing operations
before income taxes $7,243 $2,513
Plus: Asbestos related expense - 242
Plus: Pension expense 1,335 1,595
Less: Award fee income (1,155) -
Less: Pension income (125) (136)
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Pro forma earnings from continuing operations
before income taxes (non-GAAP measure) $7,298 $4,214
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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
March 31
----------------------
2004 2003
---- ----
(unaudited)
GAAP earnings per diluted share from
continuing operations $0.34 $0.12
Plus: Asbestos related expense - 0.01
Plus: Pension expense 0.06 0.08
Less: Pension income (0.01) (0.01)
Less: Award fee income (0.05) -
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Pro forma earnings per diluted share from
continuing operations (non-GAAP measure) $0.34 $0.20
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9
United Industrial Corporation and Subsidiaries
Reconciliation of Net Cash from Operating Activities from Continuing Operations
to EBITDAP* from Continuing Operations
(Dollars in Thousands)
Three Months Ended
March 31
---------------------
2004 2003
---- ----
(unaudited)
Net cash provided by operating
activities from continuing operations $8,341 $ 9,475
Equity in income of investee company 15 -
Other cash flow changes related to
operating activities (1,205) (5,101)
Income taxes 2,626 875
Interest (income) expense, net (51) 16
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EBITDAP* from continuing operations (non-GAAP measure) $9,726 $5,265
* Earnings before interest, taxes, depreciation, amortization and non-cash
pension results
10