UIC United Indl Corp

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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