SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- FORM 10-Q ------------- [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 or [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission file number: 1-4252 UNITED INDUSTRIAL CORPORATION - --------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) DELAWARE 95-2081809 - -------------------------------- -------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Identification Incorporation or Organization) No.) 18 East 48th Street, New York, NY 10017 (212) 752-8787 - --------------------------------------------------------------------------- (Address, Including Zip Code, and Telephone Number, Including Area Code of Registrant's Principal Executive Offices) Not Applicable - --------------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [_] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 12,167,493 shares of common stock as of May 1, 1995. UNITED INDUSTRIAL CORPORATION INDEX ------ Page No. -------- Part I - Financial Information Item 1. Financial Statements Consolidated Condensed Balance Sheets - Unaudited March 31, 1995 and December 31, 1994 1 Consolidated Condensed Statements of Operations - Three Months Ended March 31, 1995 and 1994 2 Consolidated Condensed Statements of Cash Flows Three Months Ended March 31, 1995 and 1994 3 Notes to Consolidated Condensed Financial Statements 4 - 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 PART II - Other Information 6 PART I - FINANCIAL INFORMATION UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands) MARCH 31 DECEMBER 31 1995 1994 ------------ ----------- (Unaudited) ASSETS - ------ Current Assets Cash & cash equivalents $ 16,416 $ 6,132 Note receivable - 8,540 Trade receivables 26,661 33,564 Inventories Finished goods & work-in-process 54,251 49,034 Materials & supplies 4,318 4,452 -------- -------- 58,569 53,486 Deferred income taxes 5,927 3,169 Prepaid expenses & other current assets 1,194 1,667 -------- -------- Total Current Assets 108,767 106,558 Other assets 37,804 37,022 Property & equipment - less allowances for depreciation (1995-$82,849; 1994-$81,767) 45,473 45,214 -------- -------- $192,044 $188,794 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities - ------------------- Short term borrowings $ 3,000 $ 4,200 Accounts payable 10,819 8,769 Accrued employee compensation & taxes 8,180 6,526 Customer advances 7,747 6,981 Federal income taxes 4,552 3,333 Other liabilities 2,089 5,664 Provision for contract losses 12,051 10,474 -------- -------- Total Current Liabilities 48,438 45,947 Long-term liabilities (less current maturities) 24,879 24,580 Deferred income taxes 9,160 9,228 Postretirement benefits other than pensions 20,858 20,618 Shareholders' Equity - -------------------- Common stock $1.00 par value Authorized - 15,000,000 shares; outstanding 12,167,493 shares (net of shares in treasury) 14,374 14,374 Additional capital 93,744 94,596 Retained earnings (deficit) (2,059) (3,199) Treasury stock, at cost, 2,206,655 shares (17,350) (17,350) -------- -------- 88,709 88,421 -------- -------- $192,044 $188,794 ======== ======== See accompanying notes 1 UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) Three Months Ended March 31 ---------------------------- 1995 1994 ------------ ----------- (Unaudited) Net Sales $ 51,653 $ 50,076 Operating costs & expenses Cost of sales 38,880 38,087 Selling & administrative 11,068 10,281 Other income (309) (205) Interest expense 588 596 Interest income (445) (389) -------- -------- 49,782 48,370 -------- -------- Income before income taxes 1,871 1,706 Income taxes 731 652 -------- -------- Net income $ 1,140 $ 1,054 ======== ======== Net earnings per share $ 0.09 $ 0.09 ======= ====== See accompanying notes 2 UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Dollars in Thousands) THREE MONTHS ENDED MARCH 31 ------------------------------- 1995 1994 -------- -------- (Unaudited) OPERATING ACTIVITIES - -------------------- Net income $ 1,140 $ 1,054 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,006 1,636 Deferred income taxes (2,826) (2,435) Increase (decrease) in contract loss provision 1,577 (625) Changes in operating assets and liabilities: Decrease in accounts receivable 6,903 5,067 Increase in inventories (5,083) (231) Decrease (increase) in prepaid expenses and other current assets 473 (127) Increase (decrease) in accounts payable, accruals, advances and other 895 (1,039) Increase in federal income taxes 1,219 2,963 Increase (decrease) in long-term liabilities 507 (678) --------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 6,811 5,585 INVESTING ACTIVITIES - -------------------- Decrease in note receivable 8,540 8,540 Purchase of property and equipment (1,773) (628) Increase in other assets - net (1,274) (794) Acquisition of business - net of cash received --- (1,489) --------- --------- NET CASH PROVIDED BY INVESTING ACTIVITIES 5,493 5,629 FINANCING ACTIVITIES - -------------------- Increase in long-term liabilities 32 1,138 Proceeds from borrowings 3,000 - Payments on long-term debt & borrowings (4,200) (13,700) Dividends (852) (858) --------- ---------- NET CASH USED IN FINANCING ACTIVITIES (2,020) (13,420) --------- ---------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 10,284 (2,206) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,132 3,906 --------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 16,416 $ 1,700 ========= ========== See accompanying notes 3 UNITED INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Condensed Financial Statements March 31, 1995 NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1995 are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1994. NOTE B - DIVIDENDS A quarterly dividend of $.07 per share is payable May 31, 1995. NOTE C - LEGAL PROCEEDINGS The Company, along with various other parties, has been named in five claims (including four tort claims) relating to environmental matters based on allegations principally related to a predecessor's operations. These tort actions seek recovery for personal injury and property damage among other damages. In one tort claim, class certification was granted as to both property damage and medical monitoring classes. The Company has joined the other defendants in appealing the class certification issue to the Arizona Supreme Court. The Company owned and operated a small facility at a site in the State of Arizona that manufactured semi-conductors between 1959 and 1960. All such operations of the Company were sold prior to 1962. This facility may have used trichloroethylene ("TCE") in small quantities. However, to date, there is no evidence that this facility released or disposed of TCE at this site. On May 18, 1993, the State of Arizona filed suit against the Company seeking the recovery of investigative costs, injunctive relief to require the Company to perform a Remedial Investigation and Feasibility Study, and ultimately to require the remediation of alleged soil and groundwater contamination at and near a certain industrial site. Since then the State has brought in co-defendants whose operations at the site were substantially larger than those of the Company. The parties are engaged in active discovery. Management intends to vigorously contest these actions and believes that the resolution of these actions will not be material to the Company. 4 The Company is involved in various other lawsuits and claims, including certain other environmental matters, arising out of the normal course of its business. In the opinion of management, the ultimate amount of liability, if any, under pending litigation, including claims described above, will not have a materially adverse effect on the consolidated financial position of the Company. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- Net sales increased 3.1% to $51,653,000 in 1995, as compared to $50,076,000 in 1994. This growth primarily resulted from improvements at the Company s Energy segment, and the non-Department of Defense (DOD) markets served by the Company s Defense segment, partially offset by the continued contraction of the defense market. The Defense segment has succeeded in maintaining its gross profit percentages because of efficiencies gained through its cost reduction program. The gross profit percentage at the Energy segment approximately doubled in the first quarter of 1995, as compared to the same period in 1994, primarily due to ongoing operational changes at the company s foundry operation, where new management has been installed. Selling and Administrative expenses have continued their downward trend as a result of the Company s cost reduction program, but this decline was partially offset in 1995 by certain litigation costs. Excluding such costs, Selling and Administrative expenses as a percentage of net sales were 20% for the first quarter of 1995, as compared to 21% for the same period in 1994. The Company recorded an increase in net income of 8.2% to $1,140,00 or .09 per share in 1995, as compared to net income of $1,054,000 or $.09 per share in 1994. The improvement was primarily attributable to increases in net income at the operating segments, partially offset by certain charges at the corporate office principally related to litigation costs. The elevated performance at the Defense segment resulted essentially from non- DOD markets and reduced interest expense due to lower borrowings. The Energy segment's improved operating results were primarily due to strong sales and ongoing operational changes, particularly at the Company s foundry operation, as noted above. Liquidity and Capital Resources - ------------------------------- Cash and cash equivalents increased $10,284,000 from December 31, 1994. The principal cause of this increase was the final installment payment of $8,540,000 on the Company s note receivable. The Company currently has no significant fixed commitment for capital expenditures or for investments. Its capital requirements consist primarily of its obligations to fund operations and interest payments on indebtedness. The Company expects that available cash and existing lines of credit will be sufficient to meet its normal operating requirements. 5 UNITED INDUSTRIAL CORPORATION AND SUBSIDIARIES PART II - Other Information ITEM 4 - Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Stockholders of the Registrant was held on May 8, 1995. (b) Rick S. Bierman and Howard M. Bloch were elected directors at the meeting, for terms ending in 1998. P. David Bocksch was also elected a director at the meeting for a term ending in 1997. The incumbent directors whose terms of office continued after the meeting are Maurice Rosenthal, Myron Simons and Bernard Fein. (c) Voting for the election of directors of the Registrant: WITHHELD (including FOR broker non-votes) --- ------------------- Rick S. Bierman 9,247,486 150,898 Howard M. Bloch 9,278,126 120,258 P. David Bocksch 9,274,890 123,494 9,305,281 shares were voted in favor of the proposal to ratify the appointment of Ernst & Young LLP as independent auditors of the Registrant for 1995, with 44,542 shares voted against, 48,561 abstentions and no broker non-votes. 4,887,839 shares were voted against the stockholder proposal concerning elimination of a classified Board of Directors, with 2,269,547 shares voted for, 204,703 votes abstained, and 2,036,295 broker non-votes. Reference is made to the Registrant's Proxy Statement dated March 30, 1995 for its 1995 Annual Meeting for additional information concerning the matters voted on at the meeting. ITEM 6 - Exhibits and Reports on Form 8-K (a) Exhibits 11 - Computation of Earnings per share 20 - The Registrant's Proxy Statement dated March 30, 1995 for its 1995 Annual Meeting, which is incorporated herein by reference. 27 - Financial Data Schedule (b) The Registrant did not file any reports on Form 8-K during the quarter ended March 31, 1995. 6 SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. UNITED INDUSTRIAL CORPORATION Date: May 12, 1995 By: /s/ Thomas J. Carmody -------------- ---------------------------- Thomas J. Carmody Vice President - Finance and Chief Financial Officer 7 UNITED INDUSTRIAL CORPORATION AND SUBSIDIARIES INDEX OF EXHIBITS FILED HEREWITH Exhibit No. Page - ---------- ---- 11 Computation of Earnings Per Share 9 20 The Registrant's Proxy Statement dated March 30, 10 1995 for its 1995 Annual Meeting, which is incorporated herein by reference. 27 Financial Data Schedule 11 8