SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 September 30, 1996
---------------------------
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. Identification No.)
incorporation or organization)
18 East 48th Street, New York, NY 10017
---------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (212) 752-8787
----------------------
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 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. 12,173,743 shares of common
stock as of November 1, 1996.
<PAGE>
UNITED INDUSTRIAL CORPORATION
INDEX
Page #
------
Part I - Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - Unaudited
September 30, 1996 and December 31, 1995 1
Consolidated Condensed Statements of Operations -
Three Months and Nine Months Ended September 30, 1996 and 1995 2
Consolidated Condensed Statements of Cash Flows
Nine Months Ended September 30, 1996 and 1995 3
Notes to Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 6
PART II - Other Information 8
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
September 30 December 31
1996 1995
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
- ------
Current assets
Cash & cash equivalents $ 10,306 $ 11,915
Trade receivables 30,311 32,911
Inventories
Finished goods & work-in-process 40,137 43,185
Materials & supplies 4,223 4,737
-------- --------
44,360 47,922
Deferred income taxes 6,448 6,487
Prepaid expenses & other current assets 5,919 1,761
-------- --------
Total Current Assets 97,344 100,996
Other assets 40,145 39,524
Property & equipment - less allowances
for depreciation (1996 - $90,821 & 1995 - $86,637) 42,035 42,586
-------- --------
$179,524 $183,106
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities
- -------------------
Short term borrowings $ 3,000 $ 3,000
Accounts payable 9,050 10,132
Accrued employee compensation & taxes 8,377 6,536
Customer advances 4,005 6,384
Current portion of long-term debt 6,250 6,250
Other liabilities 9,816 4,472
Reserve for contract losses 9,300 10,751
-------- --------
Total Current Liabilities 49,798 47,525
Long-term liabilities (less current maturities) 10,154 18,279
Deferred income taxes 10,085 9,820
Postretirement benefits other than pensions 22,085 21,322
Shareholders' Equity
- --------------------
Common stock $1.00 par value
Authorized - 15,000,000 shares; outstanding
1996 - 12,173,743 and 1995 - 12,170,793 shares
(net of shares in treasury) 14,374 14,374
Additional capital 90,196 91,421
Retained earnings (deficit) 133 (2,311)
Treasury stock, at cost, 1996 - 2,200,405 shares
1995 - 2,203,355 shares (17,301) (17,324)
-------- --------
87,402 86,160
-------- --------
$179,524 $183,106
======== ========
</TABLE>
See accompanying notes
1
<PAGE>
<TABLE>
<CAPTION>
UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share amounts)
Three Months Ended Nine Months Ended
September 30 September 30
--------------------- ------------------
(UNAUDITED)
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $54,159 $53,568 $163,925 $163,090
Operating costs & expenses
Cost of sales 45,333 42,833 128,652 126,890
Selling & administrative 8,100 9,115 29,056 29,606
Other expenses - net 331 241 472 664
Interest expense 523 574 1,738 1,763
Interest income (348) (186) (905) (978)
------- ------- -------- --------
53,939 52,577 159,013 157,945
------- ------- -------- --------
Income before income taxes 220 991 4,912 5,145
Income taxes 57 568 1,860 2,258
------- ------- -------- -------
Net income $ 163 $ 423 $ 3,052 $ 2,887
======= ======= ======== =======
Net earnings per share $ .01 $ .04 $ .25 $ .24
====== ====== ====== ======
</TABLE>
See accompanying notes
2
<PAGE>
<TABLE>
<CAPTION>
UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
NINE MONTHS ENDED SEPTEMBER 30
------------------------------
(UNAUDITED)
1996 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES $ 3,052 $ 2,887
- --------------------
Net income
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 6,078 6,402
Deferred income taxes 304 (2,781)
(Decrease) increase in contract loss provision (1,451) 715
Changes in operating assets and liabilities 6,493 (2,135)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 14,476 5,088
INVESTING ACTIVITIES
- --------------------
Decrease in note receivable - 8,540
Purchase of property and equipment (4,097) (4,011)
Increase in other assets - net (2,046) (4,171)
-------- --------
NET CASH PROVIDED BY INVESTING ACTIVITIES (6,143) 358
FINANCING ACTIVITIES
- --------------------
Decrease in long-term liabilities (1,875) (5,467)
Increase in current portion of long term liabilities - 6,250
Proceeds from borrowings 9,000 9,000
Payments on long-term debt & borrowings (15,250) (10,200)
Dividends (1,825) (2,555)
Proceeds from exercise of stock options 8 16
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (9,942) (2,956)
--------- --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,609) 2,490
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 11,915 6,132
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,306 $ 8,622
======== ========
</TABLE>
See accompanying notes
3
<PAGE>
UNITED INDUSTRIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
September 30, 1996
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 nine month period ended September 30,
1996 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1996. 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, 1995.
NOTE B - DIVIDENDS
A quarterly dividend of $.05 per share is payable November 29, 1996.
NOTE C - LEGAL PROCEEDINGS
A subsidiary of the Company owned and operated a small facility at a site in the
State of Arizona that manufactured semi-conductors from 1959 to 1961 at which
time the subsidiary was sold by the Company. 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.
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. One tort claim is a certified
property and medical class action.
On February 11, 1992 a complaint was filed against the Company and ten other
named and ten unnamed entities in the Maricopa County Superior Court of Arizona
by seven individuals seeking to represent a class. A class in excess of 10,000
was originally alleged. The plaintiffs have amended their complaints to separate
the larger property damage and medical monitoring classes into smaller
subclasses based on geographic location and alleged exposure to solvents. In the
process of amendment, the overall sizes of the respective classes have been
significantly reduced. This suit alleges that the members of the class have been
exposed to contaminated groundwater in the Phoenix/Scottsdale, Arizona area and
suffer increased risk of disease and other physical effects. They also assert
property damages under various theories; seek to have certain scientific studies
performed concerning health risks, preventative measures and long-term effects;
and seek
4
<PAGE>
incidental and consequential damages, punitive damages and an injunction against
actions causing further exposures. The property and medical classes recently
were certified. The Company has joined with the other defendants and appealed
the class certification issue to the Arizona Supreme Court. The Company intends
to vigorously contest these actions and believes that the resolution of these
actions will not be material to the Company.
Four additional lawsuits were filed on April 7, 1993, December 20, 1993, June
10, 1994 and July 18, 1995 in the Maricopa County Superior Court of Arizona.
These matters allege personal injury and wrongful death by multiple plaintiffs
arising from the alleged contamination in the Phoenix/Scottsdale, Arizona area.
The Company intends to aggressively defend against these claims; however, at
this time, no estimate can be made as to the amount or range of potential loss,
if any, to the Company with respect to these matters.
Detroit Stoker was notified in March 1992 by the Michigan Department of Natural
Resources (MDNR) that it is a potentially responsible party in connection with
the clean-up of a former industrial landfill located in Port of Monroe,
Michigan. MDNR is treating the Port of Monroe landfill site as a contaminated
facility within the meaning of the Michigan Environmental Response Act (MERA),
MCLA Section 299.601 et seq. Under MERA, if a release or a potential release of
a discarded hazardous substance is or may be injurious to the environment or to
the public health, safety, or welfare, MDNR is empowered to undertake or compel
investigation and response activities in order to alleviate any contamination
threat. Detroit Stoker intends to aggressively defend these claims, however, at
this time, no estimate can be made as to the amount or range of potential loss,
if any, to Detroit Stoker with respect to this action.
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 Company.
In May 1995, AAI Systems Management, Inc. (the "subsidiary"), an indirect
subsidiary of the Company, submitted to the U.S. Navy (the "customer") a Request
for Equitable Adjustment ("REA") totaling approximately $11.8 million in
connection with a contract to deliver helicopter simulator training devices to
the Navy. On July 14, 1995, the subsidiary received the final decision of the
customer rejecting the REA in its entirety. On October 10, 1995, the subsidiary
filed a Notice of Appeal of the final decision with the Armed Services Board of
Contract Appeals seeking monetary damages plus interest. On June 12, 1996 the
customer issued to the subsidiary a Show Cause Notice advising the subsidiary
that the customer is considering terminating the contract for default.
In early November 1996, the subsidiary reached an agreement in principle with
certain officials of the U.S. Navy to resolve this dispute. When reduced to
writing, the agreement will provide for an orderly conclusion of the contract, a
limitation on the Company's liability, precluding the possibility of additional
losses for the subsidiary under the contract, and an end of the pending
litigation against the Navy. The written agreement will also eliminate the
possibility that the contract might be terminated by the Navy based upon the
subsidiary's alleged default, which would likely have resulted in further
litigation and entailed the risk of a materially adverse result. Settlement of
5
<PAGE>
the dispute and the abbreviated completion of the contract require an additional
charge of $2.2 million ($1.4 million net of taxes) against earnings for the
quarter.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Results of Operations
Net sales increased $591,000 to $54,159,000 in the third quarter of 1996 as
compared to the third quarter of 1995. For the first nine months of 1996, net
sales of $163,925,000 were $835,000 higher than the same period in 1995. The
Defense segment experienced increases in sales of 2.8%, for the three and nine
month periods in 1996 as compared to the like periods in 1995. Both the three
and nine month periods in 1996 accomplished improved sales related to training
systems and unmanned air vehicles in the Defense segment. However, partially
offsetting these increases was the impact of percentage of completion method of
accounting for increased costs on the SH-60 helicopter simulator program. Sales
decreased in both periods in non-defense segments due to contract award delays.
The gross profit percentage remained essentially unchanged at 22% for the nine
month period ended September 30, 1996, as compared to the same period in 1995,
due primarily to the continued mix of higher cost contracts in the Defense
segment. Gross profit for the three months ending September 30, 1996 was 16%
compared to 20% for the same period in 1995. The reduction was principally due
to a reduction of $2.2 million on the helicopter simulator training devices for
the Navy. (See Note C - Legal Proceedings) Included in the Defense segment's
income for the nine months in 1996 is a reduction in pretax income of $3,300,000
related to the SH-60 helicopter program. $2,200,000 relating to the agreement
with the Navy was included in the third quarter. Also included in the first nine
months of 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, 1995, the Company indicated that the net realizable value of these
inventories was $7,700,000. Inasmuch as the Company had not produced a buyer for
such inventory at March 31,1996, it had reduced its estimated net realizable
value at that date to $6,800,000. The Company still identifies potential buyers
for a substantial portion of such inventory and has based the estimate of the
net realizable value on its current assessment of the salability of this
inventory. However, the Company faces significant competition from other
producers of similar products and therefore the estimated net realizable value
of this inventory may be further reduced during the year.
Selling and administrative expenses as a percentage of net sales were 15.0% and
17.7% for the three and nine month periods ended September 30, 1996,
respectively, as compared to 17.0% and 18.2% for the same periods in 1995. The
decrease for the three month period resulted principally from reduced expenses
at Corporate.
The Company earned net income of $163,000 and $3,052,000 for the three and nine
months ended September 30, 1996, respectively, compared to $423,000 and
$2,887,000 for the same periods in 1995.
The decrease in the income tax rate to 25.9% and 37.9% in the three and nine
month periods from 57.3% and 43.9% in the prior three and nine month periods was
due to refunds of state taxes in the three months ended September 30, 1996 and
the payment to the IRS in 1995 of obligations related to 1994.
6
<PAGE>
Effective July 1, 1996 the operations of Electric Transit Inc. (ETI) are no
longer consolidated in the financial statements. The Company's ownership has
been reduced from 53% to 35%. The Company's 1996 nine month sales and gross
margin figures were not significantly effected. ETI's inventory is not included
in the Company's September 30, 1996 financial statements. At June 30, 1996 such
inventory was $4,930,000.
Liquidity and Capital Resources
Cash flows from operations were $14,476,000 for the nine month period ended
September 30, 1996, as compared to $5,088,000 for the same period in the prior
year. The major items accounting for the difference in changes in operating
assets and liabilities were a decrease in trade receivables and inventories and
an increase in other liabilities. Funds from operations were sufficient for
dividends, capital expenditures, and repayment of borrowings. Included in the
1995 cash flows was the receipt of the final installment payment of $8,540,000
on the Company's note receivable. The Company extended certain lines of credit
from September 30, 1996 to December 31, 1996. 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 for the
remainder of the year.
7
<PAGE>
UNITED INDUSTRIAL CORPORATION AND SUBSIDIARIES
PART II - Other Information
ITEM 1 - Legal Proceedings
Reference is made to Note C to the financial statements included
in Part I hereof, which Note is incorporated herein by
reference, for information concerning lawsuits against the
Company and certain of its subsidiaries relating to
environmental and other matters.
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10 (U)- NBD Bank - United Industrial Corporation, Detroit
Stoker Company credit agreement extension to December
31, 1996.
10 (V)- Second amendment made as of September 20, 1996 to
Credit Agreement dated October 13, 1995 between First Union
Commercial Corporation and AAI Corporation (the "borrower")
and AAI subsidiaries, UIC-DEL Corporation, Symtron Systems,
Inc. and United Industrial Corporation as guarantors.
10 (W)- Amendment dated as of September 29, 1996, by and between
United Industrial Corporation and James H. Perry to that
Certain Employment Agreement dated February 29, 1996
between United Industrial Corporation and James H. Perry.
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 September 30, 1996.
8
<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 November 14, 1996 By: /s/ James H. Perry
---------------------------
James H. Perry
Chief Financial Officer
and Treasurer
9
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10 (U)- NBD Bank - United Industrial
Corporation, Detroit Stoker Company credit
agreement extension to December 31, 1996.
10 (V)- Second amendment made as of September 20,
1996 to Credit Agreement dated October 13, 1995
between First Union Commercial Corporation and
AAI Corporation (the "borrower") and AAI
subsidiaries, UIC-DEL Corporation, Symtron
Systems, Inc. and United Industrial Corporation
as guarantors.
10 (W)- Amendment dated as of September 29, 1996, by and
between United Industrial Corporation and James
H. Perry to that Certain Employment Agreement
dated February 29, 1996 between United Industrial
Corporation and James H. Perry.
11 - Computation of Earnings per share
27 - Financial Data Schedule
EXHIBIT 10 (U)
NBD Bank
611 Woodward Avenue
Detroit, Michigan 48226
June 30, 1996
United Industrial Corporation
Detroit Stoker Company
18 East 48th Street
New York, New York 10017
Ladies and Gentlemen:
This letter amends the terms of the Letter Loan Agreement dated November 30,
1995 (as modified by our letter agreement dated July 18, 1996, the "Loan
Agreement") between NBD Bank, a Michigan banking corporation, (the "Bank"),
United Industrial Corporation, a Delaware corporation, ("United Industrial"),
and Detroit Stoker Company, a Michigan corporation, ("Detroit Stoker"). Terms
used and not otherwise defined in this letter shall have the meanings ascribed
to them in the Loan Agreement.
There are currently outstanding under the Credit Facility loans to United
Industrial in an aggregate principal amount of $3,000,000 (the "Existing
Loans"), Letters of Credit for the account of United Industrial in an aggregate
face amount of $2,857,600 and Letters of Credit for the account of Detroit
Stoker in an aggregate face amount of $254,660 (collectively, the "Existing
Letters of Credit").
The Expiration Date set forth in the first paragraph of the Loan Agreement is
extended from September 30, 1996 to December 31, 1996. Notwithstanding any
provision of the Loan Agreement to the contrary, the Bank shall not extend any
new Advances under the Credit Facility. Until the Expiration Date, the Borrowers
may renew the Existing Loans but may not reborrow once those loans are paid
down.
Except as amended by this letter, the terms of the Loan Agreement shall remain
in full force and effect.
<PAGE>
United Industrial Corporation
Page 2
June 30, 1996
Please indicate your assent to the terms of this letter by signing below and
returning the original to me. The enclosed copy is for your records. As always,
please feel free to contact me with any questions or comments you may have
regarding this matter.
Very truly yours,
NBD BANK
By: _____________________
Ana R. Hoffman
Its: Vice President
Accepted and agreed to this _____ day of _________________________ , 1996.
UNITED INDUSTRIAL CORPORATION
By:__________________________
Its:_________________________
DETROIT STOKER COMPANY
By:__________________________
Its:_________________________
EXHIBIT 10 (V)
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is made as
of the 20th day of September, 1996, by and among AAI CORPORATION, a Maryland
corporation ("Borrower"), AAI SYSTEMS MANAGEMENT, INC., a Maryland corporation
("Systems"), AAI/ACL TECHNOLOGIES, INC., a Maryland corporation
("Technologies"), AAI ENGINEERING SUPPORT, INC., a Maryland corporation
("Engineering"), AAI CALIFORNIA CARSHELL, INC., a Maryland corporation
("Carshell"), AAI MEDICAL CORPORATION, a Maryland corporation ("Medical"),
UIC-DEL. CORPORATION, a Delaware corporation ("UIC-DEL"), AAI INTERNATIONAL,
INC., a Delaware corporation ("International"), AAI MICROFLITE SIMULATION
INTERNATIONAL CORPORATION, a Maryland corporation ("Microflite"), SETI, INC., a
Pennsylvania corporation ("Seti"), SYMTRON SYSTEMS, INC., a New Jersey
corporation ("Symtron"), UNITED INDUSTRIAL CORPORATION, a Delaware corporation
("UIC") (Systems, Technologies, Engineering, Carshell, Medical, UIC-DEL,
International, Microflite, Seti, Symtron and UIC being hereinafter collectively
referred to as "Guarantors"), and FIRST UNION COMMERCIAL CORPORATION, as Lender
(in such capacity, "Lender"), as Issuing Bank (in such capacity, "Issuing
Bank"), and as Agent (in such capacity, "Agent"), under the Credit Agreement (as
hereinafter defined).
RECITALS
R-1. Lender is the successor to First Fidelity Bank, National
Association ("FFB") under that certain Credit Agreement dated October 13, 1995,
as modified by First Amendment and Additional Credit Agreement dated October 18,
1995 (collectively, the "Credit Agreement"), among Borrower, FFB, and another
financial institution which subsequently merged into FFB, as a consequence of
which Lender now holds one hundred percent (100%) of the Revolving Credit
Commitments and the Notes, and one hundred percent (100%) of the L/C Commitment.
R-2. Borrower has requested that Lender, Issuing Bank and Agent amend
the Credit Agreement, and Lender, Issuing Bank and Agent have agreed to do so
upon the terms and conditions set forth in this Amendment.
NOW, THEREFORE, in consideration of the premises stated, and other good
and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties hereto agree as follows:
1. Defined Terms. All capitalized terms used in this Amendment without
other express definitions being assigned herein, shall have the meanings
assigned to such terms in the
<PAGE>
Credit Agreement, giving effect to the modification of the Credit Agreement
contained in Section 2 of this Amendment.
2. Amendment of the Credit Agreement. The Credit Agreement is hereby
amended by amending the definition of "Termination Date" contained in Section 1
to read in its entirety as follows:
"TERMINATION DATE": the earlier of (a) January 17,
1997, or (b) the date which is one hundred fifty (150) days
after the date on which the Agent shall have given written
notice to the Borrower, at the direction of the Required
Lenders and whether or not an Event of Default shall have
occurred, that the Obligations shall be due in full on such
date.
3. Representations and Warranties of Borrower. In order to induce
Lender, Issuing Bank and Agent to enter into this Amendment, Borrower represents
and warrants to Lender, Issuing Bank and Agent that:
(a) Each of Borrower and Guarantors has the power and
authority to execute, deliver and perform this Amendment. Each of Borrower and
Guarantors has taken all necessary action (including, without limitation,
obtaining any required approval of its Board of Directors or stockholders) to
authorize its execution, delivery and performance of this Amendment. No consent,
approval or authorization of, or filing with, any Governmental Authority, and no
consent of any other Person, is required in connection with the execution,
delivery and performance of this Amendment by each of Borrower and Guarantors,
except for those already duly obtained.
(b) This Amendment has been duly executed and delivered by
each of Borrower and Guarantors, and constitutes the legal, valid and binding
obligation of each of Borrower and Guarantors, enforceable against Borrower and
Guarantors in accordance with its terms without defense, setoff or counterclaim.
The execution, delivery and performance of this Amendment by each of Borrower
and Guarantors does not and will not conflict with, or constitute a violation or
breach of, or constitute a default under, or result in the creation or
imposition of any Lien upon any property of Borrower, any Subsidiary of Borrower
or any Guarantor by reason of the terms of (a) any mortgage, lease, agreement,
instrument or Contractual Obligation to which Borrower, any Subsidiary of
Borrower or any Guarantor is a party or which is binding upon it, or (b) any
Requirement of Law.
(c) Each of the representations and warranties of Borrower and
Guarantors contained in the Credit Agreement and the other Credit Documents are
correct and complete in all material respects as of the date hereof.
(d) There has not occurred any material adverse change in the
business, operations, assets or financial or other condition of Borrower or UIC
from those indicated in the last financial statements delivered to Agent
pursuant to Subsection 6.1 of the Credit Agreement.
(e) There exists no Default or Event of Default as of the date
hereof.
-2-
<PAGE>
4. Condition to Effectiveness of Amendment. The modification of the
Credit Agreement contained in Section 2 of this Amendment shall be conditioned
upon, and shall not be effective until, the following condition precedent shall
have been satisfied as determined by Agent: As of the date hereof, all
representations and warranties of Borrower and Guarantors contained in the
Credit Agreement, this Amendment and the other Credit Documents shall be correct
and complete in all material respects, and no Default or Event of Default shall
have occurred and be continuing.
5. No Defenses or Claims: Release. In order to induce Lender, Issuing
Bank and Agent to enter into this Amendment, each of Borrower and Guarantors
acknowledges and represents to Lender, Issuing Bank and Agent that it has no
defense, setoff, cause of action or claim of any kind against Lender, Issuing
Bank or Agent on account of actions heretofore taken or not taken by Lender,
Issuing Bank or Agent or otherwise, which can be asserted as a basis to seek
affirmative relief or damages from Lender, Issuing Bank or Agent or to reduce or
eliminate any obligations of Borrower or such Guarantor to Lender, Issuing Bank
or Agent. Each of Borrower and Guarantors, on behalf of itself and its
successors and assigns, hereby forever and irrevocably releases Lender, Issuing
Bank and Agent, and each of their employees, officers, agents, attorneys,
successors and assigns, from any and all claims, demands, damages, liabilities,
obligations, penalties, suits and causes of action of any kind relating to,
resulting from or arising out of any fact, matter or occurrence known to
Borrower or any of Guarantors existing as of, or occurring prior to, the date of
this Amendment directly or indirectly relating to, resulting from or arising out
of any Revolving Credit Loans or Letters of Credit, any of the Credit Documents
or any obligations of Borrower or such Guarantor to Lender, Issuing Bank or
Agent.
6. Consents of Guarantors. Each of Guarantors hereby consents to the
modification of the Credit Agreement provided for in this Amendment.
7. No Novation or Waiver. Borrower, Guarantors, Lender, Issuing Bank
and Agent intend that the execution and delivery of this Amendment shall not
constitute or be construed to operate as a novation of the Credit Agreement, the
Notes, the Deed of Trust, the Guaranty, the Borrower Security Agreement, the
Borrower Pledge Agreement, the Intellectual Property Assignments, the Guarantor
Security Agreement, the UIC Pledge Agreement, the UIC Subordination Agreement,
the UIC-DEL Subordination Agreement, the L/C Agreements or any other of the
Credit Documents or any obligations of Borrower or Guarantors evidenced by any
of the Credit Documents or as a novation of any security interests or other
Liens directly or indirectly securing any of such obligations. Nothing contained
in this Amendment or in any prior oral or written communications from or on
behalf of Lender, Issuing Bank or Agent to Borrower or any of Guarantors shall
constitute or be construed to operate as a waiver by Lender, Issuing Bank or
Agent of any Defaults or Events of Default which have occurred. Nor shall
anything contained in this Amendment or in any prior oral or written
communications from or on behalf of Lender, Issuing Bank or Agent to Borrower or
any of Guarantors constitute or be construed to operate as a waiver by Lender,
Issuing Bank or Agent of any rights or remedies heretofore or hereafter
-3-
<PAGE>
accruing to Lender, Issuing Bank or Agent on account of any such Default or
Event of Default or any other Default or Event of Default.
8. Expenses. Whether or not the transactions contemplated hereby are
consummated, Borrower shall pay to Agent on demand all out-of-pocket costs and
expenses that Agent has paid or incurred or subsequently pays or incurs in
connection with the negotiation, preparation, consummation and administration of
this Amendment, all as further provided in Subsection 10.6 of the Credit
Agreement.
9. Ratification of Documents and Obligations. Borrower, Guarantors,
Lender, Issuing Bank and Agent hereby ratify and confirm the Credit Agreement
(as amended pursuant hereto), the Notes, the Deed of Trust, the Borrower
Security Agreement, the Borrower Pledge Agreement, the Guaranty, the
Intellectual Property Assignments, the Guarantor Security Agreement, the UIC
Pledge Agreement, the UIC Subordination Agreement, the UIC-DEL Subordination
Agreement, the L/C Agreements and the other Credit Documents, and agree that the
same, and all obligations of the parties thereunder, shall remain in full force
and effect.
10. Binding Nature, Merger, Counterparts and Choice of Law. This
Amendment shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, and each reference in this
Amendment to any of the parties hereto shall be deemed to include the successors
and assigns of such party. This Amendment contains the entire agreement of the
parties with respect to the matters covered and the transactions contemplated
hereby and thereby, and no agreement, statement or promise made by any party, or
by any employee, officer, agent or attorney of any party, which is not contained
herein or therein, shall be valid or binding. This Amendment may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which, when so executed and delivered, shall be an original, but all
such counterparts shall together constitute one and the same agreement. This
Amendment, and the rights and obligations of the parties hereunder, shall be
governed by, and construed and interpreted in accordance with, the internal laws
of the State of Maryland, exclusive of principles of conflicts of laws.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
[SIGNATURE PAGE FOLLOWS]
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Amendment under seal as of the date first above written.
ATTEST/WITNESS: AAI CORPORATION
AAI SYSTEMS MANAGEMENT, INC.
AAI/ACL TECHNOLOGIES, INC.
AAI ENGINEERING SUPPORT INC.
AAI CALIFORNIA CARSHELL, INC.
AAI MEDICAL CORPORATION
AAI INTERNATIONAL, INC.
AAI MICROFLITE SIMULATION
INTERNATIONAL CORPORATION
SETI, INC.
_____________________________ By:_____________________________(SEAL)
Robert W. Worthing
Vice President, General Counsel
and Secretary of each of the foregoing
corporations
UIC - DEL. CORPORATION
_____________________________ By:_____________________________(SEAL)
Robert W. Worthing
Secretary of the foregoing corporation
UNITED INDUSTRIAL CORPORATION
SYMTRON SYSTEMS, INC.
_____________________________ By:_____________________________(SEAL)
James H. Perry
Chief Financial Officer of each of
the foregoing corporations
-5-
<PAGE>
Signatures continued:
FIRST UNION COMMERCIAL
CORPORATION, successor to First Fidelity
Bank, National Association, as Lender, Issuing
Bank and Agent
_____________________________ By:_____________________________(SEAL)
Name:___________________________
Title:__________________________
STATE OF New York , COUNTY OF New York , SS:
I HEREBY CERTIFY that on this 19 day of September, 1996, before me, the
undersigned, a Notary Public of said State, personally appeared Robert W.
Worthing, who acknowledged himself to be the Vice President of each of AAI
CORPORATION, AAI SYSTEMS MANAGEMENT, INC., AAI/ACL TECHNOLOGIES, INC., AAI
ENGINEERING SUPPORT INC., AAI CALIFORNIA CARSHELL, INC., AAI INTERNATIONAL,
INC., AAI MICROFLITE SIMULATION INTERNATIONAL CORPORATION, SETI, INC.,and AAI
MEDICAL CORPORATION, and the Secretary of each of UIC-DEL. CORPORATION and
that he, as such, being authorized so to do, executed the foregoing instrument
for the purposes therein contained.
WITNESS my hand and Notarial Seal.
My comm'n exp.: ___________________ _________________________
Notary Public
-6-
<PAGE>
STATE OF New York , COUNTY OF New York , SS:
I HEREBY CERTIFY that on this 19 day of September, 1996, before me, the
undersigned, a Notary Public of said State, personally appeared James H. Perry,
who acknowledged himself to be the Chief Financial Officer of each of SYMTRON
SYSTEMS, INC., and of UNITED INDUSTRIAL CORPORATION, and that he, as such, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained.
WITNESS my hand and Notarial Seal.
My comm'n exp.:____________________ __________________________
Notary Public
STATE OF ___________________, COUNTY OF ___________________, SS:
I HEREBY CERTIFY that on this ____ day of _______________, 1996, before
me, the undersigned, a Notary Public of said State, personally appeared
________________________, who acknowledged himself/herself to be the
________________________ of FIRST UNION NATIONAL BANK, and that he/she, as such,
being authorized so to do, executed the foregoing instrument for the purposes
therein contained.
WITNESS my hand and Notarial Seal.
My comm'n exp.: ______________ __________________________________
Notary Public
-7-
EXHIBIT 10 (W)
AMENDMENT
---------
AMENDMENT dated as of September 20, 1996, by and between
UNITED INDUSTRIAL CORPORATION, a Delaware corporation ("Employer"),
and JAMES H. PERRY ("Employee"), to that certain Employment Agreement
dated February 29, 1996 between Employer and Employee (the "Employment
Agreement;" terms defined therein being used herein as so defined).
W I T N E S S E T H:
-------------------
WHEREAS, the parties hereto desire to amend the Employment
Agreement as provided herein;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the parties hereto agree as follows:
1. The Employment Agreement is hereby amended as follows:
(a) Section 2 thereof is amended to read in its
entirety as follows:
" 2. Term. (a) The employment of Employee hereunder shall
----
be effective and shall commence on December 1, 1995 (the "Effective
Date") and shall terminate as of the close of business on November 30,
1999 or such earlier date as provided in clause (b) below (the
"Termination Date"). The period from the Effective Date through the
Termination Date is referred to as the term of the Agreement.
"(b) Employee may terminate his employment hereunder
upon not less than three (3) months prior written notice to Employer
at any time within one (1) year following a "change in control" of
Employer. For purposes hereof, a "change in control" of Employer
shall occur if (a) any person or other entity, including any person as
defined in Section 13(d)3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), becomes the beneficial owner, as defined
in Rule 13d-3 under the Exchange Act, directly or indirectly, of more
than fifty percent (50%) of the total combined voting power of all
classes of capital stock of Employer normally entitled to vote for the
election of directors of Employer (the "Voting Stock"), (b) there is a
sale of all or substantially all of the property or assets of
Employer, (c) there is a consolidation or merger of the Employer with
another corporation, the consummation of which would result in the
stockholders of Employer immediately before the occurrence of the
consolidation or merger owning, in the aggregate, less than 50% of the
Voting Stock of the surviving entity, or (d) a change in the Board of
Directors of Employer occurs with the result that the members of the
Board of Directors on the date hereof (the "Incumbent Directors") no
longer constitute a majority of such Board of Directors, provided that
any person becoming a director whose election or nomination for
<PAGE>
election was supported by a majority of the Incumbent Directors shall
be considered an Incumbent Director for purposes hereof."
(b) The second sentence of the first paragraph of
Section 3 thereof is amended to read in its entirety as follows: "The
principal place of employment of Employee shall be at the offices of
AAI Corporation, a subsidiary of Employer, located in Hunt Valley,
Maryland or within a thirty (30) mile radius thereof or within the New
York City metropolitan area."
(c) Section 3 thereof is further amended by deleting
the last sentence of the first paragraph of such Section.
(d) A new Section 20 is added to the Employment
Agreement as follows:
"20. Reimbursement of Loss on Sale of House. If
--------------------------------------
Employer terminates the employment of Employee under this Agreement
prior to the Termination Date other than pursuant to Sections 10 or 12
hereof, Employer shall reimburse Employee for any loss incurred by him
on the sale of his house in Maryland (including in the calculation of
any such loss costs of sale and brokerage commissions), up to a
maximum payment of $100,000, upon the submission of appropriate
evidence of such loss, provided that he sells his house within two (2)
years of such termination and he moves back to the New York City
metropolitan area."
<PAGE>
3. Except as amended hereby, the Employment Agreement is
hereby ratified and confirmed and shall remain in full force and
effect.
4. This Amendment shall be governed by, construed and
enforced in accordance with the laws of the State of New York, without
regard to its conflict of laws principles.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Amendment as of the day and year first above written.
UNITED INDUSTRIAL CORPORATION
By:
---------------------------
Richard R. Erkeneff,
President
------------------------------
JAMES H. PERRY
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 Nine Months Ended
September 30 September 30
--------------- ------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 12,212,123 12,220,861 12,197,703 12,203,676
========== ========== ========== ==========
Net income $163,000 $423,000 $3,052,000 $2,887,000
======== ======== ========== ==========
Earnings per share $ .01 $ .04 $ .25 $.24
====== ====== ====== ====
</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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 10,306
<SECURITIES> 0
<RECEIVABLES> 30,311
<ALLOWANCES> 0
<INVENTORY> 44,360
<CURRENT-ASSETS> 97,344
<PP&E> 132,856
<DEPRECIATION> 90,821
<TOTAL-ASSETS> 179,524
<CURRENT-LIABILITIES> 49,798
<BONDS> 10,154
0
0
<COMMON> 14,374
<OTHER-SE> 73,028
<TOTAL-LIABILITY-AND-EQUITY> 179,524
<SALES> 163,925
<TOTAL-REVENUES> 905
<CGS> 128,652
<TOTAL-COSTS> 157,708
<OTHER-EXPENSES> 472
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,738
<INCOME-PRETAX> 4,912
<INCOME-TAX> 1,860
<INCOME-CONTINUING> 3,052
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,052
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
