United Industrial Reports Strong Sales But Earnings Fall

Defense Daily, May 9, 2006

United Industrial Corp. [UIC] yesterday reported strong first quarter sales led by demand for its Shadow unmanned air vehicle (UAV) system but net income fell versus a year ago when earnings benefited from a one-time gain related to the sale of undeveloped property.

Net income declined 32 percent to $8.6 million, 67 cents earning per share (EPS), compared to $12.7 million (87 cents EPS). A year ago earnings included a $4.7 million (29 cents EPS) gain from the real estate sale and a marginal gain from discontinued operations, which swung to a $287,000 loss in the recent quarter. Free cash flow was $6.9 million in the quarter.

Regarding discontinued operations, UIC has satisfied its remaining guaranty obligations with most of the remaining expenses related to ongoing litigation to recover payments under a labor and materials bond.

Sales in the quarter climbed 28 percent to $137.6 million from $107.5 million a year ago. Organic growth accounted for 25 percent of the gain. Sales related to the war in Iraq were about $27 million in the quarter, company officials said.

The company's defense segment increased sales nearly 29 percent to $128.7 million from $100.2 million, with $24.6 million of the gain stemming from greater logistical support for an increasing number of fielded Shadow systems and an increase in production of the UAVs.

Profits in the defense segment increased 13 percent to $13.7 million on the higher volume but margins fell 150 basis points due to an increase of service bases sales, which return lower margins, and the completion last year of some higher margin production contracts.

UIC's energy division increased sales 21 percent to $8.9 million driven by demand for alternative fuel products while operating income was up sharply to $1.7 million from $100,000 due to the higher sales and improved margins. The division, known as Detroit Stoker, remains for sale.

Funded backlog at the end of the recent quarter was $541.4 million, a 9 percent increase from the end of 2005, a record level. The company also recorded $183.2 million in funded orders during the first quarter, $167.1 million in defense.

Already in the second quarter the company has garnered an additional $192 million in orders for its Shadow UAV system, with $154.6 million already funded. UIC announced an $87 million Army contract yesterday for nine Shadow systems, which includes 36 RQ-7B Shadow 200 aircraft, 18 One System ground control stations, and associated components and support equipment. Deliveries will begin next April and run through March 2008. The award is the fourth consecutive full- rate production contract that UIC has received for its Shadow system.

Earlier this month the company received a $105 million order, $67.6 million of it funded, from the Army to continue providing logistics support for the 43 Shadow systems that are currently fielded and for the refurbishment of systems returning from deployment.

[Copyright 2006 Access Intelligence, LLC. All rights reserved.]

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