-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BVQAO4tHHT6gFaR40hZ7UrGBtS90EmesnNyFVdYMklYu+Ujs/1k1s/2qsTfvvD1h iW4Ak2RulBnjfEcMKEKxjA== 0000928385-01-502786.txt : 20020413 0000928385-01-502786.hdr.sgml : 20020413 ACCESSION NUMBER: 0000928385-01-502786 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20011213 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED DEFENSE LP CENTRAL INDEX KEY: 0001052973 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS TRANSPORTATION EQUIPMENT [3790] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 333-43619-03 FILM NUMBER: 1812809 BUSINESS ADDRESS: STREET 1: 1525 WILSON BLVD STREET 2: SUITE 700 CITY: ARLINGTON STATE: VA ZIP: 22209-2411 BUSINESS PHONE: 7033126100 MAIL ADDRESS: STREET 1: 1525 WILSON BLVD STREET 2: SUITE 700 CITY: ARLINGTON STATE: VA ZIP: 22209-2411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UDLP HOLDINGS CORP CENTRAL INDEX KEY: 0001052972 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS TRANSPORTATION EQUIPMENT [3790] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 333-43619-02 FILM NUMBER: 1812810 BUSINESS ADDRESS: STREET 1: 1525 WILSON BLVD STREET 2: SUITE 700 CITY: ARLINGTON STATE: VA ZIP: 22209-2411 BUSINESS PHONE: 7033126100 MAIL ADDRESS: STREET 1: 1525 WILSON BLVD STREET 2: SUITE 700 CITY: ARLINGTON STATE: VA ZIP: 22209-2411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IRON HORSE INVESTORS LLC CENTRAL INDEX KEY: 0001052971 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS TRANSPORTATION EQUIPMENT [3790] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 333-43619-01 FILM NUMBER: 1812811 BUSINESS ADDRESS: STREET 1: 1525 WILSON BLVD STREET 2: SUITE 700 CITY: ARLINGTON STATE: VA ZIP: 22209-2411 BUSINESS PHONE: 7033126100 MAIL ADDRESS: STREET 1: 1525 WILSON BLVD STREET 2: SUITE 700 CITY: ARLINGTON STATE: VA ZIP: 22209-2411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED DEFENSE INDUSTRIES INC CENTRAL INDEX KEY: 0001051719 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS TRANSPORTATION EQUIPMENT [3790] IRS NUMBER: 522059782 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-16821 FILM NUMBER: 1812808 BUSINESS ADDRESS: STREET 1: 1525 WILSON BLVD STREET 2: SUITE 700 CITY: ARLINGTON STATE: VA ZIP: 22209-2411 BUSINESS PHONE: 7033126100 MAIL ADDRESS: STREET 1: 1525 WILSON BLVD STREET 2: SUITE 700 CITY: ARLINGTON STATE: VA ZIP: 22209-2411 10-Q/A 1 d10qa.txt UNITED DEFENSE INDUSTRIES, INC. ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ______________ FORM 10-Q/A Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended: March 31, 2001 Commission File No. 333-43619 UNITED DEFENSE INDUSTRIES, INC. (Exact Name of Registrant as Specified in Charter) Delaware 52-2059782 (State or jurisdiction of (I.R.S. employer incorporation or organization) Identification number) Guarantors and Co-registrants Iron Horse Investors, L.L.C. Delaware 52-2059783 UDLP Holdings Corp. Delaware 52-2059780 United Defense, L.P. Delaware 54-1693796 ______________ 1525 Wilson Boulevard, Suite 700 Arlington, VA 22209 (703) 312-6100 (Address and telephone number of principal executive offices of each registrant and co-registrant) Registrant's telephone number, including area code (703) 312-6100 Indicate by checkmark 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 and (2) has been subject to such filing requirement for the past 90 days. Yes [X] No [_]. Indicate the number of shares outstanding of each of the registrant's classes of common stock as of May 1, 2001:
No. of Par Shares Value ---------- ------- United Defense Industries, Inc..................................... 18,101,667 $ 0.01 Iron Horse Investors, L.L.C........................................ -none- UDLP Holdings Corp................................................. 1,000 $ 0.01 United Defense, L.P................................................ -none-
================================================================================ IRON HORSE INVESTORS, L.L.C. UNITED DEFENSE INDUSTRIES, INC. Amendment - --------- This amendment report on Form 10-Q provides restated financial information as described in Note 2 to the consolidated financial statements. INDEX -----
PART I - FINANCIAL INFORMATION PAGE - ------------------------------ ---- Item 1 - Unaudited Consolidated Financial Statements - Iron Horse Investors, L.L.C. Unaudited Consolidated Balance Sheets as of December 31, 2000 and March 31, 2001 1 Unaudited Consolidated Statements of Operations for the Three Months Ended March 31, 2000 and 2001 2 Unaudited Consolidated Statement of Members' Capital for the Three Months Ended March 31, 2001 3 Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000 and 2001 4 Notes to Unaudited Consolidated Financial Statements 5-6 Unaudited Consolidated Financial Statements - United Defense Industries, Inc. Unaudited Consolidated Balance Sheets as of December 31, 2000 and March 31, 2001 7 Unaudited Consolidated Statements of Operations for the Three Months Ended March 31, 2000 and 2001 8 Unaudited Consolidated Statement of Stockholders' Equity for the Three Months Ended March 31, 2001 9 Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000 and 2001 10 Notes to Unaudited Consolidated Financial Statements 11-16 Item 2 - Management's Discussion and Analysis of the Results of Operations and Financial Condition 17-21 Item 3 - Quantitative and Qualitative Disclosures about Market Risk 22
IRON HORSE INVESTORS, L.L.C. UNITED DEFENSE INDUSTRIES, INC. INDEX -----
PART II - OTHER INFORMATION PAGE - --------------------------- ---- Item 1 - Legal Proceedings 23 Item 6 - Exhibits and Reports on Form 8-K 23 SIGNATURE - ---------
Iron Horse Investors, L.L.C. Unaudited Consolidated Balance Sheets (In thousands)
Assets December 31, 2000 March 31, 2001 ---------------------------------------------- Current assets: Cash and marketable securities $ 113,357 $ 62,196 Trade receivables 109,705 111,134 Inventories 259,238 287,718 Other current assets 13,083 13,401 ---------------------------------------------- Total current assets 495,383 474,449 Property, plant and equipment, net 80,775 76,718 Intangible assets, net 162,340 151,481 Prepaid pension and postretirement benefit cost 123,100 123,687 Restricted cash 23,528 21,804 Other assets 11,930 9,527 ---------------------------------------------- Total assets $ 897,056 $ 857,666 ============================================== Liabilities and Capital Current liabilities: Current portion of long-term debt $ 23,086 $ 11,543 Accounts payable, trade and other 86,117 63,751 Advanced payments 342,394 363,215 Accrued and other liabilities 104,168 95,761 ---------------------------------------------- Total current liabilities 555,765 534,270 Long-term liabilities: Accrued pension and postretirement benefit cost 28,515 26,768 Long-term debt net of current portion 246,491 223,220 Other liabilities 23,148 28,513 ---------------------------------------------- Total liabilities 853,919 812,771 Minority interest 4,604 4,813 Commitments and contingencies (Note 3) Members' capital 38,533 40,082 ---------------------------------------------- Total liabilities and members' capital $ 897,056 $ 857,666 ==============================================
See accompanying notes. Amounts are as restated (Note 2). 1 Iron Horse Investors, L.L.C. Unaudited Consolidated Statements of Operations (In thousands)
Three months Three months ended ended March 31, 2000 March 31, 2001 --------------------------------------- Revenue: Sales $ 266,894 $ 292,080 Costs and expenses: Cost of sales 215,056 231,193 Selling, general and administrative expenses 41,746 42,228 Research and development 3,663 4,367 --------------------------------------- Total expenses 260,465 277,788 Income from operations 6,429 14,292 Other income (expense): Earnings related to investments in foreign affiliates (55) 654 Interest income 1,081 1,671 Interest expense (8,110) (6,194) --------------------------------------- Total other expense (7,084) (3,869) --------------------------------------- (Loss)income before income taxes and minority interest (655) 10,423 Provision for income taxes 575 5,293 --------------------------------------- (Loss)income before minority interest (1,230) 5,130 Minority interest 31 (209) --------------------------------------- Net (loss)income $ (1,199) $ 4,921 =======================================
See accompanying notes. Amounts are as restated (Note 2). 2 Iron Horse Investors, L.L.C. Unaudited Consolidated Statements of Members' Capital (In thousands) Amount ------------ Balance, December 31, 2000 $ 38,533 Net foreign currency translation adjustment (1,512) Cumulative effect of change in accounting principle- foreign currency hedges (951) Change in fair value of foreign currency hedges (909) Net income for the three months ended March 31, 2001 4,921 ------------ Total comprehensive income 1,549 ------------ Balance, March 31, 2001 $ 40,082 ============ See accompanying notes. Amounts are as restated (Note 2). 3 Iron Horse Investors, L.L.C. Unaudited Consolidated Statements of Cash Flows (In thousands)
Three months Three months ended ended March 31, 2000 March 31, 2001 ---------------------------------------------------- Operating activities Net (loss)income $ (1,199) $ 4,921 Adjustments to reconcile net (loss)income to cash provided by operating activities: Depreciation 6,337 5,117 Amortization 17,029 17,952 Minority interest (31) 209 Changes in assets and liabilities: Trade receivables (9,874) (1,429) Inventories (5,546) (28,480) Other assets 1,126 2,935 Prepaid pension and postretirement benefit cost (1,681) (587) Accounts payable, trade and other (16,284) (22,366) Advanced payments 6,556 20,821 Accrued and other liabilities 1,184 (12,292) Accrued pension and postretirement benefit cost 120 (1,747) ---------------------------------------------------- Cash used in operating activities (2,263) (14,946) ---------------------------------------------------- Investing activities Capital spending (2,919) (1,769) Disposal of property, plant and equipment 101 156 Purchase of Barnes & Reinecke, net of $1.2 million cash acquired (1,602) - ---------------------------------------------------- Cash used in investing activities (4,420) (1,613) ---------------------------------------------------- Financing activities Payments on long-term debt (35,824) (34,814) ---------------------------------------------------- Cash used in financing activities (35,824) (34,814) Effect of exchange rate changes on cash and marketable securities - 212 Decrease in cash and marketable securities (42,507) (51,161) Cash and marketable securities, beginning of period 94,325 113,357 ---------------------------------------------------- Cash and marketable securities, end of period $ 51,818 $ 62,196 ====================================================
See accompanying notes. Amounts are as restated (Note 2). 4 Iron Horse Investors, L.L.C. Notes to Unaudited Consolidated Financial Statements March 31, 2001 1. Basis of Presentation The financial information presented as of any other date than December 31 has been prepared from the books and records without audit. Financial information as of December 31 has been derived from the audited financial statements of Iron Horse Investors, L.L.C. (the "Company"), but does not include all the disclosures required by generally accepted accounting principles. In the opinion of management, the accompanying unaudited financial statements contain all adjustments, consisting of only normal recurring adjustments necessary to present fairly the Company's financial position as of March 31, 2001, and the results of its operations and cash flows for the periods ended March 31, 2001 and 2000. The results of operations are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. These unaudited consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2000. 2. Reclassifications and Restatement The Company's previously reported financial statements for 1998 through 2001 have been restated to account for the Company's investment in a Turkish joint venture under the equity method. The impact on operating results was as follows (in thousands): Three Months Ended March 31, -------------------------------------------------------------- (Decrease) increase 2000 2001 -------------------------------------------------------------- Earnings related to investments in $ (901) $(5,040) foreign affiliates -------------------------------------------------------------- Net (loss) income (470) (3,560) -------------------------------------------------------------- This change also resulted in certain reclassifications on the balance sheet and income statement. The Company had previously separately reported intangible assets related to the investment and an accrual related to a potential offset obligation, which are now included in the investment account within other assets on the balance sheet. On the income statement, certain amortization costs included in selling, general and administrative expenses related to the investment were reclassified to earnings related to investments in foreign affiliates. 5 3. Commitments and Contingencies United Defense Industries, Inc. has been a defendant in U.S. ex rel. Seman ------------------ and Shukla v. United Defense, FMC Corp., and Harsco Corp., an action filed - --------------------------------------------------------- against the Company and its prior owners on July 23, 1997 in the U.S. District Court for the District of Minnesota under the U.S. Civil False Claims Act. A complete settlement of such action was negotiated by the parties, and consented to by the U.S. Government, under which the Company is to pay a total of $6 million to settle the case, divided into installments payable over a three-year period. No finding of wrongdoing was made against the Company, and no other administrative or legal action is to be taken against the Company in respect of matters alleged in the case. On March 9, 2001, the settlement was approved by the court, and has accordingly become final. 4. Change in Accounting Principle Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. The statement requires that an entity recognize all derivatives as either assets or liabilities. The Company's subsidiary Bofors had forward exchange contracts with a notional contract value of $14.4 million at December 31, 2000. These contracts which were designated as cash flow hedges were entered into to hedge firm commitments related to purchases or sales denominated in foreign currencies. The fair value of the contracts was a liability of $0.95 million at December 31, 2000. The transition adjustment to implement this new standard on January 1, 2001, which is presented as a cumulative effect of change in accounting principle, and the subsequent change in market value of 0.9 million for the three months ended March 31, 2001 were charged to accumulated other comprehensive loss within members' capital. 5. Investments in Affiliated Companies The Company's investment in 51% owned foreign joint ventures in Turkey and Saudi Arabia are accounted for by using the equity method because the Company does not control the joint ventures although it has the ability to exercise significant influence over their operating and financial policies. Equity in earnings from these investments was $(0.1) million and $0.7 million for the three months ended March 31, 2000 and 2001. The following table summarizes financial information for these joint ventures (in thousands): Three Months Ended March 31, ---------------------------------------------------------- 2000 2001 ---------------------------------------------------------- Sales $28,879 $37,055 ---------------------------------------------------------- Cost of Sales 23,505 21,728 ---------------------------------------------------------- Net income (102) 1,243 ---------------------------------------------------------- 6 United Defense Industries, Inc. Unaudited Consolidated Balance Sheets (In thousands)
Assets December 31, 2000 March 31, 2001 ---------------------------------------------------------------- Current assets: Cash and marketable securities $ 113,357 $ 62,196 Trade receivables 109,705 111,134 Inventories 259,238 287,718 Other current assets 13,083 13,401 ---------------------------------------------------------------- Total current assets 495,383 474,449 Property, plant and equipment, net 80,775 76,718 Intangible assets, net 162,340 151,481 Prepaid pension and postretirement benefit cost 123,100 123,687 Restricted cash 23,528 21,804 Other assets 10,694 8,291 ---------------------------------------------------------------- Total assets $ 895,820 $ 856,430 ================================================================ Liabilities and Equity Current liabilities: Current portion of long-term debt $ 23,086 $ 11,543 Accounts payable, trade and other 86,117 63,751 Advanced payments 342,394 363,215 Accrued and other liabilities 104,168 95,761 ---------------------------------------------------------------- Total current liabilities 555,765 534,270 Long-term liabilities: Accrued pension and postretirement benefit cost 28,515 26,768 Long-term debt net of current portion 246,491 223,220 Other liabilities 23,148 28,513 ---------------------------------------------------------------- Total liabilities 853,919 812,771 Commitments and contingencies (Note 3) Stockholders' Equity : Common Stock $.01 par value, 20,000,000 shares authorized; 18,036,667 issued and outstanding at December 31, 2000 and March 31, 2001 180 180 Additional paid-in-capital 180,031 180,031 Stockholders' loans (1,236) (1,236) Retained deficit (137,074) (131,944) Accumulated other comprehensive loss - (3,372) ---------------------------------------------------------------- Total stockholders' equity 41,901 43,659 ---------------------------------------------------------------- Total liabilities and stockholders' equity $ 895,820 $ 856,430 ================================================================ See accompanying notes. Amounts are as restated (Note 2).
7 United Defense Industries, Inc. Unaudited Consolidated Statements of Operations (In thousands)
Three months Three months ended ended March 31, 2000 March 31, 2001 -------------------------------------------------------------------------- Revenue: Sales $266,894 $292,080 Costs and expenses: Cost of sales 215,056 231,193 Selling, general and administrative expenses 41,746 42,228 Research and development 3,663 4,367 -------------------------------------------------------------------------- Total expenses 260,465 277,788 Income from operations 6,429 14,292 Other income (expense): Earnings related to investments in foreign affiliates (55) 654 Interest income 1,081 1,671 Interest expense (8,110) (6,194) -------------------------------------------------------------------------- Total other expense (7,084) (3,869) -------------------------------------------------------------------------- (Loss) income before income taxes (655) 10,423 -------------------------------------------------------------------------- Provision for income taxes 575 5,293 -------------------------------------------------------------------------- Net (loss) income $ (1,230) $ 5,130 ========================================================================== See accompanying notes. Amounts are as restated (Note 2).
8 United Defense Industries, Inc. Unaudited Consolidated Statement of Stockholders' Equity (In thousands)
Accumulated Additional other Common Paid-In Retained Comprehensive Stockholders' Stock Capital Deficit Loss Loans Total ------------------------------------------------------------------------------------------- Balance, December 31, 2000 $ 180 $ 180,031 $(137,074) $ -- $ (1,236) $ 41,901 Net foreign currency translation adjustment -- -- -- (1,512) -- (1,512) Cumulative effect of change in accounting principle-foreign currency hedges -- -- -- (951) -- (951) Change in fair value of foreign currency hedges -- -- -- (909) -- (909) Net income for the three months ended March 31, 2001 -- -- 5,130 -- -- 5,130 ----------------- Total comprehensive income 1,758 ------------------------------------------------------------------------------------------- Balance, March 31, 2001 $ 180 $ 180,031 $(131,944) $(3,372) $ (1,236) $ 43,659 ===========================================================================================
See accompanying notes. Amounts are as restated (Note 2). 9 United Defense Industries, Inc. Unaudited Consolidated Statements of Cash Flows (In thousands)
Three month Three month ended ended March 31, 2000 March 31, 2001 -------------------------------------------- Operating activities Net (loss)income $ (1,230) $ 5,130 Adjustments to reconcile net (loss)income to cash provided by operating activities: Depreciation 6,337 5,117 Amortization 17,029 17,952 Changes in assets and liabilities: Trade receivables (9,874) (1,429) Inventories (5,546) (28,480) Other assets 1,126 2,935 Prepaid pension and postretirement benefit cost (1,681) (587) Accounts payable, trade and other (16,284) (22,366) Advanced payments 6,556 20,821 Accrued and other liabilities 1,184 (12,292) Accrued pension and postretirement benefit cost 120 (1,747) ------------------------------------ Cash used in operating activities (2,263) (14,946) ------------------------------------ Investing activities Capital spending (2,919) (1,769) Disposal of property, plant and equipment 101 156 Purchase of Barnes & Reinecke, net of $1.2 million cash acquired (1,602) - ------------------------------------ Cash used in investing activities (4,420) (1,613) ------------------------------------ Financing activities Payments on long-term debt (35,824) (34,814) ------------------------------------ Cash used in financing activities (35,824) (34,814) Effect of exchange rate changes on cash and marketable securities - 212 Decrease in cash and marketable securities (42,507) (51,161) Cash and marketable securities, beginning of period 94,325 113,357 ------------------------------------ Cash and marketable securities, end of period $ 51,818 $ 62,196 ------------------------------------ See accompanying notes. Amounts are as restated (Note 2).
10 United Defense Industries, Inc. Notes to Unaudited Consolidated Financial Statements March 31, 2001 1. Basis of Presentation The financial information presented as of any other date than December 31 has been prepared from the books and records without audit. Financial information as of December 31 has been derived from the audited financial statements of United Defense Industries, Inc. (the "Company"), but does not include all the disclosures required by generally accepted accounting principles. In the opinion of management, the accompanying unaudited financial statements contain all adjustments, consisting of only normal recurring adjustments necessary to present fairly the Company's financial position as of March 31, 2001, and the results of its operations and cash flows for the periods ended March 31, 2001 and 2000. The results of operations are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. These unaudited consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2000. 2. Reclassifications and Restatement The Company's previously reported financial statements for 1998 through 2001 have been restated to account for the Company's investment in a Turkish joint venture under the equity method. The impact on operating results was as follows (in thousands):
Three Months Ended March 31, ---------------------------------------------------------------- Decrease) increase 2000 2001 ---------------------------------------------------------------- Earnings related to investments in $(901) $(5,040) foreign affiliates ---------------------------------------------------------------- Net (loss) income $(470) $(3,712) -----------------------------------------------------------------
This change also resulted in certain reclassifications on the balance sheet and income statement. The Company had previously separately reported intangible assets related to the investment and an accrual related to a potential offset obligation, which are now included in the investment account within other assets on the balance sheet. On the income statement, certain amortization costs included in selling, general and administrative expenses related to the investment were reclassified to earnings related to investments in foreign affiliates. 3. Commitments and Contingencies As described in the Company's Report on Form 10-K/A for the year ended December 31, 2000, the Company has been a defendant in U.S. ex rel. Seman and ---------------------- Shukla - ------ 11 v. United Defense, FMC Corp., and Harsco Corp., an action filed against the - ----------------------------------------------- Company and its prior owners on July 23, 1997 in the U.S. District Court for the District of Minnesota under the U.S. Civil False Claims Act. A complete settlement of such action was negotiated by the parties, and consented to by the U.S. Government, under which the Company is to pay a total of $6 million to settle the case, divided into installments payable over a three-year period. No finding of wrongdoing was made against the Company, and no other administrative or legal action is to be taken against the Company in respect of matters alleged in the case. On March 9, 2001, the settlement was approved by the court, and has accordingly become final. 4. Financial Information for Subsidiary Guarantors and non-Guarantors The outstanding loans under the senior credit facility and senior subordinated notes are general obligations of the Company and are jointly and severally guaranteed by the wholly owned subsidiary guarantors of the Company. Bofors is the only non-guarantor subsidiary of the Company. The following information presents an unaudited consolidating Balance Sheet, Statement of Operations and Statement of Cash Flows for the Three Months 2001. 12 United Defense Industries, Inc. Unaudited Consolidating Balance Sheet As of March 31, 2001 (In millions)
Non- Subsidiary Guarantor Parent Guarantors Subsidiary Eliminations Consolidated ---------------------------------------------------------------- Assets Current assets: Cash and maketable securities $ - $ 24.5 $ 37.7 $ - $ 62.2 Trade receivables - 96.4 14.7 - 111.1 Inventories - 275.9 11.8 - 287.7 Other current assets - 6.4 7.0 - 13.4 ---------------------------------------------------------------- Total current assets - 403.2 71.2 - 474.4 Property, plant and equipment, net - 73.9 2.8 - 76.7 Intangible assets, net - 147.9 3.6 - 151.5 Prepaid pension and postretirement benefit cost - 123.7 - - 123.7 Restricted cash - - 21.8 - 21.8 Due from subsidiary 19.9 - - (19.9) - Investments in and advances to subsidiaries 261.8 - - (261.8) - Other assets - 7.3 1.0 - 8.3 ---------------------------------------------------------------- Total assets $ 281.7 $756.0 $100.4 $(281.7) $ 856.4 ================================================================ Liabilities and Equity Current liabilities: Current portion of long-term debt $ 11.5 $ - $ - $ - $ 11.5 Accounts payable, trade and other - 58.8 5.0 - 63.8 Advanced payments - 325.0 38.2 - 363.2 Accrued and other liabilities - 85.4 10.3 - 95.7 ---------------------------------------------------------------- Total current liabilities 11.5 469.2 53.5 - 534.2 Long-term liabilities: Due to parent - - 19.9 (19.9) - Accrued pension and postretirement benefit cost - 5.6 21.2 - 26.8 Long-term debt net of current portion 223.2 - - - 223.2 Other liabilities - 22.0 6.5 - 28.5 ---------------------------------------------------------------- Total liabilities 234.7 496.8 101.1 (19.9) 812.7 Common Stock 0.2 - - - 0.2 Additional paid-in-capital 180.0 - - - 180.0 Stockholders' loans (1.2) - - - (1.2) Retained earnings/(deficit) (132.0) 259.2 2.7 (261.8) (131.9) Accumulated other comprehensive loss - (3.4) (3.4) Stockholders' Equity 47.0 259.2 (0.7) (261.8) 43.7 ---------------------------------------------------------------- Total liabilities and stockholders' equity $ 281.7 $756.0 $100.4 $(281.7) $ 856.4 ================================================================
13 United Defense Industries, Inc. Unaudited Consolidating Statement of Operations For the Quarter ended March 31, 2001 (In millions)
Non- Subsidiary Guarantor Parent Guarantors Subsidiary Eliminations Consolidated ------------------------------------------------------------------ Revenue: Sales $ - $260.9 $31.2 $ - $292.1 Costs and expenses: Cost of sales - 205.9 25.3 - 231.2 Selling, general and administrative expenses - 37.4 4.8 - 42.2 Research and development - 3.4 1.0 - 4.4 ------------------------------------------------------------ Total expenses - 246.7 31.1 - 277.8 ------------------------------------------------------------ Income(loss) from operations - 14.2 0.1 - 14.3 Other income (expense): Earnings related to investments in foreign affiliates and 16.3 0.7 (16.3) 0.7 subsidiaries Interest income 0.4 0.7 1.0 (0.4) 1.7 Interest expense (6.2) - (0.4) 0.4 (6.2) ------------------------------------------------------------ Total other income (expense) 10.5 1.4 0.6 (16.3) (3.8) ------------------------------------------------------------ Income(loss) before income taxes 10.5 15.6 0.7 (16.3) 10.5 Provision for income taxes 5.3 - - - 5.3 ------------------------------------------------------------ Net income(loss) $ 5.2 $ 15.6 $ 0.7 $(16.3) $ 5.2 ============================================================
14 United Defense Industries, Inc. Unaudited Consolidating Condensed Statement of Cash Flows March 31, 2001 (In millions)
Subsidiary Guarantor Parent Guarantors Subsidiary Eliminations Consolidated ---------------------------------------------------------------- Cash (used in)provided by operating activities $ 51.1 $ 8.6 $(12.4) $(62.2) $(14.9) -------------------------------------------------------------- Cash (used in)provided by investing activities (16.3) (1.8) 0.1 16.3 (1.7) -------------------------------------------------------------- Cash (used in)provided by financing activities (34.8) (45.9) - 45.9 (34.8) Effect of exchange rate changes on cash and marketable securities 0.2 0.2 Net change in cash and marketable securities - (39.1) (12.1) - (51.2) Cash and marketable securities, beginning of period - 63.6 49.8 - 113.4 -------------------------------------------------------------- Cash and marketable securities, end of period $ - $ 24.5 $ 37.7 $ - $ 62.2 ==============================================================
15 5. Change in Accounting Principle Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. The statement requires that an entity recognize all derivatives as either assets or liabilities. At December 31, 2000, the Company had foreign exchange contracts which were designated as cash flow hedges. The fair value of the contracts was a liability of $0.95 million at December 31, 2000. The transition adjustment to implement this new standard on January 1, 2001, which is presented as a cumulative effect of change in accounting principle, was charged to accumulated other comprehensive loss within stockholders' equity. 6. Investments in Affiliated Companies The Company's investment in 51% owned foreign joint ventures in Turkey and Saudi Arabia are accounted for by using the equity method because the Company does not control the joint ventures although it has the ability to exercise significant influence over their operating and financial policies. Equity in earnings from these investments was $(0.1) million and $0.7 million for the three months ended March 31, 2000 and 2001. The following table summarizes financial information for these joint ventures (in thousands): Three Months Ended March 31, ----------------------------------------------------------- 2000 2001 ----------------------------------------------------------- Sales $28,879 $37,055 ----------------------------------------------------------- Cost of Sales 23,505 21,728 ----------------------------------------------------------- Net income (102) 1,243 ----------------------------------------------------------- 16 IRON HORSE INVESTORS, L.L.C. UNITED DEFENSE INDUSTRIES, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS ------------------------------------ OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION ---------------------------------------------------- March 31, 2001 -------------- Forward-Looking Statements Management's Discussion and Analysis of the Results of Operations and Financial Condition contains forward-looking statements that are based on management's expectations, estimates, projections and assumptions. Words such as "expects," "anticipates," "plans," "believes," "estimates," variations of these words, and similar expressions are intended to identify forward-looking statements which include but are not limited to projections of revenues, earnings, performance, cash flows and contract awards. Forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve certain risks and uncertainties which are difficult to predict. Therefore, actual future results and trends may differ materially from those made in or suggested by any forward-looking statements due to a variety of factors, including: the ability of United Defense Industries, Inc. (the "Company") to design and implement key technological improvements (such as, for example in the Crusader program) and to execute its internal performance plans; performance issues with key suppliers and subcontractors; developments with respect to contingencies such as legal proceedings and environmental matters; labor negotiations; changing priorities or reductions in the U.S. government defense budget; the performance of, and political and other risks associated with, the Company's international operations and joint ventures; and the termination of government contracts due to unilateral government action. For additional information, see "Risk Factors" in the Company's Registration Statement on Form S-4, SEC File Number 333-43619. The following discussion and analysis should be read in conjunction with the financial statements and related notes and the other financial information, included elsewhere in this report, and with the Company's Annual Report on Form 10-K/A for the year ended December 31, 2000. 17 Introduction In October 1997, the Company's direct parent, Iron Horse Investors, L.L.C. ("Iron Horse"), was funded from several partnerships controlled by The Carlyle Group. The equity was invested in the Company. On October 6, 1997, the Company acquired (the "Acquisition") directly or through its wholly owned subsidiary, UDLP Holdings Corp., 100% of the partnership interests in United Defense L.P. ("UDLP"). United Defense Industries, Inc. is the only asset of Iron Horse. Accordingly, Management's Discussion and Analysis of the Results of Operations and Financial Condition is the same for both Iron Horse and United Defense Industries, Inc. The Company's subsidiary guarantors, UDLP Holdings Corp., UDLP and Barnes & Reinecke, Inc. ("BRI"), are directly or indirectly wholly owned by the Company and all such subsidiary guarantors have guaranteed the Company's 8 3/4% Senior Subordinated Notes on a full, unconditional, and joint and several basis. Accordingly, separate financial statements of those subsidiaries are not considered material or provided herein. Bofors Defence ("Bofors"), a Swedish company acquired by the Company in September, 2000, is a non-guarantor subsidiary. Note 4 to the consolidated financial statements of United Defense Industries, Inc. sets forth condensed consolidating Balance Sheets, Statement of Operations and Statement of Cash Flows for guarantor and non-guarantor subsidiaries as of March 31, 2001 and for the three months then ended. Overview The Company is a supplier of tracked, armored combat vehicles and weapons delivery systems to the U.S. Department of Defense ("DoD") and a number of allied military forces worldwide. The Company's products include critical elements of the U.S. military's tactical force structure. The Company had a firm funded backlog of approximately $1.9 billion as of March 31, 2001, a substantial majority of which is derived from sole-source, prime contracts. Approximately 70% of the Company's sales for the first three months of 2001 were to the U.S. government, primarily to agencies of the DoD (excluding Foreign Military Sales), or through subcontracts with other government contractors. Interim Armored Vehicles. In October 1999 the U.S. Army embarked upon an initiative to create a so-called medium force, intended to be lighter and less heavily-armed than the Army's existing heavy divisions based on the M1 tank and Bradley Fighting Vehicle, but more lethal and survivable than lighter Army units such as the airborne forces. To equip the new units, known as Interim Brigade Combat Teams ("IBCT"), in April 2000 the Army commenced a solicitation for so- called Interim Armored Vehicles ("IAV"), emphasizing a thirty eight thousand pounds weight limit, rapid deployability using the Air Force's smallest air transports (C130 aircraft), and early fielding using off-the-shelf technology. United Defense participated in the competitive bidding for the IAVs, proposing the use of its tracked MTVL (stretched and upgraded M113) and M8 Armored Gun System vehicles (see Item 1. Description of Business in Company's Form 10-K report for 2000) at a total price of $1.9 billion. Certain competitors proposed 18 wheeled vehicles for the IAV program. For military combat vehicles, there are substantial manufacturing, design, and engineering differences between wheeled and tracked vehicles, and the Company historically has not produced wheeled vehicles. On November 16, 2000, the Army announced its award of the IAV contract at a price of $4.3 billion to a joint venture formed by General Motors of Canada and General Dynamics Land Systems (GM/GD). As many as 2,100 vehicles could be acquired under the IAV contract for up to six IBCT brigades over approximately a six-year period. The IAVs provided by GM/GD would be upgraded or redesigned versions of the Swiss light-duty LAV-III wheeled vehicle. On December 4, 2000, United Defense filed a formal protest with the General Accounting Office ("GAO") relating to the Army's IAV award, primarily on the grounds that (i) in a procurement where early fielding was stated to be of paramount importance, the LAV-III vehicles cannot be fielded, depending on specific vehicle type, until one to three years or more after their UDLP counterparts; (ii) the Army favored GM/GD during the competition by secretly applying new, unannounced evaluation factors which biased the selection in favor of a wheeled vehicle outcome; and (iii) in a best value procurement, the LAV-III selection cannot be justified when the vehicle is inferior in performance, requires an extensive development effort of uncertain outcome before it can ever be fielded, and will cost the Army more than double the price of the United Defense vehicles. On April 9, 2001, the GAO issued its decision, denying the Company's protest. The Company does not anticipate that it would pursue the protest in federal court, and accordingly believes that legal proceedings over the award are at an end. Beyond the initial increment of IAV funding provided by Congress in 2000, the program would require successive annual appropriations for each additional year in which the program were to be continued. The ongoing existence and/or scale of the IAV program is subject to significant uncertainties, including the Bush Administration's review of DoD missions, priorities, and programs (the "Administration Defense Review", also described under such heading in Item 7 in the Company's Form 10-K/A report for 2000). To the extent that the IAV program were to continue, further funding for it may adversely affect funding available for other Company programs, such as the Crusader artillery system and upgrades to the Bradley Fighting Vehicle fleet. Administration Defense Review. The eventual outcome of the Bush Administration's review of the Defense Department's principal missions, priorities, and programs is unknown. The Company understands that the review involves a number of panels of advisors, and that the recommendations of the various panels would in turn be drawn upon in formulating the Administration's ultimate position. Recent press reports indicate that some panel recommendations may include the cancellation or deferral of various DoD weapons programs, including certain programs in which the Company participates: the Crusader artillery system, the DD21 destroyer, and further upgrades to the Bradley Fighting Vehicle fleet. The Company is uncertain whether (i) any such panel recommendations will ultimately be made, (ii) any such recommendations, if made, would in turn be incorporated into the Administration's defense budgetary and legislative proposals, and (iii) any ensuing Congressional action would adopt, reject, or otherwise 19 vary the Administration's proposals. If the final outcome of the foregoing process were to include any significant reduction, deferral, or cancellation of one or more substantial programs in which the Company participates, the Company's revenues and profits would be commensurately reduced, to the extent not offset by favorable developments elsewhere in the Company's business. There were no material changes to the Company's major programs from those described in the Company's Form 10-K/A report other than additional funding as new contracts are negotiated and awarded. For a more detailed description of the Company's business and principal operating programs, see the Form 10-K/A report for the year ended December 31, 2000. Results of Operations Three Months Ended March 31, 2001 ("Three Months 2001") Compared with Three Months Ended March 31, 2000 ("Three Months 2000"). Revenue. Revenue in the Three Months 2001 was $292.1 million, an increase of 9.4% or $25.2 million from the Three Months 2000. The improvement in revenue was largely due to the sales generated by Bofors Defence ("Bofors"), which was acquired in September, 2000, higher billings for advanced gun systems, self- propelled howitzers and Turkish royalties. However, these increases were partially offset by lower shipments of Bradley vehicles and technical support and decreased billing for the Crusader program. Gross Profit. Gross profit for the Three Months 2001 of $60.9 million was higher by $9.0 million or 17.5% from the Three Months 2000. The gross profit percentage slightly improved by 1.4 percentage points to 20.8% for the Three Months 2001 from 19.4% for the Three Months 2000. Approximately half of the increase in gross profit was contributed by Bofors and the remaining positive variance was the result of contract profit adjustments primarily on the Crusader program. Selling, general and administrative expenses. Selling, general and administrative expenses of $42.2 million for the Three Months 2001 were slightly higher by $0.5 million from $41.7 million for Three Months 2000. The higher expenses were mostly due to spending at Bofors and increased amortization of intangibles related to acquisitions partially offset by lower costs for proposals and marketing activity. Research and development. Research and development costs were $4.4 million for the Three Months 2001 compared to $3.7 million for the Three Months 2000. The variance was primarily due to spending by Bofors. Earnings from foreign affiliates. Earnings from foreign affiliates were $0.7 million in the Three Months 2001, up by $0.8 million from loss of $0.1 million in the Three Months 2000. The increase was primarily due to $4.0 million of income representing our share of income recognized by our joint venture in Saudi Arabia due to a change in estimated contract costs and fees recorded by that joint venture, partially offset by our share of the increase in our Turkey joint venture's operating loss. 20 Interest expense. Net interest expense for the Three Months 2001 was $4.5 million compared with $7.0 million for the Three Months 2000. The decline in interest expense is the result of lower debt levels and reduced interest rates. Provision for income taxes. Income taxes provided in the Three Months 2001 was $5.3 million compared with $0.6 million for the Three Months 2000. In the Three Months 2001 $3.6 million was related to Pennsylvania state taxes for prior years. Net (loss)income. As a result of the foregoing, there was a net income of $5.1 million in the Three Months 2001 compared with a net loss of $1.2 million in the Three Months 2000. Liquidity Cash used in operating activities was $14.9 million for the Three Months 2001 and $2.3 million for the Three Months 2000. The net income adjusted for non-cash items was $33.2 million in the Three Months 2001, higher by $10.2 million than the Three Months 2000. The higher adjusted net income was adversely affected by increases in working capital necessary to fund the production of major contracts such as Bradley Fighting vehicles, amphibious assault vehicles for Korea and Italy and the Crusader program. Cash used for investing activities was $1.6 million during the Three Months 2001 compared to $4.4 million for the Three Months 2000. The reduced use of funds was the result of lower capital spending in 2001 and the purchase of Barnes & Reinecke, Inc. in 2000. Cash used for financing activities was applied to pay down debt of $34.8 million and $35.8 million in 2001 and 2000, respectively. 21 IRON HORSE INVESTORS, L.L.C. UNITED DEFENSE INDUSTRIES, INC. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT ---------------------------------------------- MARKET RISK ----------- March 31, 2001 -------------- Forward Exchange Contracts. Bofors uses forward exchange contracts to reduce the effect of fluctuating currencies on short-term foreign currency- denominated transactions. The following table summarizes by major currency the contractual amounts of Bofors' forward exchange contracts and their termination market values. Contractual Termination Contractual Currency Amount Market Value --------------------- ------ ------------ British pound USD 3.0 USD 3.3 European euro USD 1.5 USD 1.6 US dollar USD (9.0) USD (11.2) As a result of adopting SFAS No. 133, the net liability for the difference between the contractual amount and the termination market value is recorded as a current liability in the balance sheet. 22 PART II ------- OTHER INFORMATION ----------------- March 31, 2001 ITEM 1. Legal Proceedings ----------------- As described in the Company's Report on Form 10-K/A for the year ended December 31, 2000, the Company has been a defendant in U.S. ex rel. Seman and ---------------------- Shukla v. United Defense, FMC Corp., and Harsco Corp., an action filed against - ----------------------------------------------------- the Company and its prior owners on July 23, 1997 in the U.S. District Court for the District of Minnesota under the U.S. Civil False Claims Act. A complete settlement of such action was negotiated by the parties, and consented to by the U.S. Government, under which the Company is to pay a total of $6 million to settle the case, divided into installments payable over a three-year period. No finding of wrongdoing was made against the Company, and no other administrative or legal action is to be taken against the Company in respect of matters alleged in the case. On March 9, 2001, the settlement was approved by the court, and has accordingly become final. The Company is also subject to other claims and lawsuits arising in the ordinary course of business. Management believes that the outcome of any such proceedings to which the Company is a party will not have a material adverse effect on the Company. ITEM 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits None. (b) Reports on Form 8-K None. 23 SIGNATURE --------- Pursuant to the requirements 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. By: /s/ Francis Raborn ------------------- Francis Raborn Principal Financial and Accounting Officer and Authorized Signatory Dated: December 12, 2001 -----END PRIVACY-ENHANCED MESSAGE-----