SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number #1-4252
UNITED INDUSTRIAL CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 95-2081809
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(State or other jurisdiction of (I.R.S. Identification No.)
incorporation or organization)
18 East 48th Street, New York, NY 10017
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(Address of principal executive offices)
Not Applicable
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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 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. 12,175,543
shares of common stock as of May 1, 1997.
UNITED INDUSTRIAL CORPORATION
INDEX
Page #
Part I - Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - Unaudited
March 31, 1997 and December 31, 1996 1
Consolidated Condensed Statements of Operations -
Three Months Ended March 31, 1997 and 1996 2
Consolidated Condensed Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996 3
Notes to Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
PART II - Other Information 7
PART I - FINANCIAL INFORMATION
UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
MARCH 31 DECEMBER 31
1997 1996
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(Unaudited)
ASSETS
Current Assets
Cash & cash equivalents $ 6,944 $ 13,427
Trade receivables 36,858 40,134
Inventories
Finished goods & work-in-process 31,252 35,423
Materials & supplies 4,224 4,084
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35,476 39,507
Deferred income taxes 6,135 6,131
Prepaid expenses & other current assets 1,157 1,217
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Total Current Assets 86,570 100,416
Other assets 37,245 38,018
Property & equipment - less allowances
for depreciation (1997-$91,390; 1996-$89,256) 41,175 41,534
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$164,990 $179,968
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 8,091 $ 10,135
Accrued employee compensation & taxes 8,656 7,690
Customer advances 4,488 5,873
Federal income taxes 1,731 963
Current portion of long-term debt - 13,750
Other liabilities 8,547 8,105
Provision for contract losses 7,927 9,166
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Total Current Liabilities 39,440 55,682
Long-term liabilities (less current maturities) 2,654 2,654
Deferred income taxes 9,803 9,662
Postretirement benefits other than pensions 22,025 21,825
Shareholders' Equity
Common stock $1.00 par value
Authorized - 15,000,000 shares; outstanding
12,175,543 and 12,173,743 shares -
1997 and 1996 (net of shares in treasury) 14,374 14,374
Additional capital 90,194 90,196
Retained earnings 3,787 2,876
Treasury stock, at cost, 2,198,605 at 1997
and 2,200,405 shares at 1996 (17,287) (17,301)
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91,068 90,145
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$164,990 $179,968
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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
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1997 1996 *
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(Unaudited)
Net sales $ 58,444 $ 54,501
Operating costs & expenses
Cost of sales 45,268 39,990
Selling & administrative 9,811 11,663
Other expense 371 193
Interest expense 510 563
Interest income (335) (224)
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55,625 52,185
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Income before income taxes 2,819 2,316
Income taxes 1,056 885
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Net income $ 1,763 $ 1,431
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Net earnings per share $ .14 $ .12
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See accompanying notes
*Restated to conform to
current year classifications
2
UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
THREE MONTHS ENDED MARCH 31
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1997 1996
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(Unaudited)
OPERATING ACTIVITIES
Net income $ 1,763 $ 1,431
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 2,514 2,057
Deferred income taxes 137 32
(Decrease) increase in contract loss provision (1,239) (514)
Changes in operating assets and liabilities 5,346 711
Increase in federal income taxes 768 692
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NET CASH PROVIDED BY
OPERATING ACTIVITIES 9,289 4,409
INVESTING ACTIVITIES
Decrease in note receivable - -
Purchase of property and equipment (1,783) (1,358)
Decrease (increase) in other assets - net 413 37
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NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (1,370) (1,321)
FINANCING ACTIVITIES
Increase in long-term liabilities 200 31
Proceeds from borrowings - 3,000
Payments on long-term debt & borrowings (13,750) (3,000)
Dividends (852) (608)
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NET CASH USED IN FINANCING ACTIVITIES (14,402) (577)
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(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (6,483) 2,511
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 13,427 11,915
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CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 6,944 $ 14,426
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See accompanying notes
3
UNITED INDUSTRIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
March 31, 1997
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, 1997
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. 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, 1996.
NOTE B - DIVIDENDS
A quarterly dividend of $.07 per share is payable May 30, 1997.
4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Three months ended March 31, 1997 compared to three months ended March 31, 1996:
Consolidated net sales increased $3,943,000 or 7.2% to $58,444,000 in 1997, as
compared to $54,501,000 in 1996. In the Defense segment, sales increased
$2,342,000 or 5.2%. Generally this resulted from a higher volume of contract
related work. In the Company's Energy segment, increased prices and volume
accounted for its $1,363,000 or 17.8% rise in sales.
Gross margin decreased to 22.5% in the first quarter of 1997 from 26.6% in the
first quarter of 1996 primarily due to the Defense segment and partially offset
by increases in other segments. A fluctuation in the mix of contracts from
"fixed price production" to "cost plus development" in the Defense segment
resulted in a 6.9% decrease in the gross margin percentage to 20.2% in the first
quarter of 1997 as compared to 27.1% in the like period in 1996. However, the
current contract mix includes lower risk programs which offer opportunities for
higher margin long-term sole source production awards. The gross margin
percentage in the Energy segment increased 9.8% to 37.0% for the three months
ended March 31, 1997 from 27.2% in 1996. This growth was generally attributable
to an improved pricing structure as well as continued operating efficiencies
realized at the Company's foundry operation. Included in the Defense segment's
costs in 1996 is a pretax charge of $900,000 related to the reduction of the
estimated net realizable value of certain non- contract inventories. At December
31, 1996, the Company estimated that the net realizable value of these
inventories was $6,800,000. The Company has agreed to sell approximately 80% of
these inventories at an amount in excess of its estimated net realizable value
to a customer and anticipates that it will enter into a contract in the near
term.
Selling and administrative expenses for the three months ended March 31, 1997
declined $1,852,000 or 15.9% to $9,811,000 from $11,663,000 during the three
months ended March 31, 1996. This savings primarily occurred in the Defense
segment and was substantially due to facilities consolidation, including
headcount reductions, and lower contract procurement costs related to the timing
of new program activity. As a percentage of sales, selling and administrative
expenses decreased to 16.8% for the first quarter of 1997, as compared to 21.4%
for the same period in 1996.
The increase in other expense represented primarily proposal costs during the
first quarter of 1997 incurred by Electric Transit, Inc. (ETI), a joint venture
between the Company's subsidiary AAI Corporation and the Czech Republic firm,
SKODA, associated with an opportunity to produce 250 electric trolley coaches
for the City and County of San Francisco. In April 1997, ETI was notified that
San Francisco's Public Transportation Department recommended ETI for this award.
Interest income increased due to increased investments.
Net income increased by 23.2% to $1,763,000 or $.14 per share in 1997, as
compared to net income of $1,431,000 or $.12 per share in 1996. The improvement
was primarily attributable to lower selling and administrative expenses,
partially offset by increased cost of sales.
5
FASB statement No. 128, "Earnings Per Shares," is effective in the fourth
quarter of 1997. The impact of this FASB Statement on the calculation of
earnings per share is not expected to be material.
Liquidity and Capital Resources
Cash and cash equivalents decreased $6,483,000 from December 31, 1996. This
decrease included the payment of $13,750,000 in complete settlement of the
Company's long-term loan. Operating activities provided the partially offsetting
cash increase. The Company currently has no significant fixed commitment for
capital expenditures or for investments. The Company expects that available cash
and existing lines of credit will be sufficient to meet its cash requirements
for the remainder of the calendar year. Its cash requirements consists primarily
of its obligations to fund operations, and make interest and principal payments,
if necessary. The Company's credit agreement with a bank has been extended to
May 18, 1997. There were no borrowings under this agreement at March 31, 1997.
The Company has received a commitment letter from the bank for a replacement
credit agreement which is in the process of negotiation.
Contingent Matters
Reference is made to Item 3. Legal Proceedings, in the December 31, 1996 Form
10-K which is incorporated herein by reference.
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UNITED INDUSTRIAL CORPORATION AND SUBSIDIARIES
PART II - Other Information
ITEM 5 - Other Information
On May 6, 1997, the Company entered into a non-binding Letter of Intent
for the sale of its subsidiary, Neo Products Co.
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10P - Fourth Amendment made as of March 18, 1997 to Agreement
dated October 13, 1994 between First Union Commercial
Corporation and AAI and AAI subsidiaries, UIC-Del Corporation,
Symtron and United Industrial Corporation as guarantors.
11 - Computation of Earnings per share
27 - Financial Data Schedule
(b) The Registrant did not file any reports on Form 8-K during the
quarter ended March 31, 1997.
7
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 14, 1997 By: /s/ James H. Perry
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James H. Perry
Chief Financial Officer
and Treasurer
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UNITED INDUSTRIAL CORPORATION AND SUBSIDIARIES
INDEX OF EXHIBITS FILED HEREWITH
Exhibit No.
10P Fourth Amendment made as of March 18, 1997 to Agreement dated
October 13, 1994 between First Union Commercial Corporation
and AAI and AAI subsidiaries, UIC-Del Corporation, Symtron and
United Industrial Corporation
as guarantors.
11 Computation of Earnings Per Share
27 Financial Data Schedule
9