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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, 2002.
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
- ----------------------------------- -------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
570 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
(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 a definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [_].
[Cover page 1 of 2 pages]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act) Yes [x] No [_]
Aggregate market value of the voting stock (which consists solely of shares of
Common Stock) held by non-affiliates of the registrant as of June 28, 2002,
computed by reference to the closing sale price of the registrant's Common Stock
on the New York Stock Exchange on such date: $273,546,639.
On March 10, 2003, the registrant had outstanding 13,067,918 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, 2002 are incorporated by reference
into Parts I and II of this report.
[Cover page 2 of 2 pages]
PART I
Forward Looking Information
This Annual Report 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
are intended to identify such forward looking statements which include, but are
not limited to, projections of revenues, earnings, segment performance, cash
flows and contract awards. These forward looking statements are 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. These
risks and uncertainties include, but are not limited to, the following: the
Company's successful execution of internal performance plans; performance issues
with key suppliers, subcontractors and business partners; the ability to
negotiate financing arrangements with lenders; legal proceedings; outcome of
current and future litigation; the accuracy of the Company's analysis of its
potential asbestos related exposure and insurance coverage; product demand and
market acceptance risks; the effect of economic conditions; the impact of
competitive products and pricing; product development, commercialization and
technological difficulties; capacity and supply constraints or difficulties;
legislative or regulatory actions impacting the Company's energy segment and
discontinued transportation operation; changing priorities or reductions in the
U.S. government defense budget; contract continuation and future contract
awards; and U.S. and international military budget constraints and
determinations. 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 statements.
ITEM 1. BUSINESS
At December 31, 2002, the operations of United Industrial Corporation ("United"
or the "Company") consist of two business segments: defense and energy,
principally conducted through two wholly-owned subsidiaries. The transportation
operation is treated as a discontinued operation and complete cessation of
production operations is scheduled during 2003. The Company will continue to
have warranty obligations thereafter.
Defense
AAI Corporation
AAI Corporation ("AAI") is engaged in engineering, development and manufacturing
of Unmanned Aerial Vehicle ("UAV") platforms, Electronic Warfare ("EW") test and
training systems, military and commercial simulators, automated test systems,
and advanced boresight equipment. In addition, AAI provides sophisticated
engineering, logistics, and maintenance services, which complement its key
product platforms, as well as those of other original equipment manufacturers.
AAI's advanced products designed for military customers include such high
profile programs as the Shadow UAV system, recently selected as the U.S. Army's
Tactical Unmanned Aerial Vehicle platform, and the Joint Services Electronic
Combat Systems Tester, employed by all U.S. military branches to ensure optimal
airborne EW operations. AAI's aerospace products, utilized by numerous military
and commercial customers worldwide, offer superior test and maintenance
capabilities for the F-16, many Boeing airframes, various General Electric and
Pratt & Whitney aircraft engines, and other aviation equipment. AAI supplies its
high quality aerospace test equipment to provide depot maintenance services to
foreign and domestic military aviation customers. In 2002 and 2001 approximately
77% of the sales volume of AAI consisted of research, development and production
of military items under domestic defense contracts. International defense
contracts including foreign military sales through the U.S. government,
accounted for 19.7% of company sales in 2002 as compared to 18.2% in 2001. These
contracts generally related to unmanned aerial vehicle systems and weapon test
and training systems for foreign governments.
1
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 UAV business area, AAI is one of the few companies to have successfully
fielded an operational UAV system for the U.S. Department of Defense. AAI first
began development work in the UAV business in 1986, producing the highly
successful RQ-2 Pioneer UAV through a joint venture with Israel Aircraft
Industries. The Pioneer has been employed by the United States in Operation
Desert Storm and in the conflicts in Somalia and Bosnia. In 1999, AAI was
awarded a contract to provide the next generation of tactical UAV's to the U.S.
Army, the RQ-7 Shadow 200. In addition, AAI has other UAV systems and products
which it markets internationally. Competitors include Northrop-Grumman
Corporation, General Atomics and Israel Aircraft Industries.
In the area of training and simulation systems, AAI competes with many large and
small organizations developing equipment for the U.S. Government. AAI has a
leading position in the development of aircraft maintenance simulators for the
U.S. Air Force, having produced trainers for the Boeing E-3 Airborne Warning and
Control System (AWACS); Northrop-Grumman E-8 Joint Stars wide-area surveillance
aircraft and Boeing C-17 Globemaster cargo aircraft. AAI is also a leader in
shipboard training and simulation systems, having produced its first systems,
the 20B4 and 20B5 "Pierside" trainers, in the 1970's time frame. AAI currently
provides the permanently installed radar stimulator/simulators for all ships
that are part of the U.S. Navy's Battle Force Tactical Training (BFTT) System
and the portable Carry-on Combat Systems Trainers (COCST) that are configurable
to any combat ship and are fully BFTT compatible. Major competitors include:
Northrop-Grumman Corporation, L-3 Communications and CAE Inc.
AAI also develops and manufactures a variety of automated test systems to
support military aviation requirements. These include the AN/USM-670 Joint
Service Electronic Combat Systems Tester (JSECST), an organizational level
(O-level) test system that assures aircraft electronic warfare systems are ready
for use, and Advanced Boresight Equipment (ABE), a gyro-stabilized,
electro-optical, angular measurement system that is used to align avionics and
weapon systems on-board military aircraft and helicopters. Major competitors in
the military test market include: BAE Systems PLC, DRS Technologies, Inc. and
EDO Corporation.
AAI's administrative offices and its principal manufacturing and engineering
facilities are located in Hunt Valley, Maryland.
Energy Systems
Detroit Stoker Company
Detroit Stoker Company ("Detroit Stoker") is a leading supplier of stokers and
related combustion equipment for the production of steam used in heating,
industrial processing and electric power generation around the world. Detroit
Stoker offers a full line of stokers for burning bituminous and lignite coals as
well as biomass, municipal solid waste and industrial by-products. Detroit
Stoker also provides auxiliary equipment and services including fuel feed and
ash removal systems, gas/oil burners and complete aftermarket services for its
products. Principal markets include Pulp and Paper, Public Utilities,
Independent Power Producers, Industrial manufacturing, Institutional and
Cogeneration facilities. The products of Detroit Stoker compete with those of
several other manufacturers. Competition is based on several factors including
price, features and performance.
2
Detroit Stoker's waste to energy technology is used extensively in both public
and private plants that generate steam and power from municipal waste. Its solid
fuel combustion technologies are particularly well suited for biomass fuels that
generate power from waste products such as bark, sugar cane husks, sawdust,
sunflower hulls, and poultry litter. The combustion of biomass fuels is gaining
worldwide popularity, as it does not contribute to global warming.
Detroit Stoker exports its products to Europe, Asia, South America and
Australia, and is a market leader in North America. Detroit Stoker's
globalization strategy is to further expand both its customer and supplier base
in each of these regions.
Detroit Stoker's administrative offices and its principal manufacturing
operations are located in Monroe, Michigan.
On May 17, 2002 Detroit Stoker ceased its foundry operation and is purchasing
its necessary castings from lower cost sources. This decision has improved
operating margins. During 2002 Detroit Stoker incurred severance and other cash
charges totaling approximately $1,286,721. In addition, the Company wrote off
the net book value of the assets related to its foundry facility of $3,420,245
during the foundry's operating period in 2002.
Transportation
On July 26, 2002 the Company closed a transaction in which it sold two rail car
overhaul contracts, as well as related assets and liabilities, with the New
Jersey Transit Corporation and the Maryland Mass Transit Administration to
Alstom Transportation Inc. Complete cessation of transportation's production
operations is scheduled during 2003. The Company will continue to have warranty
obligations thereafter.
AAI Transportation Systems is being accounted for as discontinued operations.
See Note 16 to the Financial Statements included in Item 8 of this Report.
For additional information concerning the Company, reference is made to the
information set forth in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's 2002
Annual Report to Shareholders (the "Annual Report"), which section is
incorporated herein by reference.
General
Employees
As of March 1, 2003 United and its subsidiaries had approximately 1,600
employees. Approximately 50 of these employees are represented by two unions
under contracts expiring between July 2003 and January 2004. 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 electronic, ordnance and marine equipment and
stokers. In addition, United has 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
ordnance devices, ground support equipment and electronic developments. No
patent is considered to be of material importance to United.
3
Research and Development
During 2002, 2001 and 2000, the defense segment expended approximately
$4,431,000, $5,041,000 and $3,835,000, respectively, on the independent research
and development of new products and improvements of existing products. In
addition to the above amounts, the defense segment has contracts, primarily with
the U.S. government, to conduct research and development. During 2002, 2001 and
2000, the energy segment expended approximately $157,000, $479,000 and $166,000,
respectively, on research and development of new products and improvements of
existing products. All of the programs and funds to support such programs are
sponsored by the subsidiary involved.
Backlog
The backlog of orders by industry segment at December 31, 2002 and 2001 was as
follows:
2002 2001
---- ----
Defense $296,117,000 $201,221,000
Energy Systems 5,299,000 6,122,000
The backlog in the discontinued transportation operations was $17,811,000 and
$164,891,000 at December 31, 2002 and 2001, respectively. The year 2001
transportation backlog includes $137,923,000 of backlog in respect of the two
overhaul contracts that the Company sold.
Except for about $100,000,000, substantially all of the backlog orders at
December 31, 2002 are expected to be filled in 2003.
During 2002 and 2001, respectively, the defense sales were comprised of 69% and
67% fixed price contracts and 31% and 33% cost type contracts.
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
U.S. 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 U.S.
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 11 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 2002,
2001 and 2000, export sales by United and its subsidiaries amounted to
approximately $66,366,000, $54,670,000 and $57,110,000, respectively.
4
Available Information
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K, proxy statements and amendments to those reports, are available
free of charge on our internet website at http://www.unitedindustrial.com as
soon as reasonably practicable after such reports are electronically filed with
or furnished to the Securities and Exchange Commission.
ITEM 2. PROPERTIES
United maintains executive and administrative offices at leased premises at 570
Lexington Avenue, New York, N.Y., which lease expires in August 2008. The
following is a tabulation of the principal properties owned or leased by
United's subsidiaries as at March 23, 2003.
Approximate
Area Owned
Location Principal Use in Square Feet or Leased
1510 East First Street Machine shop, steel fabrication, 194,910 floor space Owned in fee
Monroe, MI engineering and sales facilities of on 14.4 acres of land
Detroit Stoker (East Building)
1426 East First Street Assembly, shipping and administrative 101,000 floor space Owned in fee
Monroe, MI facilities of Detroit Stoker on 2.2 acres of land
(West Building)
15290 Fifteen Mile Road Foundry, 59,386 floor space Owned in fee
Marshall, MI Midwest Metallurgical on 28.4 acres of land
Industry Lane Manufacturing, engineering and 429,750 floor space Owned in fee
Hunt Valley, MD administrative facilities of AAI on 64 acres of land
Clubhouse Road Manufacturing, engineering and Leased to:
Hunt Valley, MD administrative facilities of AAI 153,727 October 31, 2003
82,430 April 30, 2005
22,410 November 30, 2003
55,987 February 29, 2004
28,827 October 31, 2003
3200 Enterprise Street Manufacturing, engineering and 131,544 Leased to April 2009
Brea, CA administrative facilities
of ACL Technologies
1213 Jefferson Davis Highway Office Space 2,211 Leased to February 28,
Arlington, VA 22202 2006
1601 Paseo San Luis Office Space 3,408 Leased to June 30, 2007
Sienna Vista, AZ
13501 Ingenuity Drive Office Space 2,000 Leased to February 28,
Orlando, FL 2005
5
Approximate
Area Owned
Location Principal Use in Square Feet or Leased
4141 Colonel Glenn Hwy Office Space 1,454 Leased to July 31, 2004
Beavercreek, OH
555 Sparkman Drive Office Space 2,650 Leased to January 14,
Huntsville, AL 2004
Kenia, AK Training School Approximately 1 acre Leased to November 6,
of land 2027
2850 West 5th North Street Office Space 15,105 Leased to October 31,
Summerville, SC 2004
2745 West 5th North Street Warehouse 12,000 Leased to November 30,
Summerville, SC 2003
2735 W Fifth Assembly and Administrative Facility 59,000 Leased to December 31,
North Street of AAI 2006
Summerville, SC
For information with respect to obligations for lease rentals, see Note 8 to the
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
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").
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. 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.
Reference is made to the information concerning asbestos litigation set forth in
the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Annual Report, which information is
incorporated herein by reference.
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's financial position, results of operations or
cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Reference is made to Item 4 of Part II to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 2002, which information is hereby
incorporated by reference.
6
EXECUTIVE OFFICERS OF THE REGISTRANT
Annual elections are held following the annual meeting of shareholders 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.
Age at
Name Position, Office December 31, 2002
---- ---------------- -----------------
Richard R. Erkeneff* -- President and Chief Executive Officer of the Company 67
(since October 1995); President (from November 1993 to
January 2003) and Chief Executive Officer (since November
1993) of AAI Corporation, a wholly-owned subsidiary of
the Company.
Robert Worthing -- Vice President and General Counsel of the Company (since 57
July 1995); General Counsel of AAI Corporation, a
wholly-owned subsidiary of the Company (since April 1992).
Susan Fein Zawel -- Vice President, Corporate Communications and Associate 48
General Counsel (since June 1995), Secretary (since May
1994) and Counsel (1992 to 1995) of the Company.
James H. Perry -- Vice President (since May 1998), Chief Financial Officer 41
(since October 1995) and Treasurer (since December 1994)
of the Company; Vice President, Chief Financial Officer
and Treasurer of AAI Corporation, a wholly-owned
subsidiary of the Company (since July 2000).
Frederick M. Strader -- President and Chief Operating Officer of AAI Corporation, 49
a wholly-owned subsidiary of the Company (since January
2003); Executive Vice President of AAI, and Vice
President and General Manager of AAI's Defense Systems
unit and Engineering Services unit (May 2001 to December
2002); Vice President of United Defense LP, Armament
Systems Division (1994 to April 2001) (responsible for
all aspects of the division in designing, producing and
supporting large caliber armament for the Navy, Army and
Marine Corp, with a $500 million budget and 1,800
employees).
- --------------------
* Member of the Company's Board of Directors
7
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCK
HOLDER MATTERS
Reference is made to the information set forth in Note 14 to the Financial
Statements included in Item 8 of this Report concerning dividends, stock prices,
stock listing and number of record holders, which information is incorporated
herein by reference.
Reference is made to the section entitled Equity Compensation Plan Information
in Item 12 to this Form 10-K, which information is hereby incorporated by
reference.
ITEM 6. SELECTED FINANCIAL DATA
Reference is made to the information set forth in the section entitled
"Five-Year Financial Data" in 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" in the Annual Report, which section is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to the information regarding Quantitative and Qualitative
Disclosures About Market Risk contained in the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in 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 in the Annual Report are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
8
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to each director
of the Company. Except as otherwise indicated, each director has held his or her
present principal occupation for the past five years.
Age (at Became
Name December 31, 2002) Principal Occupation Director
--------- ------------------ ----------------------- ----------
Richard R. Erkeneff 67 President of the Company (since October 1995); President 1995
(from November 1993 to January 2003) and Chief Executive Officer
(since November 1993) of AAI Corporation, a wholly-owned subsidiary of
the Company ("AAI"); Senior Vice President of the Aerospace Group at McDonnell
Douglas Corporation, an aerospace firm (January to November 1993); and
President (March 1992 to October 1992) and Executive Vice President (1988 to
1992) of McDonnell Douglas Electronics Systems Company.
Harold S. Gelb 82 Chairman of the Board of the Company (since November 1995); private 1995
investor (since 1985); and retired senior partner of Ernst & Young LLP,
an accounting firm.
Paul J. Hoeper 56 Business consultant (since February 2001); Assistant Secretary of the Army 2002
for Acquisition, Logistics and Technology (May 1998 to January 2001);
Deputy Under Secretary of Defense, International and Commercial Programs
(May 1996 to May 1998); Director of AAI Corporation, a wholly-owned
subsidiary of the Company (since June 2001); Director of Versar Inc.
Glen M. Kassan 59 Executive Vice President of Steel Partners, Ltd. ("SPL"), a management and 2002
advisory company that provides management services to Steel
Partners II, L.P. ("Steel") and other affiliates of Steel (since March 2002);
Executive Vice President (June 2001 to March 2002) and Vice President (October
1999 to May 2001) of Steel Partners Services, Ltd. ("SPS"), a management and
advisory company (which provided management services to Steel and other
affiliates of Steel until March 2002, when SPL acquired the rights to provide
certain management services from SPS); Vice President, Chief Financial Officer
and Secretary of WebFinancial Corporation, a consumer and commercial lender
(since June 2000); director (since January 2002) and President (since February
2002) of SL Industries, Inc., a designer and producer of proprietary advanced
systems and equipment for the power and data quality industry; Vice Chairman of
the Board of Directors of Caribbean Fertilizer Group Ltd., a private company
engaged in the production of agricultural products in Puerto Rico and Jamaica
(since June 2000); Chairman and Chief Executive Officer of Long Term Care
Services, Inc., a privately owned healthcare services company which Mr. Kassan
co-founded in 1994 and initially served as Vice Chairman and Chief Financial
Officer (1997 to 1998); director of Puroflow Incorporated, a designer and
manufacturer of precision filtration devices (since August 2001).
9
Warren G. Lichtenstein 37 Chairman of the Board, Secretary and the Managing Member 2001
of Steel Partners, L.L.C. ("Steel LLC"), the general partner
of Steel Partners II, L.P. ("Steel") (since January 1, 1996);
Chairman and a director of Steel Partners, Ltd., the general partner
of Steel Partners Associates, L.P., which was the general partner of
Steel (1993 to January 1996); acquisition/risk arbitrage analyst at
Ballantrae Partners, L.P., a private investment partnership formed to
invest in risk arbitrage, special situations and undervalued companies
(1988 to 1990). Mr. Lichtenstein is a director of Gateway Industries,
Inc., WebFinancial Corporation, Puroflow Incorporated, ECC
International Corp. and CPX Corp.
Joseph S. Schneider 52 President of JSA Partners, Inc., a consulting firm in the 1998
aerospace and defense industry (since September 1997);
Consultant with A.T. Kearney, a subsidiary of Electronic Data
Systems Corporation (September 1995 to March 1997); President of
EDS/JSA International, Inc., a management consulting firm (August 1994
to September 1995) and successor company to JSA International, Inc. of
which he was President (1981-1994); Chairman and Co-founder of JSA
Research, Inc., an independent aerospace and defense research firm
serving institutional investors (since 1993). Mr. Schneider is a
director of Signal Technology Corporation.
None of the directors is a director of any other company with a class of
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934 or subject to the requirements of Section 15(d) of such Act or any company
registered as an investment company under the Investment Company Act of 1940,
except as set forth above.
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.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and any persons who own more than ten percent of the
Company's Common Stock to file reports of initial ownership of the Company's
Common Stock and subsequent changes in that ownership with the Securities and
Exchange Commission and the New York Stock Exchange. Such persons are also
required to furnish the Company with copies of all Section 16(a) forms they
file. Based solely upon a review of the copies of the forms furnished to the
Company, or written representations from certain reporting persons that no Form
5's were required, the Company believes that during 2002 all Section 16(a)
filing requirements were complied with, except that a report for one transaction
occurring during 2002 was or will be filed late by each of Harold S. Gelb, Susan
Fein Zawel, James H. Perry and Robert W. Worthing, and a report for one
transaction occurring during 2001 was or will be filed late by Joseph S.
Schneider.
There are no family relationships between any director or executive officer of
the Company.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the annual compensation
for services in all capacities to the Company for the fiscal years ended
December 31, 2002, 2001 and 2000 of the chief executive officer and each of the
other executive officers of the Company whose annual compensation exceeded
$100,000.
10
Long-Term
Compensation
Annual Compensation Awards
----------------------------------------------- -------------------------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($)(1) Compensation ($)(2) Options Compensation ($)(3)
--------------------------- ---- ---------- ------------ ------------------- ------- -------------------
Richard R. Erkeneff 2002 528,000 369,116 -- 30,618
President and Chief 2001 484,000 96,871 -- 27,300
Executive Officer of the 2000 440,000 -- -- 21,238
Company and AAI
James H. Perry 2002 262,600 246,021 10,000 23,045
Vice President, Chief 2001 250,120 10,468 10,000 20,157
Financial Officer and 2000 200,720 -- 21,000 14,652
Treasurer of the Company
and AAI
Robert W. Worthing 2002 275,558 259,033 10,000 32,309
Vice President and General 2001 265,158 11,097 10,000 27,316
Counsel of the Company 2000 220,043 -- 21,000 20,821
and AAI
Susan Fein Zawel 2002 200,000 190,444 5,000 25,837
Vice President Corporate 2001 200,000 8,370 5,000 21,066
Communications, Secretary 2000 170,512 -- 9,000 15,063
and Associate General
Counsel of the Company
- -------------------------------------------------------------------------------
(1) Included in amounts under this heading are bonus awards of $80,796, $85,655
and $64,606 for Mr. Perry, Mr. Worthing and Ms. Zawel, respectively, related to
the sale of two rail car overhaul contracts described under Part I, Item 1
above.
(2) The aggregate amount of other compensation represents perquisites that
exceed the lesser of $50,000 or 10% of the total annual salary and bonus
reported for such executive officer.
(3) All amounts under this heading represent employer match contributions made
to the Company's 401(k) plan and contributions to the Company's Retirement Plan.
Options Granted in Last Fiscal Year
The following table sets forth certain information concerning options granted
during 2002 to the named executives.
Potential Realizable
Individual Grants Value at Assumed
------------------------------------------------------ Annual Rates of
Number of % of Total Stock Price
Securities Options Appreciation for
Underlying Granted to Exercise or Option Term
Options Employees in Base Price --------------------
Name Granted Fiscal Year ($/Share) Expiration Date 5% ($) 10% ($)
- ---- ------- ----------- --------- --------------- ------ -------
James H. Perry 10,000 8 19.05 March 1, 2012(1) 119,825 303,657
Robert W. Worthing 10,000 8 19.05 March 1, 2012(1) 119,825 303,657
Susan Fein Zawel 5,000 4 19.05 March 1, 2012(1) 59,912 151,829
- --------------------------------------------------------------------------------
(1) One-third of the options are exercisable upon the first anniversary of the
date of grant, which was March 1, 2002, an additional one-third of the options
are exercisable upon the second anniversary of the date of grant and the
balance of the options are exercisable upon the third anniversary of the
date of grant.
11
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values
Number of Securities Value of Unexercised
Underlying In-the-Money
Unexercised Options Options at
Shares at Fiscal Year-End Fiscal Year-End ($)
Acquired on Value Exercisable (E)/ Exercisable (E)/
Name Exercise # Realized ($) Unexercisable (U) Unexercisable (U)
------------------------------------------------------------------------
Richard R. Erkeneff 0 0 510,000(E) 3,385,000(E)
-0-(U) -0-(U)
James H. Perry 0 0 77,000(E) 522,450(E)
32,000(U) 102,900(U)
Robert W. Worthing 0 0 71,000(E) 508,200(E)
32,000(U) 102,900(U)
Susan Fein Zawel 0 0 55,000(E) 393,550(E)
15,000(U) 48,350(U)
Employment Agreements
Mr. Erkeneff is employed as President and Chief Executive Officer of the Company
and Chief Executive Officer of AAI pursuant to an employment agreement dated
December 8, 1998 and amended as of June 1, 2001 and as of December 20, 2002 that
provides he be paid a salary at the annual rate of $792,000 commencing January
1, 2003 (increased from an annual rate of $528,000 for 2002), and participate in
all life insurance, medical, retirement, pension, disability and other employee
benefit plans generally made available to other executive officers of the
Company or AAI. The employment agreement terminates on July 31, 2003, unless Mr.
Erkeneff's employment is terminated prior thereto by the Company for cause or
Mr. Erkeneff resigns prior thereto with good reason, subject to the Company's
right to extend the term of the agreement for up to five months upon 60 days
prior written notice. Pursuant to the employment agreement, Mr. Erkeneff
received a cash bonus of $369,116 for 2002 pursuant to the Company's Performance
Sharing Plan. Mr. Erkeneff will not be eligible to receive a bonus for 2003. On
January 4, 1999, in accordance with his employment agreement, Mr. Erkeneff
received an option to acquire 100,000 shares of the Company's common stock
pursuant to the terms of the Company's 1994 Stock Option Plan, at $913/16 per
share, at an exercise price equal to the fair market value of the common stock
as of the grant date, terminating on June 30, 2003. The 100,000 shares subject
to this option are vested. In the event that the Company terminates the
employment of Mr. Erkeneff without cause (as such term is defined in the
employment agreement) or Mr. Erkeneff terminates his employment for good reason
(as such term is defined in the employment agreement), Mr. Erkeneff will be
entitled to continue to receive his salary through July 31, 2003. Mr. Erkeneff
has agreed to resign as a director of the Company upon the request of the Board
at any time after the termination of his employment.
Mr. Perry is employed by the Company pursuant to an employment agreement,
amended as of January 2, 2003, that provides he be paid a salary at the annual
rate of $200,720, adjusted as of January 1, 2002 to $262,600, and participate in
all life insurance, medical, retirement, pension or profit sharing, disability
or other employee benefit plans generally made available to other executive
officers of the Company (and at least equivalent to those provided to Mr. Perry
during 2002). The employment agreement terminates on February 28, 2004, unless
Mr. Perry's employment is terminated prior thereto by the Company for cause.
Pursuant to the employment agreement, Mr. Perry is eligible to receive annual
discretionary salary increases and cash bonuses as may be granted by the
Company's Board of Directors. In the event that the Company terminates the
employment of Mr. Perry without cause (as such term is defined in the employment
agreement), or if Mr. Perry terminates his employment for Good Reason (as such
term is defined in the employment agreement), Mr. Perry will be entitled to (a)
150% of his annualized base salary, plus (b) an incentive compensation award
equal to 35% of the amount specified in (a) above, payable over a period of 18
months following cessation of employment. This provision survives the expiration
of the employment agreement. Pursuant to an agreement dated as of April 10,
2002, Mr. Perry will be entitled to receive on the closing date of a Change of
Control of the Company (as defined in the agreement) an amount equal to 50% of
his base salary.
12
Mr. Worthing is employed by the Company pursuant to an employment agreement,
amended as of January 2, 2003, that provides he be paid a salary at the annual
rate of $220,043, adjusted as of January 1, 2002 to $275,558, and participate in
all life insurance, medical, retirement, pension or profit sharing, disability
or other employee benefit plans generally made available to other executive
officers of the Company (and at least equal to those provided to Mr. Worthing in
2002). The employment agreement terminates on February 28, 2004 unless Mr.
Worthing's employment is terminated prior thereto by the Company for cause.
Pursuant to the employment agreement, Mr. Worthing is eligible to receive annual
discretionary salary increases and cash bonuses as may be granted by the
Company's Board of Directors. In the event that the Company terminates the
employment of Mr. Worthing without cause (as such term is defined in the
employment agreement), or if Mr. Worthing terminates his employment for Good
Reason (as such term is defined in the employment agreement), Mr. Worthing will
be entitled to (a) 150% of his annualized base salary, plus (b) an incentive
compensation award equal to 42% of the amount specified in (a) above, payable
over a period of 18 months following cessation of employment. This provision
survives the expiration of the employment agreement. Pursuant to an agreement
dated as of April 10, 2002, Mr. Worthing will be entitled to receive on the
closing date of a Change of Control of the Company (as defined in the agreement)
an amount equal to 50% of his base salary.
Ms. Fein Zawel is employed by the Company pursuant to an employment agreement,
amended as of January 2, 2003, that provides she be paid a salary at the annual
rate of $170,512, adjusted as of January 1, 2001 to $200,000, and participate in
all life insurance, medical, retirement, pension or profit sharing, disability
or other employee benefit plans generally made available to other executive
officers of the Company (and at least equivalent to those provided to Ms. Fein
Zawel during 2002). The employment agreement terminates on February 28, 2004,
unless Ms. Fein Zawel's employment is terminated prior thereto by the Company
for cause. Pursuant to the employment agreement, Ms. Fein Zawel is eligible to
receive annual discretionary salary increases and cash bonuses as may be granted
by the Company's Board of Directors. In the event that the Company terminates
the employment of Ms. Fein Zawel without cause (as such term is defined in the
employment agreement), or if Ms. Fein Zawel terminates her employment for Good
Reason (as such term is defined in the employment agreement), Ms. Fein Zawel
will be entitled to (a) 150% of her annualized base salary, plus (b) an
incentive compensation award equal to 34% of the amount specified in (a) above,
payable over a period of 18 months following cessation of employment. This
provision survives the expiration of the employment agreement.
Retirement Benefits
All employees of the Company and its subsidiaries are eligible to participate in
the UIC Retirement Plan, a cash balance plan (the "Retirement Plan") upon
commencement of employment. In accordance with the Retirement Plan, a
participant's accrued benefit includes the actuarial equivalent of the
participant's accrued benefit under the applicable predecessor defined benefit
plan as of December 31, 1994 plus annual allocations based upon a percentage of
salary and interest earned on such participant's account thereafter. The
Retirement Plan also has options for early retirement and alternative forms of
payment, including lump sum benefits and benefits for surviving spouses. The
estimated annual benefit to be provided by the UIC Retirement Plan and payable
to Messrs. Erkeneff, Perry and Worthing and Ms. Fein Zawel, commencing at normal
retirement age, are $15,061, $22,512, $21,456 and $18,813, respectively.
United Industrial Corporation Health-Care Plan for Retired Directors
The Company has implemented the United Industrial Corporation Health-Care Plan
for Retired Directors (the "Plan"), which was adopted by the Company's Board of
Directors on December 18, 1995. The Board may, in its sole discretion, amend,
suspend or terminate the Plan, at any time, with or without prior notice. A
director of the Company is eligible to participate in the Plan if he or she: (i)
ceases to be a member of the Board; (ii) has served as a member of the Board for
15 full years; (iii) has attained the age of 65; (iv) is eligible for Medicare
Part A; and (v) has enrolled in both Medicare Part A and Medicare Part B and any
other available supplemental medical or hospitalization coverage by reason of
entitlement under any government entitlement, including, without limitation,
that provided under Title XVIII of the Social Security Act. A director who
participates in the Plan is entitled to coverage under the group medical plan
available to the executive officers of the Company on the same terms and
13
conditions as such coverage is available to such executive officers and their
spouses and dependents. If a director who participates in the Plan resides
outside the service area of the Company's group medical plan, such director and
his or her spouse and dependents will receive medical benefit coverage under a
medical plan or health insurance policy which provides benefits that are
reasonably comparable to the benefits under the Company's group medical plan;
however, if no such coverage is reasonably available (whether due to geography
or the physical condition of the director or his or her spouse or dependents),
then the Company will reimburse such director for any reasonable expense that
would have been covered under the Company's group medical plan. Benefits
provided under the Plan will be secondary to any benefits under any other
hospitalization or major medical plan or arrangement provided to such director
under government entitlements or provided to such director (either directly or
indirectly through such director's spouse) by any other personal or
employer-provided health-care plan or health insurance policy.
Director Compensation
Directors received $20,000 per year and $1,000 for each meeting attended, and a
fee of $500 for each committee meeting attended. In lieu of such fees, Mr. Gelb,
Chairman of the Board, received $12,500 per month and a $10,000 per year
automobile allowance. In addition, Mr. Schneider and Mr. Hoeper also served as
directors of AAI, for which each received compensation of $2,000 per meeting.
Effective January 1, 2003, directors (other than Mr. Gelb, whose compensation as
indicated above will remain the same) will receive $23,000 per year and $1,150
for each meeting attended and a fee of $575 for each committee meeting attended.
Mr. Schneider and Mr. Hoeper will receive a $5,000 fee as Chairman of the Audit
and Compensation/Stock Option Committees, respectively.
All current directors are eligible to participate in the medical plan available
to the executive officers of the Company. The Company also has a medical plan
for retired directors as described above. Nonemployee directors also participate
in the Company's 1996 Stock Option Plan for Nonemployee Directors (the "1996
Plan"). Pursuant to the 1996 Plan, each Eligible Director (as defined in the
1996 Plan) is granted an option to purchase 15,000 shares of Common Stock upon
their initial appointment to the Board of Directors, exercisable at the market
price of the Company's Common Stock on the date of grant. The options granted
under the 1996 Plan expire ten years after the date of grant and become
exercisable (i) as to one-third of the total number of shares subject to the
grant on the date of grant (the "First Vesting Date"), (ii) as to an additional
one-third of the total number of shares subject to the grant on the date of the
next annual shareholders' meeting after the First Vesting Date (the "Second
Vesting Date"), and (iii) as to the remaining one-third of the total number of
shares subject to the grant on the date of the next annual shareholders' meeting
after the Second Vesting Date (the "Final Vesting Date"). On the date of the
annual shareholders' meeting which takes place during the calendar year in which
the first anniversary of the Final Vesting Date occurs, each Eligible Director
shall automatically be granted an option to purchase 15,000 shares of Common
Stock, provided such grantee is an Eligible Director in office immediately
following such annual meeting.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Security Ownership of Certain Beneficial Owners
On March 10, 2003, there were outstanding and entitled to vote 13,067,918 shares
of Common Stock. At March 10, 2003, more than 5% of the Company's outstanding
voting securities was beneficially owned by each of the persons named in the
following table, except that the information as to Kennedy Capital Management,
Inc. is as of December 31, 2002 and is based upon information furnished to the
Company by such person in a Schedule 13G, and the information as to Steel
Partners II, L.P. is based upon information furnished by such entity in a
Schedule 13D.
14
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
- --------------------------------------------------------------------------------------------------------
Common Stock Kennedy Capital Management, Inc. 1,595,450(1) 12.2%
10829 Olive Boulevard
St. Louis, Missouri 63141
Common Stock Steel Partners II, L.P. 1,582,050 12.2%
150 East 52 Street
New York, New York 10022
- --------------------------------------------------------------------------------------------------------
(1) Kennedy Capital Management, Inc., a registered investment advisor, has sole
voting power as to 1,550,650 shares of Common Stock and sole dispositive power
as to 1,595,450 shares.
Security Ownership of Management
The following table sets forth, as of March 1, 2003, the number of shares of
Common Stock of the Company beneficially owned by each director of the Company,
each executive officer named in the Summary Compensation Table above, and by all
directors and executive officers of the Company as a group. Except as otherwise
indicated all shares are owned directly.
Amount and
Nature of Beneficial Percent
Name or Group Ownership(1)(2) of Class
------------------ ------------------------------------
Richard R. Erkeneff 646,000 4.76%
Harold S. Gelb 40,000 (3)
Paul J. Hoeper 7,000 (3)
Glen M. Kassan 5,000 (3)
Warren G. Lichtenstein 1,592,050(4) 12.17%
James H. Perry 101,338 (3)
Joseph S. Schneider 30,000 (3)
Robert W. Worthing 98,922(5) (3)
Susan Fein Zawel 406,122(6) 3.09%
All directors and executive
officers as a group,
consisting of 10 persons 2,981,432 21.36%
- -----------------------------------------------------------------------------
(1) The information as to securities owned by directors and executive officers
was furnished to the Company by such directors and executive officers. Includes
units in the Company's 401(k) plan, which consist of shares of Common Stock and
cash.
(2) Includes shares which the following persons have the right to acquire within
60 days through the exercise of stock options: Mr. Erkeneff, 510,000 shares; Mr.
Gelb, 35,000 shares; Mr. Lichtenstein, 10,000 shares; Mr. Perry, 95,333; Mr.
Schneider, 25,000 shares; Mr. Worthing, 89,333 shares; Ms. Fein Zawel, 63,666
shares; Mr. Kassan, 5,000 shares; Mr. Hoeper, 5,000 shares; and all directors
and executives as a group, 893,332 shares.
(3) Less than 1%.
(4) All of such shares are owned by Steel Partners II, L.P. ("Steel") (other
than Mr. Lichtenstein's stock options). Mr. Lichtenstein is the Chairman of the
Board, Secretary and Managing Member of the general partner of Steel. Mr.
Lichtenstein disclaims beneficial ownership of the shares owned by Steel, except
to the extent of his pecuniary interest therein.
(5) Does not include 500 shares of Common Stock owned by Mr. Worthing's spouse,
as to which he disclaims beneficial ownership.
(6) Includes 11,440 shares of Common Stock owned by Ms. Fein Zawel's spouse,
4,772 shares of Common Stock owned by Ms. Fein Zawel jointly with her spouse,
and 32,634 shares of Common Stock held in trust for her minor children.
15
Equity Compensation Plan Information
Number of securities
Number of securities remaining available
to be issued upon for future issuance
exercise of Weighted-Average under equity
outstanding options, exercise price of compensation plans
warrants outstanding (excluding securities
and options, warrants reflected in
Plan Category rights and rights column (a))
------------- -------------------- ----------------- --------------------
(a) (b) (c)
Equity compensation plans
approved by security
holders ..................... 1,523,000 $11.22 105,000
The Company has no equity compensation plans not approved by security holders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 14. CONTROLS AND PROCEDURES
(a) The Company maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in the Company's filings
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the periods specified in the rules and forms of the Securities
and Exchange Commission. Such information is accumulated and communicated to the
Company's management, including its principal executive officer and principal
financial officer, as appropriate, to allow timely decisions regarding required
disclosure. The Company's management, including its principal executive officer
and principal financial officer, recognizes that any set of controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives.
Within 90 days prior to the filing date of this annual report on Form 10-K, the
Company has carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Company's principal
executive officer and the Company's principal financial officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. Based on such evaluation, the Company's principal executive
officer and principal financial officer concluded that the Company's disclosure
controls and procedures are effective.
(b) There have been no significant changes in the Company's internal controls or
in other factors that could significantly affect the internal controls
subsequent to the date of their evaluation in connection with the preparation of
this annual report on Form 10-K.
16
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) - The response to this portion of Item 15 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)- United Industrial Corporation 1996 Stock Option Plan for
Nonemployee Directors (4).
(10)(c)- Loan and Security Agreement dated as of June 28, 2001
among United and certain of its subsidiaries, as
Borrowers, and Fleet Capital Corporation, as Lender (5).
(10)(d)- Pledge Agreement dated as of June 28, 2001 among United
and certain of its subsidiaries, as Pledgors, and Fleet
Capital Corporation, as Lender (5).
(10)(e)- Waiver, Amendment and Consent Agreement dated as of March
6, 2002 among United and certain of its subsidiaries, as
Borrowers, and Fleet Capital Corporation, as Lender (9).
(10)(f)- Second Amendment and Consent Agreement dated as of June
28, 2002 among United and certain of its subsidiaries, as
Borrowers, and Fleet Capital Corporation, as Lender (8).
(10)(g)- Third Amendment and Waiver Agreement dated as of March 21,
2003 among United and certain of its subsidiaries, as
Borrowers, and Fleet Capital Corporation, as Lender.
(10)(h)- Employment Agreement, dated December 8, 1998, between
United and Richard R. Erkeneff (1).
(10)(i)- Amendment No. 1 dated as of June 1, 2001 to the Employment
Agreement dated as of December 8, 1998 by and between
United and Richard R. Erkeneff (5).
(10)(j)- Amendment No. 2 and Amendment No. 3 dated as of
December 20, 2002 to the Employment Agreement dated as of
December 8, 1998 by and between United and Richard R.
Erkeneff.
(10)(k)- Employment Agreement, dated March 3, 2000, between United
and Susan Fein Zawel (6).
(10)(l)- Amendment to Employment Agreement, dated January 2, 2003,
between United and Susan Fein Zawel.
(10)(m)- Employment Agreement, dated March 3, 2000, between United
and Robert Worthing (6).
17
(10)(n)- Success Bonus Agreement, dated April 10, 2002, between
United and Robert Worthing (7).
(10)(o)- Amendment to Employment Agreement, dated January 2, 2003,
between United and Robert Worthing.
(10)(p)- Employment Agreement, dated March 3, 2000, between United
and James H. Perry (6).
(10)(q)- Success Bonus Agreement, dated April 10, 2002, between
United and James H. Perry (7).
(10)(r)- Amendment to Employment Agreement, dated January 2, 2003,
between United and James H. Perry.
(10)(s)- Master Agreement, dated as of March 27, 2002, between
ALSTOM Transportation Inc. and AAI Corporation (9).
(10)(t)- Amendment to Master Agreement, dated as of July 26, 2002,
between ALSTOM Transportation Inc. and AAI
Corporation (10).
(13)- United's 2002 Annual Report to Shareholders.
(21)- Subsidiaries of United.
(23)- Consent of Independent Auditors.
(99)(a)- Certification of the Chief Executive Officer of the
Company pursuant to 18 U.S.C.ss.1350, as adopted by
Section 906 of the Sarbanes-Oxley Act of 2002.
(99)(b)- Certification of the Chief Financial Officer of the
Company pursuant to 18 U.S.C.ss.1350, as adopted by
Section 906 of the Sarbanes-Oxley Act of 2002.
- ----------------------
(1) Incorporated by reference to United's Annual Report on Form 10-K for the
year ended December 31, 1998.
(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 Registration Statement on
Form S-8 filed with the Securities and Exchange Commission on
June 26, 1997.
(5) Incorporated by reference to United's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2001.
(6) Incorporated by reference to United's Annual Report on Form 10-K for the
year ended December 31, 1999.
(7) Incorporated by reference to United's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2002.
(8) Incorporated by reference to United's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2002.
(9) Incorporated by reference to United's Annual Report on Form 10-K for the
year ended December 31, 2001.
(10) Incorporated by reference to United's Current Report on Form 8-K filed
with the Securities and Exchange Commission on August 12, 2002.
(b) Reports on Form 8-K
On October 7, 2002, the Company filed a Current Report on Form 8-K
relating to its Annual Meeting.
18
Annual Report on Form 10-K
Item 15(a) (1) and (2), (c) and (d)
List of Financial Statements and Financial Statement Schedules
Certain Exhibits
Financial Statement Schedules
Year ended December 31, 2002
United Industrial Corporation
New York, New York
Form 10-K--Item 15(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, 2002, are incorporated by reference
in Item 8:
Consolidated Balance Sheets--December 31, 2002 and 2001
Consolidated Statements of Operations--
Years Ended December 31, 2002, 2001 and 2000
Consolidated Statements of Cash Flows
Years Ended December 31, 2002, 2001 and 2000
Notes to Financial Statements
The following consolidated financial statement schedule of United Industrial
Corporation and subsidiaries is included in Item 15(d):
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.
F-2
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of United Industrial
Corporation and subsidiaries as of December 31, 2002 and 2001, and for each of
the three years in the period ended December 31, 2002, and have issued our
report thereon dated March 10, 2003. Our audits also included the financial
statement schedule listed in Item 15(d) of this Annual Report (Form 10-K). This
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
New York, New York
March 10, 2003
F-3
Schedule II -- Valuation and Qualifying Accounts
United Industrial Corporation and Subsidiaries
December 31, 2002
COL. A COL. B COL. C COL. D COL. E
(1) (2)
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER ACCOUNTS DEDUCTIONS END OF
DESCRIPTION OF PERIOD EXPENSES (DESCRIBE) (DESCRIBE) PERIOD
----------- ---------- ---------- -------------- ---------- ----------
Year ended December 31, 2002:
Deducted from asset accounts:
Allowance for doubtful accounts $235,000 $235,000
======== ========
Product warranty liability $1,650,000 $306,000 $1,256,000(A) $700,000
========== ======== ========== ========
Year ended December 31, 2001:
Deducted from asset account:
Allowance for doubtful accounts $235,000 $235,000
======== ========
Product warranty liability $5,154,000 $3,504,000(A) $1,650,000
========== ========== ==========
Year ended December 31, 2000:
Deducted from asset account:
Allowance for doubtful accounts $235,000 $235,000
======== ========
Product warranty liability $5,600,000 $1,300,000 $1,746,000(A) $5,154,000
========== ========== ========== ==========
(A) Product warranty expenditures.
F-4
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 28, 2003
-----------------------------
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 March 28, 2003
- --------------------------------------------
Harold S. Gelb,
Chairman of the Board and Director
/s/ Joseph S. Schneider March 28, 2003
- --------------------------------------------
Joseph S. Schneider, Director
/s/ Richard R. Erkeneff March 28, 2003
- ---------------------------------------------
Richard R. Erkeneff, President and
Chief Executive Officer and Director
March 28, 2003
- --------------------------------------------
Warren G. Lichtenstein, Director
/s/ Paul J. Hoeper March 28, 2003
- --------------------------------------------
Paul J. Hoeper, Director
March 28, 2003
- --------------------------------------------
Glen M. Kassan, Director
/s/ James H. Perry March 28, 2003
- --------------------------------------------
James H. Perry,
Vice President, Treasurer and
Chief Financial Officer (Principal
Financial and Accounting Officer)
CERTIFICATIONS
I, Richard R. Erkeneff, certify that:
1. I have reviewed this annual report on Form 10-K of United Industrial
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: March 28, 2003 /s/ Richard R. Erkeneff
-----------------------
Richard R. Erkeneff
Chief Executive Officer
I, James H. Perry, certify that:
1. I have reviewed this annual report on Form 10-K of United Industrial
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: March 28, 2003 /s/ James H. Perry
------------------------
James H. Perry
Chief Financial Officer
EXHIBIT INDEX
(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)- United Industrial Corporation 1996 Stock Option Plan for
Nonemployee Directors (4).
(10)(c)- Loan and Security Agreement dated as of June 28, 2001
among United and certain of its subsidiaries, as
Borrowers, and Fleet Capital Corporation, as Lender (5).
(10)(d)- Pledge Agreement dated as of June 28, 2001 among United
and certain of its subsidiaries, as Pledgors, and Fleet
Capital Corporation, as Lender (5).
(10)(e)- Waiver, Amendment and Consent Agreement dated as of March
6, 2002 among United and certain of its subsidiaries, as
Borrowers, and Fleet Capital Corporation, as Lender (9).
(10)(f)- Second Amendment and Consent Agreement dated as of June
28, 2002 among United and certain of its subsidiaries, as
Borrowers, and Fleet Capital Corporation, as Lender (8).
(10)(g)- Third Amendment and Waiver Agreement dated as of March 21,
2003 among United and certain of its subsidiaries, as
Borrowers, and Fleet Capital Corporation, as Lender.
(10)(h)- Employment Agreement, dated December 8, 1998, between
United and Richard R. Erkeneff (1).
(10)(i)- Amendment No. 1 dated as of June 1, 2001 to the
Employment Agreement dated as of December 8, 1998 by and
between United and Richard R. Erkeneff (5).
(10)(j)- Amendment No. 2 and Amendment No. 3 dated as of
December 20, 2002 to the Employment Agreement dated as of
December 8, 1998 by and between United and Richard R.
Erkeneff.
(10)(k)- Employment Agreement, dated March 3, 2000, between United
and Susan Fein Zawel (6).
(10)(l)- Amendment to Employment Agreement, dated January 2, 2003,
between United and Susan Fein Zawel.
(10)(m)- Employment Agreement, dated March 3, 2000, between United
and Robert Worthing (6).
(10)(n)- Success Bonus Agreement, dated April 10, 2002, between
United and Robert Worthing (7).
(10)(o)- Amendment to Employment Agreement, dated January 2, 2003,
between United and Robert Worthing.
(10)(p)- Employment Agreement, dated March 3, 2000, between United
and James H. Perry (6).
(10)(q)- Success Bonus Agreement, dated April 10, 2002, between
United and James H. Perry (7).
(10)(r)- Amendment to Employment Agreement, dated January 2, 2003,
between United and James H. Perry.
(10)(s)- Master Agreement, dated as of March 27, 2002, between
ALSTOM Transportation Inc. and AAI Corporation (9).
(10)(t)- Amendment to Master Agreement, dated as of July 26, 2002,
between ALSTOM Transportation Inc. and AAI
Corporation (10).
(13)- United's 2002 Annual Report to Shareholders.
(21)- Subsidiaries of United.
(23)- Consent of Independent Auditors.
(99)(a)- Certification of the Chief Executive Officer of the
Company pursuant to 18 U.S.C.ss.1350, as adopted by
Section 906 of the Sarbanes-Oxley Act of 2002.
(99)(b)- Certification of the Chief Financial Officer of the
Company pursuant to 18 U.S.C.ss.1350, as adopted by
Section 906 of the Sarbanes-Oxley Act of 2002.
- ----------------------
(1) Incorporated by reference to United's Annual Report on Form 10-K for the
year ended December 31, 1998.
(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 Registration Statement on Form S-8
filed with the Securities and Exchange Commission on June 26, 1997.
(5) Incorporated by reference to United's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2001.
(6) Incorporated by reference to United's Annual Report on Form 10-K for the
year ended December 31, 1999.
(7) Incorporated by reference to United's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002.
(8) Incorporated by reference to United's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002.
(9) Incorporated by reference to United's Annual Report on Form 10-K for the
year ended December 31, 2001.
(10) Incorporated by reference to United's Current Report on Form 8-K filed with
the Securities and Exchange Commission on August 12, 2002.