HUNT VALLEY, Md., Nov. 9 /PRNewswire-FirstCall/ United Industrial
Corporation (NYSE:UIC) today reported financial results for its
third quarter ended September 30, 2007. The company designs,
produces and supports aerospace and defense systems through its
wholly owned subsidiary, AAI Corporation, and AAI Corporation's
direct and indirect wholly owned subsidiaries, AAI Services
Corporation, Aerosonde Pty Ltd, Aerosonde North America
Incorporated, ESL Defence Limited, McTurbine Inc. and Symtx, Inc.
Its high-technology products and services include unmanned aircraft
systems, training and simulation systems, automated aerospace test
and maintenance equipment, armament systems, aviation ground
support equipment, logistical and engineering services, and
maintenance, repair and overhaul activities. On December 29, 2006,
United Industrial divested its energy segment, which consisted of
Detroit Stoker Company, as part of the company's ongoing strategy
to focus on its core defense business. The former energy segment
was previously reported as part of continuing operations and is now
included in discontinued operations. Accordingly, the historical
results of operations and financial position of the discontinued
energy operation reflected in the Consolidated Statements of
Operations and Cash Flows for the three and nine month periods
ended on September 30, 2006 are included in discontinued operations
and discussed separately in the information that follows. Agreement
to be Acquired by Textron Inc. On October 7, 2007, United
Industrial Corporation ("United Industrial") entered into an
Agreement and Plan of Merger ("the Merger Agreement") with Textron
Inc. ("Textron") and Marco Acquisition Sub Inc., an indirect wholly
owned subsidiary of Textron ("Purchaser"). Pursuant to the Merger
Agreement, on October 16, 2007, Purchaser commenced a tender offer
to purchase all of the outstanding shares of common stock of United
Industrial for $81.00 per share (the "Offer") net to the seller in
cash, without interest and less any applicable withholding taxes.
As soon as practicable following completion of the Offer, Purchaser
will merge with and into United Industrial (the "Merger"). The
Offer is scheduled to expire at 12:00 midnight, New York City time,
on Tuesday, November 13, 2007, unless extended by Purchaser in its
discretion or as required pursuant to the Merger Agreement.
Accordingly, this Earnings Release should be read with the
understanding that, should the Merger be completed, United
Industrial will be a wholly owned subsidiary of Textron and Textron
will have the power to control United Industrial and the conduct of
its business. Financial Results for the Third Quarter Ended
September 30, 2007 Net sales for the third quarter of 2007
increased 27.0% to $166.9 million from $131.4 million during the
same period in 2006. The growth in net sales included $15.1 million
related to acquisitions made by the company in 2006, an increase of
$21.8 million in logistical support for an increasing number of
fielded Shadow 200(R) Tactical Unmanned Aircraft Systems ("TUAS"),
$6.1 million of increased volume on aircraft Maintenance Training
Device ("MTD") programs, $4.0 million of increased volume on the
UAS One System(R) ground control stations including greater
developmental efforts supporting the Extended Range Multi-Purpose
UAS program and production of One System Remote Video Terminals,
partially offset by a $4.6 million decrease in the Shadow 200 TUAS
production program and other decreases of $6.9 million. Operating
margin for the third quarter of 2007 was 9.7%, 2.5 percentage
points greater than during the third quarter of 2006. During 2007,
efficiencies on TUAS production and performance based logistics
programs, and lower non-cash pension expense increased operating
margin 4.8 and 0.7 percentage points, respectively. This increase
was partially offset by losses in businesses acquired in 2006, and
expenses related to the pending Merger of the company with Textron,
which reduced margins by 3.3 and 1.4 percentage points,
respectively. The losses from businesses acquired in 2006 were due
to amortization of intangible assets, integration costs and cost
overruns on certain contracts. In 2006, cost overruns in four fixed
price contracts reduced company operating margins by 1.7 percentage
points. Net income from continuing operations for the third quarter
of 2007 increased 61.7% to $9.3 million, or $0.77 per diluted
share, from $5.7 million, or $0.45 per diluted share, during the
same period in 2006. Net income, including results of both
continuing and discontinued operations, for the third quarter of
2007 increased 43.3% to $9.0 million, or $0.75 per diluted share,
from $6.2 million, or $0.48 per diluted share, during the same
period in 2006. Financial Results for the Nine Months Ended
September 30, 2007 Net sales for the nine months ended September
30, 2007 increased 28.5% to $510.9 million from $397.5 million
during the same period in 2006. The growth in net sales includes
$51.6 million related to acquisitions made by the company in 2006,
a $32.5 million increase in logistical support for an increasing
number of fielded Shadow 200 TUAS, a $21.6 million increase due to
increased volume on aircraft MTD programs, $20.1 million of
increased sales for the UAS One System ground control station
including greater developmental efforts supporting the Extended
Range Multi-Purpose UAS program and production of One System Remote
Video Terminals, a $1.3 million increase in UAS engineering
activities, and $4.1 million in other increases. These increases
were partially offset by a decrease of $17.8 million in the Shadow
200 TUAS production program, primarily due to the timing of
material requirements in the first quarter of 2007. Operating
margin for the first nine months of 2007 was 9.9%, 0.9 percentage
points greater than during the first nine months of 2006. This
increase was primarily due to production efficiencies on TUAS
production and performance based logistics programs, and lower
non-cash pension expense that contributed 2.7 and 0.7 percentage
points, respectively. These increases were partially offset by
losses from businesses acquired in 2006, expenses related to the
pending Merger of the company with Textron, and higher long term
incentive and stock based compensation which reduced margins by
2.6, 0.5 and 0.2 percentage points, respectively. The losses from
businesses acquired in 2006 were due to amortization of intangible
assets, integration costs and cost overruns on certain contracts.
Also, in 2006, cost overruns on four fixed price contracts reduced
operating margin by 0.8 percentage points. Net income from
continuing operations for the nine months ended September 30, 2007
increased 36.7% to $29.7 million, or $2.34 per diluted share, from
$21.7 million, or $1.65 per diluted share, during the same period
in 2006. Net income, including results of both continuing and
discontinued operations, for the nine months ended September 30,
2007 increased 12.8% to $28.3 million, or $2.24 per diluted share,
from $25.1 million, or $1.87 per diluted share, during the same
period in 2006. Financial Results for Discontinued Operations The
company recorded a loss, net of tax benefit, from discontinued
operations for the third quarter of 2007 of $0.3 million and
income, net of tax provision, for the third quarter of 2006 of $0.5
million including $1.6 million from the discontinued energy segment
that was divested on December 29, 2006. The company recorded a
loss, net of tax benefit, from discontinued operations for the nine
months ended September 30, 2007 of $1.4 million and income, net of
tax provision, for the nine months ended September 30, 2006 of $3.3
million including $5.1 million from the company's discontinued
energy segment. The loss for the three and nine months ended
September 30, 2007 was primarily attributable to on-going
litigation costs involving AAI's claims under a labor and materials
bond. Funded New Orders and Funded Backlog During the third quarter
of 2007, the company received $145.5 million of funded new orders
for products and services, an increase of $27.7 million, or 23.5%,
compared to $117.8 million of funded new orders during the same
period in 2006. During the nine months ended September 30, 2007,
the company received $505.7 million of funded new orders for
products and services, a decrease of $31.4 million, or 5.8%,
compared to $537.1 million during the same period in 2006. Funded
backlog for the company's continuing operations was $657.1 million
at September 30, 2007, a decrease of $5.1 million, or 0.8%, from
$662.2 million at December 31, 2006. The company's funded new
orders for the third quarter of 2007 included the following awards:
Unmanned Aircraft Systems -- $44.9 million from the U.S. Army for
TUAS Performance-Based Logistics ("PBL") to support the Global War
on Terror ("GWOT"); -- $20.6 million from the U.S. Army for
additional TUAS One System Remote Video Terminal production units
and Mobile Directional Antenna Systems; -- $6.9 million from
General Atomics for the continuation of the Extended Range
Multi-Purpose Unmanned Aircraft System ground control station
development program; Test and Training -- $8.6 million from the
Royal Australian navy to replace missile and navigation training
systems previously developed by AAI for FFG-class ships; -- $4.5
million from the U.S. Air Force for advanced boresight equipment
("ABE(R)") for special operations platforms; Services and Logistics
-- $4.8 million from the U.S. Army for continued logistics support
of joint service Biological Detection Systems. Use of Non-GAAP
Measures In addition to disclosing financial results that are
determined in accordance with accounting principles generally
accepted in the United States of America ("GAAP"), the company
discloses EBITDA (earnings before interest, taxes, depreciation and
amortization) from continuing operations, which is a non-GAAP
measure. In addition, the company discloses Free Cash Flow, a non-
GAAP measure, which equals net cash provided by operating
activities less net cash used in acquiring property and equipment,
net of retirements. The company believes EBITDA from continuing
operations and Free Cash Flow from continuing operations are used
by some investors, analysts, lenders and other parties to measure
the company's performance over time. 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. The measures allow investors, analysts, lenders and
other parties to better evaluate the company's financial
performance and prospects in the same manner as management. Because
the company's methods for calculating such non-GAAP measures may
differ from other companies' methods, such non-GAAP measures
presented may not be comparable to similarly titled measures
reported by other companies. Such measures 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. Reconciliations from non-GAAP reported measures
described in this press release to GAAP reported results are
provided in the financial tables attached to this press release.
Forward-Looking Information Except for the historical information
contained herein, information set forth in this press release
contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on management's expectations,
estimates, projections and assumptions. 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,
statements regarding the expected completion of the acquisition of
the company by Textron, including the Offer, Merger and related
procedural steps in the acquisition transaction, obtaining a
sufficient number of tendered shares of the company's common stock
and the required regulatory approvals of the Merger, growth and
business strategies to be implemented, and projections of revenues,
earnings, performance, cash flows and contract awards. These
forward-looking statements are inherently 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. All information in this press release is as of
November 9, 2007. 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 and other documents as filed with
the Securities and Exchange Commission. United Industrial
Corporation & Subsidiaries Consolidated Earnings Per Share
(Unaudited) Basic earnings per share for all periods presented was
computed by dividing net earnings for the respective period by the
weighted average number of shares of the company's common stock,
par value $1.00 per share ("Common Stock") outstanding during the
period. Diluted earnings per share was computed by dividing net
earnings during the period, adjusted to add back the after-tax
interest and other charges related to the company's $120.0 million
aggregate principal amount of 3.75% Convertible Senior Notes due
September 15, 2024 ("3.75% Convertible Senior Notes"), by the
weighted average number of shares of Common Stock outstanding
during the period, adjusted to add the weighted average number of
potential dilutive shares of Common Stock that would have been
outstanding upon the assumed exercise of stock options using the
treasury stock method and conversion of the 3.75% Convertible
Senior Notes for Common Stock. Basic and diluted earnings per share
amounts for continuing operations were computed as follows: Three
Months Ended September 30, 2007 2006 (Dollars in thousands, Per Per
except per share data) Earnings Shares Share Earnings Shares Share
Basic Earnings Per Share: Income from continuing operations $9,253
9,921,923 $0.93 $5,721 11,420,539 $0.50 Effect of Dilutive
Securities: Stock Options -- 440,918 -- 356,646 3.75% Convertible
Senior Notes 1,071 3,058,356 911 3,058,356 Diluted Earnings Per
Share: Income from continuing operations $10,324 13,421,197 $0.77
$6,632 14,835,541 $0.45 Nine Months Ended September 30, 2007 2006
(Dollars in thousands, Per Per except per share data) Earnings
Shares Share Earnings Shares Share Basic Earnings Per Share: Income
from continuing operations $29,693 10,426,762 $2.85 $21,725
11,370,735 $1.91 Effect of Dilutive Securities: Stock Options --
407,474 -- 396,376 3.75% Convertible Senior Notes 2,811 3,058,356
2,713 3,058,356 Diluted Earnings Per Share: Income from continuing
operations $32,504 13,892,592 $2.34 $24,438 14,825,467 $1.65 United
Industrial Corporation & Subsidiaries Consolidated Statements
of Operations (Dollars in Thousands) (Unaudited) Three Months Ended
2007 vs 2006 September 30, Increase/(Decrease) 2007 2006 Amount %
Net sales $166,868 $131,350 $35,518 27.0% Operating costs and
expenses (150,720) (121,832) (28,888) 23.7 Operating income 16,148
9,518 6,630 69.7 Non-operating income and (expense): Interest
income 133 1,175 (1,042) (88.7) Interest expense (2,072) (1,578)
(494) 31.3 Other income, net 312 95 217 228.4 (1,627) (308) (1,319)
428.2 Income from continuing operations before income taxes 14,521
9,210 5,311 57.7 Provision for income taxes (5,268) (3,489) (1,779)
51.0 Income from continuing operations 9,253 5,721 3,532 61.7
(Loss) income from discontinued operations, net of income tax
(provision) benefit (302) 525 (827) (157.5) Net income $8,951
$6,246 $2,705 43.3% Nine Months Ended 2007 vs 2006 September 30,
Increase/(Decrease) 2007 2006 Amount % Net sales $510,884 $397,451
$113,433 28.5% Operating costs and expenses (460,347) (361,488)
(98,859) 27.3 Operating income 50,537 35,963 14,574 40.5
Non-operating income and (expense): Interest income 918 3,008
(2,090) 69.5 Interest expense (5,161) (4,403) (758) 17.2 Other
income, net 680 263 417 158.6 (3,563) (1,132) (2,431) 214.8 Income
from continuing operations before income taxes 46,974 34,831 12,143
34.9 Provision for income taxes (17,281) (13,106) (4,175) 31.9
Income from continuing operations 29,693 21,725 7,968 36.7 (Loss)
income from discontinued operations, net of income tax (provision)
benefit (1,414) 3,348 (4,762) 142.2 Net income $28,279 $25,073
$3,206 12.8% United Industrial Corporation And Subsidiaries
Consolidated Condensed Balance Sheets (Dollars in Thousands)
September 30, December 31, 2007 2006 (Unaudited) ASSETS Current
assets: Cash and cash equivalents $4,291 $39,158 Accounts
receivable, net 64,618 71,503 Note receivable 833 833 Inventories
88,188 73,700 Prepaid expenses and other current assets 12,591
10,102 Assets of discontinued operations 11,892 11,996 Total
current assets 182,413 207,292 Marketable equity securities 4,989
11,392 Deferred income taxes, net of valuation allowance 2,472
4,073 Note receivable 3,267 4,167 Intangible assets, net 30,413
27,894 Goodwill 48,108 51,314 Other assets 6,116 5,466 Property and
equipment, net 47,234 47,042 Total assets $325,012 $358,640
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Borrowings under revolving credit facility 16,021 -- Current
portion of long-term debt $17 $2,896 Accounts payable 40,037 39,578
Accrued employee compensation and taxes 22,104 17,506 Customer
advances 25,615 32,393 Post-retirement benefit obligation other
than pension 2,118 2,118 Other current liabilities 19,319 13,988
Liabilities of discontinued operations 12,500 12,113 Total current
liabilities 137,731 120,592 Long-term debt 120,018 120,030
Post-retirement benefit obligation other than pension 13,210 14,052
Unfunded status of pension liability 35,987 37,830 Other
liabilities 4,315 2,837 Total liabilities 311,261 295,341
Shareholders' equity: Preferred stock, par value $1.00 per share;
1,000,000 shares authorized; none issued and outstanding -- --
Common stock, par value $1.00 per share; 30,000,000 shares
authorized; 9,898,102 and 11,320,095 shares outstanding at
September 30, 2007 and December 31, 2006, respectively (net of
shares in treasury) 14,374 14,374 Additional capital 88,915 86,471
Retained earnings 107,624 82,337 Treasury stock, at cost; 4,476,046
and 3,054,053 shares at September 30, 2007 and December 31, 2006,
respectively (159,909) (78,505) Accumulated other comprehensive
loss, net of income tax (37,253) (41,378) Total shareholders'
equity 13,751 63,299 Total liabilities and shareholders' equity
$325,012 $358,640 United Industrial Corporation & Subsidiaries
Statements of Consolidated Cash Flows (Dollars in Thousands)
(Unaudited) Nine Months Ended September 30, 2007 2006 CASH FLOWS
FROM OPERATING ACTIVITIES: Net income $28,279 $25,073 Adjustments
to reconcile net income to net cash provided by operating
activities: Loss (income) from discontinued operations, net of
income tax benefit (provision) 1,414 (3,348) Amortization of debt
issuance cost and deferred financing costs 915 949 Depreciation and
amortization 11,121 8,425 Stock-based compensation 2,491 1,817
Deferred income tax benefit (1,339) (973) Excess tax benefit from
stock-based compensation (327) (1,059) Other, net (485) (71)
Changes in operating assets and liabilities (2,695) 33,701 Net cash
provided by operating activities from continuing operations 39,374
64,514 Net cash (used in) provided by operating activities from
discontinued operations (923) 3,657 Net cash provided by operating
activities 38,451 68,171 CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (8,193) (5,110) Proceeds from
sale of marketable equity securities 6,651 -- Collections of note
receivable 900 -- Business acquisition and purchase price
adjustment (1,239) (6,701) Net cash provided by (used in) investing
activities from continuing operations (1,881) (11,811) Net cash
used in investing activities from discontinued operations -- (42)
Net cash provided by (used in) investing activities (1,881)
(11,853) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under
revolving credit facility 16,021 -- Repayment of long-term debt
(2,891) (966) Decrease in deposits and restricted cash -- 4,810
Proceeds from exercise of stock options 1,389 2,414 Excess tax
benefit from stock-based compensation 327 1,059 Dividends paid
(3,116) (3,409) Purchase of treasury shares (83,167) -- Net cash
(used in) provided by financing activities (71,437) 3,908
(Decrease) increase in cash and cash equivalents (34,867) 60,226
Cash and cash equivalents at beginning of period 39,158 77,496(1)
Cash and cash equivalents at end of period $ 4,291 $137,722(2) (1)
Includes cash reported in assets held for sale of $14,363 at
January 1, 2006. (2) Includes cash reported in assets held for sale
of $19,819 at September 30, 2006. United Industrial Corporation
& Subsidiaries Non-GAAP Financial Data from Continuing
Operations (Dollars in Thousands) (Unaudited) Three Months Ended
Nine Months Ended September 30, September 30, 2007 2006 2007 2006
EBITDA $20,154 $12,684 $62,338 $44,651 Deduct: Depreciation and
amortization (3,694) (3,071) (11,121) (8,425) Interest expense, net
(1,939) (403) (4,243) (1,395) Provision for income taxes (5,268)
(3,489) (17,281) (13,106) Income from continuing operations $9,253
$5,721 $29,693 $21,725 Three Months Ended Nine Months Ended
September 30, September 30, 2007 2006 2007 2006 Free cash flow Cash
provided by operating activities $21,521 $47,928 $39,374 $64,514
Purchases of property and equipment (3,847) (1,626) (8,193) (5,110)
Free cash flow $17,674 $46,302 $31,181 $59,404 DATASOURCE: United
Industrial Corporation CONTACT: Stuart F. Gray, Treasurer of United
Industrial Corporation, +1-410-628-8686 Web site:
http://www.unitedindustrial.com/ Company News On-Call:
http://www.prnewswire.com/comp/113559.html
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