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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 1996.
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required) 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
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(State or Other Jurisdiction of
Incorporation or Organization) (I.R.S. Employer Identification No.)
18 EAST 48TH STREET
NEW YORK, NEW YORK 10017
(212) 752-8787
- --------------------------------------------------------------------------------
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
NONE
- --------------------------------------------------------------------------------
(Title of Class)
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [_].
Aggregate market value of the voting stock (which consists solely of shares of
Common Stock) held by non-affiliates of the registrant as of March 26, 1997,
computed by reference to the closing sale price of the registrant's Common Stock
on the New York Stock Exchange Stock Exchange on such date: $73,086,734.
On March 26, 1997, the registrant had outstanding 12,175,543 shares of Common
Stock, par value $1.00 per share, which is the registrant's only class of common
stock.
DOCUMENTS INCORPORATED BY REFERENCE:
1. Certain portions of the registrant's Annual Report to Shareholders for
the fiscal year ended December 31, 1996 are incorporated by reference
into Parts I and II of this report.
2. Certain portions of the registrant's definitive Proxy Statement to be
filed pursuant to Regulation 14A of the Securities Exchange Act of 1934,
as amended, in connection with the Annual Meeting of Stockholders of the
registrant to be held on May 13, 1997 are incorporated by reference into
Part III of this report.
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PART I
ITEM 1. BUSINESS
United Industrial Corporation ("United" or the "Company") was incorporated under
the laws of the State of Delaware on September 14, 1959 under the name Topp
Industries Corporation. On December 31, 1959, the name of the corporation was
changed to United Industrial Corporation.
The operations of United consist of three principal industry segments: defense,
energy systems and plastic products, conducted through four wholly-owned
subsidiaries.
Defense
AAI Corporation
AAI Corporation ("AAI") is engaged in research, development and manufacture in
the following major areas: (1) training and simulation systems; (2) automatic
test equipment for electronic systems and components; (3) ordnance systems; (4)
mechanical support systems for industrial, military, and marine applications;
(5) unmanned air vehicle systems; (6) automated weather monitoring systems; and
(7) transportation systems. Since its inception, AAI's business has been
primarily in support of the U.S. Department of Defense ("DOD"). Since 1990, the
Company has emphasized diversification into other markets to reduce its
dependence on the DOD. The United States defense budget has been significantly
reduced in recent years and this trend is expected to continue. In 1996
approximately 62% of the sales volume of AAI consisted of research, development
and production of military items under defense contracts compared to 64% in
1995. Certain of the contracts currently being worked on by AAI involve testing
systems for U.S. Navy aircraft, training equipment for the U.S. Air Force and
U.S. Navy, and weapons handling systems for the U.S. Army.
The balance of AAI's business consists of work performed in the non-Department
of Defense markets. These areas include hydraulic test equipment, transportation
equipment and weather systems. AAI was awarded a contract for 1,096 weather
systems to be installed in certain government airports throughout the country.
This contract was recently restructured and extended through 1997. New orders
were received in 1996 for 159 additional systems. In 1996, 142 weather systems
were installed bringing total systems installed since inception of the contract
to 819.
Because of the variety of its activities, it is not possible to state precisely
the competitive position of AAI with respect to each of its product lines. In
the area of training and simulation systems, AAI is one of approximately ten
leading organizations developing equipment for the U.S. Government. AAI's
ability to obtain orders for training and simulation systems is dependent
principally on the ability, expertise and training of its
2
employees and the level of funding by the DOD and foreign military users. A
number of large and small companies produce automatic test equipment that
compete with AAI for market share. In the area of weapons and munitions, AAI
ranks among approximately ten leading companies engaged in development work.
However, AAI's production activity in this field is less significant. AAI began
development in the Unmanned Air Vehicle business in 1986. The Company produced
the highly successful Pioneer Unmanned Air Vehicle employed by the United States
during Operation Desert Storm, and presently is pursuing contracts with foreign
countries. AAI is one of several large and small competitors in this field.
AAI's administrative offices and the major part of its manufacturing and
engineering facilities are located in Hunt Valley, Maryland.
Symtron Systems, Inc.
On January 18, 1994, the Company acquired all of the outstanding shares of
Symtron Systems, Inc. ("Symtron"), a producer of firefighter training simulators
for the government, military and commercial markets. The purchase price
consisted of initial cash payments of $2,000,000, assumption of certain
liabilities of approximately $5,900,000 and a contingent payment, not to exceed
$1,000,000, based on the profits on contracts existing at the acquisition date.
Additionally, contingent amounts are payable if certain pretax profits, as
defined in the purchase agreement, are earned for each of the years in the three
year period ending December 31, 1998. In 1996 and 1995, the Company made
contingent payments of $254,000 and $1,000,000, respectively, which were
classified as selling and administrative expense in the 1996 and 1995 financial
statements. Funds generated from operations and an existing line of credit were
utilized to finance the purchase of Symtron. Symtron's 1996 sales consisted of
production for the Navy and commercial customers. The main office and plant of
Symtron are located in Fair Lawn, New Jersey. In January 1997 Symtron and its
principal direct competitor agreed to settle litigation regarding the use of
Symtron tectechnology, which included the competitor's withdrawal from the
firefighter training marketplace for at least five years. This agreement,
however, is currently under review by the United States District Court for the
State of New Jersey. Other competitors are small foreign firms who Symtron
believes have not yet delivered a computer control system for live firefighter
training to the United States market.
Energy Systems
Detroit Stoker Company
Detroit Stoker Company ("Detroit Stoker") is engaged in the design, manufacture
and sale of industrial stokers, gas/oil burners, municipal solid waste
combustion systems for waste to energy plants, rotary seal feeders for the
metering of granular materials, replacement parts and aftermarket services. Its
products are used for the generation of process steam and electric power in a
wide range of industrial and municipal applications. Principal customers include
public utilities, industrial manufacturing plants, universities, pulp and paper
mills, sugar mills and independent power producers (non-utility generators). Its
waste to energy
3
technology is used extensively in both public and private plants which generate
steam and power from municipal waste. Its solid fuel combustion technologies are
particularly well suited to the burning of biomass fuels. The primary raw
materials used by Detroit Stoker are iron and steel which are available from
many sources. The main office and plant of Detroit Stoker are located in Monroe,
Michigan.
The products of Detroit Stoker compete with those of several other
manufacturers. Detroit Stoker is presently marketing a liquid and gaseous fuel
burning product line with low emissions for the power industry, primarily for
boiler applications. Potential customers for these products consist of original
boiler manufacturers as well as all major industrial and institutional energy
consumers. Competition is based on several factors including price, features and
performance.
Midwest Metallurgical Laboratory, Inc. ("Midwest"), a subsidiary of Detroit
Stoker, is a foundry engaged in the manufacture of grey and ductile iron,
stainless steel and special alloy iron castings. All of the sales of Midwest are
to Detroit Stoker. Midwest's plant and offices are located in Marshall,
Michigan.
Plastic Products
Neo Products Co.
Neo Products Co. ("Neo") engineers and fabricates thermoplastic products to the
specifications submitted by its customers. Neo also manufactures items for point
of purchase display advertising and consumer products related primarily to
infants, food service equipment for a major airline and fuel tank reservoirs for
the auto industry.
Sales to customers of items for point of purchase display advertising
represented approximately 24% of sales in 1996. These sales principally
consisted of display racks and trays. Sales of consumer end use items
represented 63% of sales in 1996. These sales primarily included carrier
cradles, chairs and waste baskets. Sales to the auto industry represented
approximately 6% of sales in 1996. The largest customer of Neo accounted for
approximately 63% of sales in 1996 compared to 54% and 39% in 1995 and 1994,
respectively. Neo's main office and plant are located in Chicago, Illinois.
Neo is engaged in the highly competitive field of thermoplastic fabrication.
Neo's operations are in potential and actual competition with fabrication
facilities of some of its own customers as well as other thermoplastic
fabricators. Neo has improved its competitive position by increasing the size of
its larger injection molding presses to accommodate larger size molded parts.
Although it is not possible to estimate the position of Neo among competitors in
this field, it is believed to hold less than 1% market share. The primary raw
material used by Neo is plastic resin, which is available from many sources.
4
For additional information concerning United's subsidiaries reference is made to
information set forth in the Letter to Shareholders contained in United's 1996
Annual Report to Shareholders (the "Annual Report"), which letter is
incorporated herein by reference.
General
Employees
As of March 1, 1997 United and its subsidiaries had approximately 1,900
employees. Approximately 200 of these employees are represented by several
unions under contracts expiring between July 1997 and March 1999. United
considers its employee relationships to be satisfactory.
Patents
United and its subsidiaries own more than 100 United States patents relating to
various products, including stokers, marine equipment, ordnance and electronic
equipment, and firefighter trainers. In addition, United has numerous pending
applications for patents. There is no assurance as to how many patents will be
issued pursuant to these pending applications. The applications relate to a wide
variety of fields, including automation control systems, ordnance devices, and
electronic developments. No patent is considered to be of material importance to
United.
Research and Development
During 1996, 1995 and 1994 the subsidiaries of United (exclusive of AAI)
expended approximately $639,000, $194,000 and $98,031, respectively, on the
development of new products and the improvement of existing products. All of the
programs and the funds to support such programs are sponsored by the subsidiary
involved. In addition to the above amount, AAI is engaged in research and
development primarily for the U.S. Government.
Backlog
The backlog of orders by industry segment at December 31, 1996 and 1995 was as
follows:
1996 1995
---- ----
Defense 150,888,000 $198,788,000
Energy Systems 6,871,000 5,070,000
Plastic Products 941,000 2,349,000
The defense contract backlog decrease more than offsets the increase in
commercial backlog of the defense segment. The increase in backlog for energy
systems was due to the increased
5
level of new contracts being awarded. Except for approximately $23,000,000 of
research and development backlog, substantially all of the backlog orders at
December 31, 1996 are expected to be filled in 1997.
Government Contracts
No single customer other than the U.S. Government, principally the Department of
Defense, accounted for 10% or more of net sales during the year. Sales to the
Government normally carry a lesser margin of profit than commercial sales and
may be subject to price redetermination under certain circumstances. Contracts
for such sales can be terminated for the convenience of the Government.
Financial Information Relating to Industry Segments
For financial information with respect to industry segments of United, reference
is made to the information set forth in Note 12 of the Notes to Financial
Statements included in Item 8 of this Report, which Note is incorporated herein
by reference.
Foreign Operations and Export Sales
United and its subsidiaries have no significant foreign operations. During 1996
export sales by United and its subsidiaries amounted to approximately
$26,491,000. Export sales in 1995 and 1994 amounted to less than 10% of net
sales for these years.
ITEM 2. PROPERTIES
United maintains executive and administrative offices at leased premises at 18
East 48th Street, New York, N.Y., which lease expires in December 1997. The
following is a tabulation of the principal properties owned or leased by
United's subsidiaries as at March 3, 1997.
6
Approximate
Area Owned
Location Principal Use in Square Feet or Leased
- -------- ------------- -------------- ---------
1510 East First Street Machine shop, steel 194,910 floor Owned in fee
Monroe, MI fabrication, engineering and space on 14.4
sales facilities of Detroit acres of land
Stoker (East Building)
1426 East First Street Assembly, shipping and 101,000 floor Owned in fee
Monroe, MI administrative facilities of space on 2.2
Detroit Stoker acres of land
(West Building)
15290 Fifteen Mile Road Foundry, 59,386 floor Owned in fee
Marshall, MI Midwest Metallurgical space on 28.4
acres of land
Industry Lane Manufacturing, engineering 740,208 floor Owned in fee
Cockeysville, MD and administrative space on 87
facilities of AAI acres of land
1701 Pollitt Drive Administrative, engineering 30,000 Leased to June
Fair Lawn, NJ and manufacturing facilities 30, 2001
of Symtron
1505 East Warner Avenue Manufacturing, engineering 103,200 Leased to
Santa Ana, CA and administrative facilities Sept. 30, 1999
of ACL Technologies
1035 Semoran Boulevard Sales office 900 Leased to
Winter Park, FL for Symtron April 30, 1997
5400 S. Kilbourn Avenue Manufacturing and 45,000 Owned in fee
Chicago, IL administrative facilities of Neo
For information with respect to obligations for lease rentals, see Note 8 of the
Notes to Financial Statements in the Annual Report, which Note is incorporated
herein by reference. United considers its properties to be suitable and adequate
for its present needs. The properties are being substantially utilized.
ITEM 3. 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 operation of a small facility at a site in the State of
Arizona that manufactured semiconductors between 1959 and 1960. All such
operations of the Company were sold by 1961.
7
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 complaint 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 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. In comparison to the other
defendants, the operations of the Company were very limited in time and size.
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 ss. 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.
On or about November 15, 1996, AAI Systems Management, Inc. (the "subsidiary"),
an indirect subsidiary of the Company, signed a settlement agreement with the
U.S. Navy (the "customer"), concluding a dispute with the customer over a
contract to deliver helicopter
8
simulator training devices. The agreement provided for an orderly conclusion of
the contract and a limitation on the Company's liability, precluding the
possibility of additional losses for the subsidiary under the contract.
Settlement of the dispute and the abbreviated completion of the contract
required an additional charge of $2.2 million ($1.4 million net of taxes)
against earnings for the third quarter.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Annual elections are held in May to elect officers for the ensuing year. Interim
elections are held as required. Except as otherwise indicated, each executive
officer has held his current position for the past five years.
9
Age at
Name Position, Office December 31, 1996
---- ---------------- -----------------
Richard R. Erkeneff* -- President of the Company (since October 1995) 61
and AAI (since November 1993); Senior Vice
President of the Aerospace Group at McDonnell
Douglas Corporation, an aerospace firm
(October 1992 to November 1993); and
President (March 1992 to October 1992) and
Executive Vice President (1988 to 1992) of
McDonnell Douglas Electronics Systems
Company.
Robert Worthing -- Vice President and General Counsel of the 51
Company (since July 18, 1995); General
Counsel of AAI (since April, 1992); and Vice
President and Senior Counsel of TRW's Space
and Defense Sector (October 1979-January
1992).
Susan Fein Zawel* -- Vice President, Corporate Communications and 42
Associate General Counsel (since June 1995),
Secretary (since May 1994) and Counsel (1992
to 1995) of the Company.
James H. Perry -- Chief Financial Officer (since October 25, 35
1995) and Treasurer (since December 1994) of
the Company; and Senior Manager (October
1992-November 1994) and Manager (1988-
September 1992) at Ernst & Young LLP.
James M. Ballentine, Jr. -- Acting President of Detroit Stoker (since April 63
1995); President of Saddle River Partners, a
consulting and investment company (since
August 1992); and President of Hydrotherm,
Inc., a multiplant manufacturer of boilers and
air conditioning equipment (1979 to August
1992).
John J. Henning -- President of Symtron (since 1988). 55
Michael A. Schillaci -- President of Neo (since 1987). 49
- --------------------
* Member of the Company's Board of Directors
10
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
Reference is made to the information set forth in Note 14 of the Notes to
Financial Statements included in Item 8 of this Report concerning dividends,
stock prices, stock listing and record holders, which information is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Reference is made to the information set forth in the sections entitled
"Five-Year Financial Data" on page 38 of the Annual Report, which section is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Reference is made to the information set forth in the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" commencing on page 17 of the Annual Report, which section is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of independent auditors and consolidated financial statements
included on pages 20 through 37 of the Annual Report are incorporated herein by
reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the information to be set forth in the section entitled
"Election of Directors" in the definitive proxy statement involving the election
of directors in connection with the Annual Meeting of Stockholders of United to
be held on May 13, 1997 (the "Proxy Statement"), which section (other than the
Compensation Committee Report and Performance Graph) is incorporated herein by
reference. The Proxy Statement will be filed with the Securities and Exchange
Commission not later than 120 days after December 31, 1996, pursuant to
Regulation 14A of the Securities Exchange Act of 1934, as amended.
The information required with respect to executive officers is set forth in Part
I of this report under the heading "Executive Officers of the Registrant,"
pursuant to instruction 3 to paragraph (b) of Item 401 of Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information to be set forth in the section entitled
"Election of Directors" in the Proxy Statement, which section (other than the
Compensation Committee Report and Performance Graph) is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Reference is made to the information to be set forth in the section entitled
"Voting Rights" and "Security Ownership of Management" in the Proxy Statement,
which sections are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the information to be set forth in the section entitled
"Election of Directors" in the Proxy Statement, which section (other than the
Compensation Committee Report and Performance Graph) is incorporated herein by
reference.
12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) (1) and (2) - The response to this portion of Item 14 is submitted as a
separate section of this report entitled "List of Financial
Statements and Financial Statement Schedules".
(3) Exhibits:
(3)(a)- Restated Certificate of Incorporation of United (1).
(3)(b)- Amended and Restated By-Laws of United (2).
(10)(a)- United Industrial Corporation 1994 Stock Option Plan, as
amended (3).
(10)(b)- Purchase Agreement, dated January 18, 1994, between United and
Symtron Systems, Inc. (1).
(10)(c)- Credit Agreement dated as of October 13, 1994 among AAI, the
Lenders parties thereto and First Fidelity Bank, National
Association, as Agent (the "Agent") and Issuing Bank (4).
(10)(d)- Pledge and Security Agreement dated as of October 13, 1994 by
AAI in favor of the Agent (4).
(10)(e)- Pledge and Security Agreement dated as of October 13, 1994 by
the Company in favor of the Agent (4).
(10)(f)- Security Agreement dated as of October 13, 1994 between AAI and
the Agent (4).
(10)(g)- Security Agreement dated as of October 13, 1994 between each
subsidiary of AAI, certain subsidiaries of the Company and the
Agent (4).
(10)(h)- Guaranty dated as of October 13, 1994 by the Company and
certain of its subsidiaries and by each subsidiary of AAI in
favor of the Agent (4).
(10)(i)- First Amendment made as of October 18, 1995 to Credit Agreement
dated October 13, 1994 between First Union Commercial
Corporation (as successor to the Agent) and AAI, and AAI
Subsidiaries, UIC-DEL Corporation, Symtron and United as
guarantors.
(10)(j)- Second Amendment made as of September 20, 1996 to Credit
Agreement dated October 13, 1994 between First Union Commercial
Corporation and AAI and AAI subsidiaries, UIC-DEL Corporation,
Symtron and United as guarantors (5).
13
(10)(k)- Third Amendment made as of January 17, 1997 to Credit Agreement
dated October 13, 1994 between First Union Commercial
Corporation and AAI and AAI subsidiaries, UIC-DEL Corporation,
Symtron and United as guarantors.
(10)(l)- Employment Agreement dated March 26, 1996, between United and
Richard R. Erkeneff (2).
(10)(m)- Employment Agreement, dated January 8, 1996, between United and
Susan Fein Zawel (2).
(10)(n)- Employment Agreement, dated February 9, 1996, between United
and James H. Perry (2).
(10)(o)- Amendment dated as of September 29, 1996, by and between United
and James H. Perry to the Employment Agreement dated February
29, 1996 between United and James H. Perry (5).
(11)- Computation of Earnings Per Share.
(13)- United's 1996 Annual Report to Shareholders.
(21)- Subsidiaries of United.
(23)- Consent of Independent Auditors.
(27)- Financial Data Schedule.
- --------------------
(1) Incorporated by reference to United's Annual Report on Form 10-K
for the year ended December 31, 1993.
(2) Incorporated by reference to United's Annual Report on Form 10-K
for the year ended December 31, 1995.
(3) Incorporated by reference to United's Registration Statement on
Form S-8, filed with the Securities and Exchange Commission on
January 10, 1997.
(4) Incorporated by reference to United's Quarterly Report on Form
10-Q for the quarter ended September 30, 1994.
(5) Incorporated by reference to United's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996.
(b) - Reports on Form 8-K - United did not file any reports on Form 8-K
during the quarter ended December 31, 1996.
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
(Registrant)
By: /s/ Richard R. Erkeneff
-----------------------------
Richard R. Erkeneff, President
Date: March 26, 1997
---------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
Name Date
---- ----
/s/Harold S. Gelb
- -------------------------------
Harold S. Gelb,
Chairman of the Board and Director March 26, 1997
/s/Howard M. Bloch
- -------------------------------
Howard M. Bloch,
Vice-Chairman of the Board and Director March 26, 1997
/s/Richard R. Erkeneff
- -------------------------------
Richard R. Erkeneff, President and
Chief Executive Officer and Director March 26, 1997
/s/Edward C. Aldridge, Jr.
- -------------------------------
Edward C. Aldridge, Jr., Director March 26, 1997
/s/E. Donald Shapiro
- -------------------------------
E. Donald Shapiro, Director March 26, 1997
/s/Susan Fein Zawel
- -------------------------------
Susan Fein Zawel,
Vice President and Director March 26, 1997
/s/James H. Perry
- -------------------------------
James H. Perry,
Treasurer (Principal Financial and
Accounting Officer) March 26, 1997
15
Annual Report on Form 10-K
Item 14(a)(1) and (2), (c) and (d)
List of Financial Statements and Financial Statement Schedules
Certain Exhibits
Financial Statement Schedules
Year ended December 31, 1996
United Industrial Corporation
New York, New York
Form 10-K--Item 14(a) (1) and (2)
UNITED INDUSTRIAL CORPORATION AND SUBSIDIARIES
List of Financial Statements and Financial Statement Schedules
The following consolidated financial statements of United Industrial Corporation
and subsidiaries, included in the annual report of the registrant to its
shareholders for the year ended December 31, 1996, are incorporated by reference
in Item 8:
Consolidated Balance Sheets--December 31, 1996 and 1995
Consolidated Statements of Operations--
Years Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows
Years Ended December 31, 1996, 1995 and 1994
Notes to Financial Statements
The following consolidated financial statement schedules of United Industrial
Corporation and subsidiaries are included in Item 14(d):
Schedule I Condensed Financial Information of Registrant
Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.
2
Report of Independent Auditors
BOARD OF DIRECTORS AND SHAREHOLDERS
UNITED INDUSTRIAL CORPORATION
We have audited the accompanying consolidated balance sheets of United
Industrial Corporation and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of operations and cash flows for each of the
three years in the period ended December 31, 1996. Our audits also included the
financial statement schedules listed in the Index at Item 14(a). These financial
statements and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of United
Industrial Corporation and subsidiaries at December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
February 26, 1997
3
Schedule I - Condensed Financial Information of Registrant
United Industrial Corporation
Condensed Balance Sheets
(Dollars in thousands) DECEMBER 31
1996 1995
------ -----
ASSETS
Current Assets:
Cash and cash equivalents $ 447 $ 4,453
Prepaid expenses and other current assets 326 205
Deferred income taxes 6,131 6,487
------ ------
Total current assets 6,904 11,145
Equipment 356 342
Less allowances for depreciation (251) (235)
-------- --------
105 107
Other assets (principally investments in
and amounts due from wholly-owned
subsidiaries) 173,930 163,552
-------- --------
$180,939 $174,804
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 3,211 $ 7,220
Income taxes 963 -
------- -----
Total current liabilities 4,174 7,220
Deferred income taxes 9,662 9,820
Other liabilities (principally amounts due to
wholly-owned subsidiaries) 76,958 71,604
Shareholders' equity:
Common stock 14,374 14,374
Other shareholders' equity 75,771 71,786
------- --------
90,145 86,160
-------- --------
$180,939 $174,804
======== ========
See notes to condensed financial statements of registrant.
4
Schedule I - Condensed Financial Information of Registrant
United Industrial Corporation
Condensed Statements of Operations
YEAR ENDED DECEMBER 31
(DOLLARS IN THOUSANDS) 1996 1995 1994
------ ------ ------
Management fees from wholly-owned
subsidiaries $ 2,251 $ 2,310 $2,064
Other (expense) revenue - net (20) (15) 150
-------- ------- ------
2,231 2,295 2,214
Other (income) and expenses:
Administrative expenses 4,688 5,558 3,247
Interest income (1,997) (2,277) (1,292)
Interest expense 7,025 7,174 4,708
------- ------- ------
9,716 10,455 6,663
------- ------- ------
Loss before income taxes and
equity in net income of
subsidiaries (7,485) (8,160) (4,449)
Income tax benefit 2,542 2,526 1,639
------ ------- -----
Loss before equity in net income
of subsidiaries (4,943) (5,634) (2,810)
Equity in net income of
subsidiaries 11,347 6,522 8,022
-------- ------- ------
Net income $6,404 $ 888 $5,212
------ ------- ------
Dividends paid by
subsidiaries to Parent $ 1,000 $ 1,000 $ -
======= ======= ====
See notes to condensed financial statements of registrant.
5
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
UNITED INDUSTRIAL CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS) YEAR ENDED DECEMBER 31
1996 1995 1994
------ ------ ------
Operating activities:
Net income $6,404 $ 888 $5,212
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 16 17 9
Deferred income taxes 356 (126) (441)
Undistributed earnings of
subsidiaries (10,347) (5,522) (8,022)
Changes in operating assets and
liabilities:
Income taxes 963 (3,333) 6,951
Prepaid expenses and other current
assets (121) 3 732
Current liabilities (1,009) 321 (616)
Accounts with wholly-owned
subsidiaries 5,165 9,785 3,037
----- ------- -----
Net cash provided by operating activities: 1,427 2,033 6,862
----- ----- -----
Investing activities:
Purchase of property and equipment (14) (39) (69)
Decrease (increase) in intercompany
receivables due to transfer of
deferred taxes from wholly-owned
subsidiaries 158 2,600 (3,523)
(Decrease) increase in deferred taxes
resulting from transfer from wholly
owned subsidiaries (158) (2,600) 3,523
Other, net 7 (27) (53)
------ ------ --------
Net cash used in investing activities $ (7) $ (66) $ (122)
------- ------ -------
(Condensed Statements of Cash Flows - continued on next page)
6
Schedule I - Condensed Financial Information of Registrant
United Industrial Corporation
Condensed Statements of Cash Flows (continued)
(DOLLARS IN THOUSANDS) YEAR ENDED DECEMBER 31
1996 1995 1994
------ ------ ------
Financing activities:
Proceeds from borrowings $ 9,000 $9,000 $12,000
Payments on borrowings (12,000) (9,000) (12,000)
Dividends paid (2,434) (3,165) (2,571)
Purchase of treasury shares - - (475)
Proceeds from exercise of stock options 8 16 -
------- ------ ------
Net cash used in financing activities (5,426) (3,149) (3,046)
------- ------ -------
(Decrease) increase in cash and cash
equivalents (4006) (1,182) 3,694
Cash and cash equivalents at beginning of
year 4,453 5,635 1,941
--------- ------ -------
Cash and cash equivalents at end of year $ 447 $4,453 $ 5,635
======= ====== =======
See notes to condensed financial statements of registrant.
7
Schedule I - Notes to Condensed
Financial Statements of Registrant
A. ACCOUNTING POLICIES
BASIS OF PRESENTATION
In the parent-company-only financial statements, the Company's investment in
subsidiaries is stated at cost plus equity in undistributed earnings of
subsidiaries since the date of acquisition. The Company's share of the net
income of its unconsolidated subsidiaries is reflected using the equity method.
Parent-company-only financial statements should be read in conjunction with the
Company's consolidated financial statements.
8
Schedule II - Valuation and Qualifying Accounts
United Industrial Corporation and Subsidiaries
December 31, 1996
Col. A Col. B Col. C Col. D Col. E
(1) (2)
Charged to Charged to Balance at
Balance at Beginning Costs and Other Accounts Deductions End of
Description of Period Expenses (Describe) (Describe) Period
----------- --------- -------- ---------- ---------- ------
Year ended December 31, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts $ 310,000 $ 65,000 (A) $ 245,000
========= ============ =========
Product warranty liability $ 650,000 $ 71,000 (B) $ 579,000
========= ============ =========
YEAR ENDED DECEMBER 31, 1995:
Deducted from asset account:
Allowance for doubtful accounts $ 368,000 $ 43,000 $ 101,000 (A) $ 310,000
========= ========= ============= =========
Product warranty liability $ 525,000 $ 125,000 $ 650,000
========= ========= =========
Year ended December 31, 1994:
Deducted from asset account:
Allowance for doubtful account $ 418,000 $ 50,000 (B) $ 368,000
========= ============ =========
Product warranty liability $ 800,000 $ 275,000 (B) $ 525,000
========= ============= =========
(A) UNCOLLECTIBLE ACCOUNTS WRITTEN OFF, NET OF RECOVERIES.
(B) REDUCTION OF VALUATION ACCOUNT.
EXHIBIT INDEX
EXHIBIT NO. PAGE
(3)(a)- Restated Certificate of Incorporation of United (1).
(3)(b)- Amended and Restated By-Laws of United (2).
(10)(a)- United Industrial Corporation 1994 Stock Option Plan, as
amended (3).
(10)(b)- Purchase Agreement, dated January 18, 1994, between United
and Symtron Systems, Inc. (1).
(10)(c)- Credit Agreement dated as of October 13, 1994 among AAI, the
Lenders parties thereto and First Fidelity Bank, National
Association, as Agent (the "Agent") and Issuing Bank (4).
(10)(d)- Pledge and Security Agreement dated as of October 13, 1994
by AAI in favor of the Agent (4).
(10)(e)- Pledge and Security Agreement dated as of October 13, 1994
by the Company in favor of the Agent (4).
(10)(f)- Security Agreement dated as of October 13, 1994 between AAI
and the Agent (4).
(10)(g)- Security Agreement dated as of October 13, 1994 between each
subsidiary of AAI, certain subsidiaries of the Company and the
Agent (4).
(10)(h)- Guaranty dated as of October 13, 1994 by the Company and certain
of its subsidiaries and by each subsidiary of AAI in favor of
the Agent (4).
(10)(i)- First Amendment made as of October 18, 1995 to Credit Agreement
dated October 13, 1994 between First Union Commercial
Corporation (as successor to the Agent) and AAI, and AAI
subsidiaries, UIC-DEL Corporation, Symtron and United as
guarantors.
(10)(j)- Second Amendment made as of September 20, 1996 to Credit
Agreement dated October 13, 1994 between First Union Commercial
Corporation and AAI and AAI subsidiaries, UIC-DEL Corporation,
Symtron and United as guarantors (5).
(10)(k)- Third Amendment made as of January 17, 1997 to Credit Agreement
dated October 13, 1994 between First Union Commercial
Corporation and AAI and AAI subsidiaries, UIC-DEL Corporation,
Symtron and United as guarantors.
(10)(l)- Employment Agreement dated March 26, 1996, between United
and Richard R. Erkeneff (2).
(10)(m)- Employment Agreement, dated January 8, 1996, between
United and Susan Fein Zawel (2).
(10)(n)- Employment Agreement, dated February 9, 1996, between
United and James H. Perry (2).
(10)(o)- Amendment dated as of September 29, 1996, by and between
United and James H. Perry to the Employment Agreement
dated February 29, 1996 between United and James H. Perry (5).
(11)- Computation of Earnings Per Share.
(13)- United's 1996 Annual Report to Shareholders.
(21)- Subsidiaries of United.
(23)- Consent of Independent Auditors.
(27)- Financial Data Schedule.
____________________
(1) INCORPORATED BY REFERENCE TO UNITED'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1993.
(2) INCORPORATED BY REFERENCE TO UNITED'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1995.
(3) INCORPORATED BY REFERENCE TO UNITED'S REGISTRATION STATEMENT ON
FORM S-8, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
JANUARY 10, 1997.
(4) INCORPORATED BY REFERENCE TO UNITED'S QUARTERLY REPORT ON FORM
10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1994.
(5) INCORPORATED BY REFERENCE TO UNITED'S QUARTERLY REPORT ON FORM
10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996.
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