<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 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
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(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
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(Address, Including Zip Code, and Telephone Number, Including Area Code
of Registrant's 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 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 by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court. Yes [_] No [_]
On August 1, 1995 the registrant had outstanding 12,166,160 shares of
Common Stock, which is the registrant's only class of common stock.
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UNITED INDUSTRIAL CORPORATION
INDEX
-----
Page #
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Part I - Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - Unaudited
June 30, 1995 and December 31, 1994 1
Consolidated Condensed Statements of Operations -
Three Months and Six Months Ended June 30, 1995
and 1994 2
Consolidated Condensed Statements of Cash Flows
Six Months Ended June 30, 1995 and 1994 3
Notes to Consolidated Condensed Financial
Statements 4 - 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 7 - 9
PART II - Other Information 10
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
June 30 December 31
1995 1994
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
------
Current Assets
Cash & cash equivalents $ 15,714 $ 6,132
Note receivable - 8,540
Trade receivables 26,467 33,564
Inventories
Finished goods & work-in-process 50,361 49,034
Materials & supplies 4,266 4,452
-------- --------
54,627 53,486
Deferred income taxes 5,991 3,169
Prepaid expenses & other current assets 949 1,667
-------- --------
Total Current Assets 103,748 106,558
Other assets 38,371 37,022
Property & equipment - less allowances
for depreciation (1995 - $83,462 & 1994 - $81,767) 44,854 45,214
-------- --------
$186,973 $188,794
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------
Current liabilities
-------------------
Short term borrowings $ 3,000 $ 4,200
Accounts payable 8,765 8,769
Accrued employee compensation & taxes 8,523 6,526
Customer advances 5,659 6,981
Federal income taxes 1,570 3,333
Other liabilities 2,647 5,664
Reserve for contract losses 13,295 10,474
-------- --------
Total Current Liabilities 43,459 45,947
Long-term liabilities (less current maturities) 24,876 24,580
Deferred income taxes 9,187 9,228
Postretirement benefits other than pensions 21,116 20,618
Shareholders' Equity
--------------------
Common stock $1.00 par value
Authorized - 15,000,000 shares; outstanding
1995 - 12,168,793 and 1994 - 12,167,493 shares
(net of shares in treasury) 14,374 14,374
Additional capital 92,036 94,596
Retained earnings (deficit) (735) (3,199)
Treasury stock, at cost, 1995 - 2,205,355 shares
1994 - 2,206,655 shares (17,340) (17,350)
-------- --------
88,335 88,421
-------- --------
$186,973 $188,794
======== ========
<FN>
See accompanying notes
/TABLE
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share amounts)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
(UNAUDITED)
1995 1994* 1995 1994*
---- ----- ---- -----
<S> <C> <C> <C> <C>
Net Sales $ 57,869 $ 42,216 $109,522 $92,292
Operating costs & expenses
Cost of sales 45,177 30,399 84,057 68,355
Selling & administrative 9,423 10,721 20,491 21,002
Other (income) expense - net 732 5 423 (69)
Interest - net 254 338 397 545
Reduction of restructuring charge - (1,554) - (1,554)
------- ------- -------- -------
55,586 39,909 105,368 88,279
------- ------- -------- -------
Income before income taxes 2,283 2,307 4,154 4,013
Income taxes 959 899 1,690 1,551
------- ------- -------- -------
Net income $ 1,324 $ 1,408 $ 2,464 $ 2,462
======= ======= ======== =======
Net earnings per share $ .11 $ .11 $ .20 $ .20
====== ====== ====== ======
<FN>
See accompanying notes
* Restated to conform to current classifications.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
SIX MONTHS ENDED JUNE 30
----------------------------
(UNAUDITED)
1995 1994
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
--------------------
Net income $ 2,464 $ 2,462
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 4,186 2,815
Deferred income taxes (2,863) (2,010)
Increase (decrease) in contract loss provision 2,821 (845)
Changes in operating assets and liabilities 3,328 10,684
--------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,936 13,106
INVESTING ACTIVITIES
--------------------
Decrease in note receivable 8,540 8,540
Purchase of property and equipment (2,855) (535)
Increase in other assets - net (2,320) (2,691)
Acquisition of business - net of
cash received - (2,218)
--------- --------
NET CASH PROVIDED BY INVESTING ACTIVITIES 3,365 3,096
FINANCING ACTIVITIES
--------------------
Increase in long-term liabilities 31 1,946
Proceeds from borrowings 3,000 6,000
Payments on long-term debt & borrowings (4,200) (23,700)
Dividends (2,555) (1,716)
Proceeds from exercise of Stock options 5 -
--------- --------
NET CASH USED IN FINANCING ACTIVITIES (3,719) (17,470)
--------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,582 (1,268)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,132 3,906
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15,714 $ 2,638
========= ========
<FN>
See accompanying notes
/TABLE
<PAGE>
<PAGE>
UNITED INDUSTRIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
June 30, 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 six month period ended June
30, 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 August 30, 1995 and
additional capital has been reduced.
NOTE C - SUNDRY
In May 1995, AAI Systems Management, Inc. (the "subsidiary"), an
indirect subsidiary of the Company, submitted to the U.S. Government
(the "customer") a Request for Equitable Adjustment ("REA") totaling
approximately $11,800,000 in connection with a certain contract with
the subsidiary. The REA seeks monetary damages based on costs
incurred by the subsidiary arising out of or in connection with
customer directed suspension of work and resulting schedule delays,
additional work directives, and other actions by the customer in
connection with the contract for which contractors are allowed
recovery under the Federal Acquisition Regulations. On July 14, 1995,
the subsidiary received the final decision of the customer rejecting
the REA in its entirety. Subsequent correspondence from the customer
offered certain economic relief not offered in it's July 14 rejection
and a willingness to discuss the claim and a request that work
continue on this important project. The subsidiary believes that the
claims made in the REA are meritorious and will vigorously pursue
recovery of the monies claimed through a number of options available
to it, including bringing a direct action in the U.S. Claims Court.
The subsidiary is currently evaluating its options and has not yet
made a decision as to which action it will take.
The Company provides for costs related to contingencies such as
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this after its possible exposure is reasonably determined. It is the
opinion of management, that the ultimate resolution of this
contingency will not have a material adverse effect on the financial
condition of the Company.
NOTE D - LEGAL PROCEEDINGS
The Company, along with numerous other parties, has been named in five
tort actions relating to environmental matters based on allegations
partially 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 by 1961. Although this
facility may have used trichloroethylene ("TCE") in small quantities,
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 ("RI/FS"), 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.
On June 20, 1995 the Company and the State of Arizona executed an
agreement in principle to settle the clean-up litigation. In exchange
for a full release from liability by the State and the Arizona
Department of Environmental Quality, the Company has agreed to the
following:
* Undertake and pay for the costs of an RI/FS based upon a draft
March 1993 work plan.
* Pay $125,000 towards past costs incurred by the State of Arizona
and the Department of Environmental Quality.
* Pay $125,000 towards costs of future remediation and clean-up of
the site. In addition, at the time the State selects a remedy,
the Company agrees to an additional contribution in the amount of
a percentage of the estimated clean-up cost.
The Company and the State have begun negotiations on drafting a
Consent Decree incorporating these terms and conditions. Resolution
of this matter will not have a materially adverse effect on the
consolidated financial position of the Company.
<PAGE>
<PAGE>
The Company is involved in various other law suits 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.
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Results of Operations
Net sales increased $15,653,000 or 37% to $57,869,000, in the second
quarter of 1995 as compared to the second quarter of 1994. For the
first six months of 1995, net sales were $17,230,000 or 19% higher
than the same period in 1994. Sales increased in both periods in all
segments, except the Plastic Products segment which experienced a
slight decrease in sales for the three months ending June 30, 1995.
The major increase was in the Defense segment.
Despite the increase in sales, gross profit percentages at the Defense
segment slipped approximately seven and four percentage points for the
three and six month periods ended June 30, 1995, respectively, as
compared to the same periods in the prior year, to approximately 21%
and 23%, respectively. These decreases were attributable to lower
margin projects and are reflective of the competitive market place in
this segment, and the amortization of intangible assets related to an
acquisition made in 1994. The gross profit percentages at the Energy
segment showed slight improvement for the second quarter and
significant improvement for the six month period, primarily due to the
continued emphasis on replacement parts and increased sales of
Hydrograte stokers which command higher margins as well as ongoing
operational changes at the Company's foundry operation.
The benefits of the spending reduction program implemented in 1994
continue to be reflected in lower Selling and Administrative expenses.
For example, the Defense segment reported lower overhead spending of
$1,203,000 and $1,807,000 for the three and six month periods ended
June 30, 1995 as compared to the same periods in the prior year.
Higher costs at UIC Corporate, however, as a result of recent
organization changes and reserves taken to settle an environmental
suit, partially offset these savings. Selling and Administrative
expenses as a percentage of net sales were approximately 16% and 19%
for the three and six month periods ended June 30, 1995, as compared
to 25% and 23%, for the same periods in 1994.
The Company recorded net income of $1,324,000 and $2,464,000 for the
three and six month periods ended June 30, 1995, respectively. These
results are essentially unchanged from the same period in 1994, though
those periods in 1994 include profits of $1,554,000 related to the
sale of assets associated with the Company's restructuring in 1993.
The results for both periods in 1995 included improved operating
results at the Company's Energy segment. However, lower margins and
increased amortization of intangible assets at the Defense segment
offset this improvement in the second quarter. During the six month
period, reserves taken to settle an environmental suit and other
higher corporate expenses as well as lower margins and increased
amortization of intangible assets at the Defense segment offset the
improved results at the Energy segment. The growth experienced in the
Energy segment was primarily due to strong sales and ongoing
operational changes at the Company's foundry operation.
<PAGE>
<PAGE>
Liquidity and Capital Resources
Cash flows from operations were $9,936,000 for the six month period
ended June 30, 1995, as compared to $13,106,000 for the same period in
the prior year. Changes in working capital accounts explain the
variance, as net income was substantially unchanged. Funds from
operations were sufficient for dividends, capital expenditures, and
repayment of borrowings. Additionally, the Company received the final
installment payment of $8,540,000 on its note receivable in February
1995. The Company currently has no significant fixed commitments for
capital expenditures or for investments. Its capital requirements
consist primarily of its obligation to fund operations and interest
payments on indebtedness. The Company expects that available cash and
existing lines of credit will be sufficient to finance operations.
Contingent Matters
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 by 1961. Although this
facility may have used trichloroethylene ("TCE") in small quantities,
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 ("RI/FS"), 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.
On June 20, 1995 the Company and the State of Arizona executed an
agreement in principle to settle the clean-up litigation. In exchange
for a full release from liability by the State and the Arizona
Department of Environmental Quality, the Company has agreed to the
following:
* Undertake and pay for the costs of an RI/FS based upon a draft
March 1993 work plan.
* Pay $125,000 towards past costs incurred by the State of Arizona
and the Department of Environmental Quality.
* Pay $125,000 towards costs of future remediation and clean-up of
the site. In addition, at the time the State selects a remedy,
the Company agrees to an additional contribution in the amount of
a percentage of the estimated clean-up cost.
<PAGE>
<PAGE>
The Company and the State have begun negotiations on drafting a
Consent Decree incorporating these terms and conditions. Resolution
of this matter will not have a materially adverse effect on the
consolidated financial position of the
Company.
In May 1995, AAI Systems Management, Inc. (the "subsidiary"), an
indirect subsidiary of the Company, submitted to the U.S. Government
(the "customer") a Request for Equitable Adjustment ("REA") totaling
approximately $11,800,000 in connection with a certain contract with
the subsidiary. The REA seeks monetary damages based on costs
incurred by the subsidiary arising out of or in connection with
customer directed suspension of work and resulting schedule delays,
additional work directives, and other actions by the customer in
connection with the contract for which contractors are allowed
recovery under the Federal Acquisition Regulations. On July 14, 1995,
the subsidiary received the final decision of the customer rejecting
the REA in its entirety. Subsequent correspondence from the customer
offered certain economic relief not offered in it's July 14 rejection
and a willingness to discuss the claim and a request that work
continue on this important project. The subsidiary believes that the
claims made in the REA are meritorious and will vigorously pursue
recovery of the monies claimed through a number of options available
to it, including bringing a direct action in the U.S. Claims Court.
The subsidiary is currently evaluating its options and has not yet
made a decision as to which action it will take.
The Company provides for costs related to contingencies such as this
after its possible exposure is reasonably determined. It is the
opinion of management, that the ultimate resolution of this
contingency will not have a material adverse effect on the financial
condition of the Company.
<PAGE>
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UNITED INDUSTRIAL CORPORATION AND SUBSIDIARIES
PART II - Other Information
Item 1 - Legal Proceedings
Reference is made to Note D to the financial statements
included in Part I hereof, which Note is incorporated herein
by reference, for information concerning the lawsuit of the
State of Arizona against the Company relating to environmental
matters.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
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 June 30, 1995.
<PAGE>
<PAGE>
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: August 14, 1995 By: /s/ Thomas J. Carmody
--------------- ------------------------
Thomas J. Carmody
Vice President - Finance
and Chief Financial Officer
<PAGE>
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EXHIBIT INDEX
Exhibit
Number Description
------ -----------
11 - Computation of Earnings per share
27 - Financial Data Schedule
<PAGE>
EXHIBIT 11 - Computation of Earnings Per Share -
<TABLE>
<CAPTION>
Item 6(a)
Exhibit 11
Computation of Earnings per Share
United Industrial Corporation and Subsidiaries
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 12,218,639 12,258,693 12,195,084 12,258,693
========== ========== ========== ==========
Net income $1,324,000 $1,408,000 $2,464,000 $2,462,000
========== ========== ========== ==========
Earnings per share $ .11 $ .11 $ .20 $ .20
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial
information extracted from the financial
statements contained in the body of the
accompanying Form 10-Q and is qualified in its
entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 15,714
<SECURITIES> 0
<RECEIVABLES> 26,467
<ALLOWANCES> 0
<INVENTORY> 54,627
<CURRENT-ASSETS> 103,748
<PP&E> 128,316
<DEPRECIATION> 83,462
<TOTAL-ASSETS> 186,973
<CURRENT-LIABILITIES> 43,459
<BONDS> 24,876
0
0
<COMMON> 14,374
<OTHER-SE> 73,961
<TOTAL-LIABILITY-AND-EQUITY> 186,973
<SALES> 109,522
<TOTAL-REVENUES> 109,522
<CGS> 84,057
<TOTAL-COSTS> 104,548
<OTHER-EXPENSES> 423
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 397
<INCOME-PRETAX> 4,154
<INCOME-TAX> 1,690
<INCOME-CONTINUING> 2,464
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,464
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
