November 10, 2004|By Paul Adams | Paul Adams,SUN STAFF
The parent company of AAI Corp., whose unmanned aerial vehicles have emerged as one of the technological darlings of the war in Iraq, saw its shares climb nearly 10 percent yesterday after the company reported a third-quarter profit of $7.4 million.
The gain, equivalent to 56 cents a share, compares with a loss of $14 million, or $1.03 a share, in the third quarter last year for United Industrial Corp. The Hunt Valley company has benefited as the Bush administration has emphasized technologies that fit with the Defense Department's efforts to transform the military.
United Industrial's shares closed yesterday at $36, up $3.24.
Net sales rose 42.5 percent to $98.7 million, compared with $69.3 million in the third quarter last year. The company's defense-related sales, which account for 90 percent of its business, zoomed 44 percent to $90 million, compared with $62.2 million in last year's third quarter.
AAI's unmanned aerial vehicles have flown more than 3,000 sorties and logged 13,000 flight hours on surveillance missions in Iraq.
In January, the Army signed an $86.1 million contract with the company to begin full production of its Shadow tactical unmanned aerial vehicle, a deal that could extend production through 2007.
The company said it is realizing higher volume and bigger-than-expected margins on that contract. It also has switched to a lean manufacturing system that is squeezing more profits out of its production line.
"The volume is greater, but we're also seeing greater profitability on the production contract," said James H. Perry, United Industrial's chief financial officer.
United Industrial has about 1,000 employees in Maryland and is looking to fill 100 jobs this year.
AAI has received $297.4 million in new business in the first nine months of this year, including $124.8 million in the third quarter. That brought its order backlog at the end of the third quarter to $330.6 million, said Frederick M. Strader, United Industrial's chief executive officer, in a statement.
Sales of unmanned aerial vehicles account for about $180.7 million of the backlog, including advanced financing for one year of support for Maryland and Pennsylvania National Guard units equipped with the systems.
Other recent successes for the company include a new Defense Department contract to provide logistical support for biological detection systems at more than 50 government facilities in the United States, the Middle East and Europe. The contract, which runs for more than five years, could be worth as much as $160 million, the company said.
The company is planning to use some of its cash reserves for acquisitions. On Sept. 15, it raised $120 million through a debt sale and used $24.4 million of the proceeds to buy back 850,400 shares of its stock. Another $92 million could be used to finance acquisitions.
"Obviously, we're going to stay within the niches we're in," Perry said. "But another defense-type business that made sense and that was somewhat related would be considered, as well."
The company also is still shopping for a buyer for Detroit Stoker Co., a subsidiary that makes parts for industrial boilers and power plants. Possible asbestos claims at the Michigan company have scared off suitors.
United Industrial also recently found a buyer for undeveloped land adjacent to its headquarters. The $8 million sale is expected to close in January.
