FORM 10-Q



                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

FOR QUARTER ENDED June 30, 1998                COMMISSION FILE NUMBER 333-43619
                  -------------                                       ---------

                        United Defense Industries, Inc.
             ------------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


            Delaware                                           52-2059782
-------------------------------                        -------------------------
(STATE OR OTHER 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-RESIGTRANT)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE   (703) 312-6100
                                                     --------------

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 the number of shares outstanding of each of the registrant's classes of
common stock as of August 12, 1998:

                                    No. of shares     Par value
                                    -------------     ---------
United Defense Industries, Inc.      17,890,700          $0.01
Iron Horse Investors, L.L.C.            -none-
UDLP Holdings Corp.                       1,000          $0.01
United Defense, L.P.                    -none-


<PAGE>


                          IRON HORSE INVESTORS, L.L.C.
                        UNITED DEFENSE INDUSTRIES, INC.

                                      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,
            1997 and June 30, 1998                                         1

         Unaudited Consolidated Statements of Operations for the
            Three Months Ended and for the Six
            Months Ended June 30, 1997 and 1998                            2

         Unaudited Consolidated Statement of Members' Capital
            for the Three Months Ended June 30, 1998                       3

         Unaudited Consolidated Statements of Cash Flows
            for the Three Months Ended June 30, 1997 and 1998              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, 1997 and June 30, 1998                            7

         Unaudited Consolidated Statements of Operations for the
            Three Months Ended and for the Six
            Months ended June 30, 1997 and 1998                            8

         Unaudited Consolidated Statement of Stockholders' Equity
            for the Three Months Ended June 30, 1998                       9

         Unaudited Consolidated Statements of Cash Flows
            for the Three Months Ended June 30, 1997 and 1998              10

         Notes to Unaudited Consolidated Financial Statements              11-12

Item 2 - Management's Discussion and Analysis of the Results
              of Operations and Financial Condition                        13-18

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings                                                 19
Item 2(c) - Recent Sale of Unregistered Securities                         20
Item 6 - Exhibits and Reports on Form 8-K                                  20
SIGNATURE
---------

<PAGE>


                          IRON HORSE INVESTORS, L.L.C.
                     UNAUDITED CONSOLIDATED BALANCE SHEETS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

ASSETS:                                                         DECEMBER 31, 1997             JUNE 30, 1998
                                                                -----------------             -------------
<S><C>
Current assets:
     Cash and marketable securities                                  $   35,623               $   26,709
     Trade receivables                                                   94,847                  101,589
     Inventories -contracts in process                                  330,373                  265,769
     Other current assets                                                 6,998                    5,951
                                                                -------------------------------------------
  Total current assets                                                  467,841                  400,018

Property, plant and equipment, net                                      198,909                  168,363

Intangible assets                                                       433,048                  387,907
Prepaid pension                                                         139,431                  136,617
Other assets                                                              6,854                    5,081
                                                                -------------------------------------------
Total assets                                                         $1,246,083               $1,097,986
                                                                ===========================================

LIABILITIES AND CAPITAL
Current liabilities:
     Current portion of long term debt                                  $12,000                       $0
     Accounts payable, trade and other                                   93,641                   59,734
     Advanced payments                                                  261,401                  194,182
     Accrued and other liabilities                                       71,002                   80,496
                                                                -------------------------------------------
     Total current liabilities                                          438,044                  334,412

Long term liabilities net of current portion:
    Accrued pension                                                       7,108                      947
    Accrued postretirement benefit                                        3,290                    3,811
    Long term debt                                                      647,800                  618,836
    Other liabilities                                                    13,100                   22,800
                                                                -------------------------------------------
Total liabilities                                                     1,109,342                  980,806

Minority Interest                                                             0                    5,340
Commitments and contingencies (Note 3)

Members' Capital                                                        136,741                  111,840
                                                                -------------------------------------------
Total liabilities and members' capital                               $1,246,083               $1,097,986
                                                                ===========================================
</TABLE>


                                                                          1


<PAGE>



                          IRON HORSE INVESTORS, L.L.C.
                UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                               THREE MONTHS          THREE MONTHS           SIX MONTHS           SIX MONTHS
                                                  ENDED                  ENDED                ENDED                ENDED
                                              JUNE 30, 1997          JUNE 30, 1998        JUNE 30, 1997        JUNE 30, 1998
                                              -------------          -------------        -------------        -------------
                                              (PREDECESSOR)                               (PREDECESSOR)
<S><C>
Revenue:
     Sales                                        $320,191             $316,866              $607,737            $631,670

Costs and expenses:
     Cost of sales                                 257,255              260,792               485,123             541,127
     Selling, general and
      administrative expenses                       26,642               35,369                54,123              86,809
     Research and development                        3,796                3,924                 6,278               6,628
                                              ------------------------------------        ----------------------------------
          Total expenses                           287,693              300,085               545,524             634,564

     Earnings related to investments
        in foreign affiliates                        4,453               (9,899)               12,675               5,450
                                              ------------------------------------        ----------------------------------
Income(loss) from operations                        36,951                6,882                74,888               2,556

Other income (expense)
     Interest income                                   497                  227                 1,013                 512
     Interest expense                                                   (10,920)                    0             (26,336)
     Miscellaneous, net                                (42)                  68                     0                  68
                                              ------------------------------------        ----------------------------------
Income(loss) before  taxes                          37,406               (3,743)               75,901             (23,200)
Provision for income taxes                           1,169                  701                 1,910               1,701
                                              ------------------------------------        ----------------------------------
Net Income(loss)                                   $36,237              ($4,444)              $73,991            ($24,901)
                                              ====================================        ==================================
</TABLE>


                                                                              2


<PAGE>


                          IRON HORSE INVESTORS, L.L.C.
                        UNAUDITED CONSOLIDATED STATEMENT
                              OF MEMBERS' CAPITAL

                                 (IN THOUSANDS)

                                                         AMOUNT
                                                         ------

Balance, December 31, 1997                              $136,741
Net loss for the six months ended June 30, 1998          (24,901)
                                                        --------
Balance, June 30, 1998                                  $111,840
                                                        ========




                                                                         3


<PAGE>



                          IRON HORSE INVESTORS, L.L.C.
                UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                         SIX MONTHS ENDED           SIX MONTHS ENDED
                                                                           JUNE 30, 1997             JUNE 30, 1998
                                                                         ----------------           ----------------
                                                                           (PREDECESSOR)
<S><C>
OPERATING ACTIVITIES
Net Income(loss)                                                             $ 73,991                    ($24,901)
Adjustments to reconcile net income(loss) to cash
  provided by operating activities:
   Depreciation                                                                12,636                      34,634
   Amortization                                                                 7,560                      49,388
   Other                                                                       (1,143)                      1,663
Changes in assets and liabilities:
   Trade receivables                                                           19,760                      (6,742)
   Inventories                                                                  1,523                      64,604
   Other current assets                                                        (3,491)                      1,047
   Prepaid pension cost                                                        (4,176)                      2,814
   Accounts payable, trade and other                                           (8,645)                    (33,907)
   Advanced payments                                                            7,303                     (67,219)
   Accrued and other liabilities                                                1,845                      19,194
   Accrued pension cost                                                         4,879                      (6,161)
   Accrued post retirement benefits                                            (2,081)                        521
                                                                         ------------               -------------
Cash provided by operating activities                                         109,961                      34,935
                                                                         ------------               -------------

INVESTING ACTIVITIES
   Capital spending                                                           (10,279)                    (11,308)
   Disposal of property, plant and equipment                                    5,324                       3,015
   Short term investment with FMC Corporation                                 (35,826)                          0
                                                                         ------------               -------------
Cash used in investing activities                                             (40,781)                     (8,293)
                                                                         ------------               -------------
FINANCING ACTIVITIES
   Payments on long term debt                                                       0                     (40,964)
   Proceeds from sale of common stock by subsidiary                                 0                       5,408
   Partners'  distributions                                                   (69,115)                          0
                                                                         ------------               -------------
  Cash used in financing activities                                           (69,115)                    (35,556)
                                                                         ------------               -------------

Increase (decrease) in cash and marketable securities                              65                      (8,914)
Cash and marketable securities, beginning of period                                23                      35,623
                                                                         ------------               -------------
Cash and marketable securities, end of period                                     $88                     $26,709
                                                                         ============               =============
</TABLE>


                                                                           4


<PAGE>


                          Iron Horse Investors, L.L.C.
              Notes to Unaudited Consolidated Financial Statements
                                  June 30, 1998

1.       BASIS OF PRESENTATION

Iron Horse Investors, L.L.C. together with its subsidiaries (the "Company"),
was formed for the primary purpose of facilitating the acquisition of United
Defense, L.P. ("UDLP") via its investment in United Defense Industries,
Inc. ("UDI").

In October 1997, the Company was funded with $173 million of equity capital,
from an investment group led by the Carlyle Group ("Carlyle"), which was
invested in UDI. On October 6, 1997, UDI acquired 100% of the partnership
interests in UDLP from FMC and Harsco. As a result of adjustments to the
carrying value of assets and liabilities pursuant to the transaction, the
financial position and results of operations for periods subsequent to the
acquisition are not comparable to pre-acquisition UDLP amounts.

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 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 June 30, 1998, and the results of its and UDLP's operations and
its cash flows for the periods ended June 30, 1998 and 1997. The results of
operations are not necessarily indicative of the results that may be expected
for the year ending December 31, 1998. 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 for the year
ended December 31, 1997.

2.       INCOME TAXES

As a limited partnership, income earned by UDLP passed to its partners and was
taxable at that level, except for taxes payable on the income of UDLP's Foreign
Sales Corporation (FSC) subsidiary.

As a limited liability company, income which has not been taxed previously is
passed through to its members. The Company's corporate subsidiaries are
responsible for income taxes at that level, and accordingly, the Company's
subsidiaries provide for income taxes at the corporate level. The income tax
provision for the 1998 interim periods is for taxes payable on the income of the
Company's FSC subsidiary.


                                                                             5


<PAGE>



                          Iron Horse Investors, L.L.C.
              Notes to Unaudited Consolidated Financial Statements
                                   (continued)

3.       COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

Alliant Techsystems, Inc. ("Alliant"), a subcontractor to UDLP in connection
with the Paladin howitzer prime contract, filed suit in February 1998 against
UDLP, its former owners (FMC and Harsco), and Sechan Electronics, Inc.
("Sechan"), a replacement subcontractor employed on the Paladin program. Alliant
seeks damages in an unspecified amount on breach of contract and other theories.

The dispute arises out of a U.S. Army-directed termination for convenience in
1996 of certain subcontract work, which until the time of termination had been
performed by Alliant, and was thereafter replaced by subcontract work performed
by Sechan. Management does not believe that Alliant's suit will have a material
adverse impact on the Company.

Certain software vendors have claimed UDLP is liable for the cost of software
licenses utilized in the business. UDLP has resolved certain of such claims and
expects to resolve the remaining claims, collectively, for an amount which
management does not believe will have a material adverse impact on the Company.


                                                                            6


<PAGE>


                        UNITED DEFENSE INDUSTRIES, INC.
                     UNAUDITED CONSOLIDATED BALANCE SHEETS

                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS:                                                            DECEMBER 31, 1997         JUNE 30, 1998
                                                                   -----------------         -------------
<S><C>
Current assets:
     Cash and marketable securities                                      $35,623                 $26,709
     Trade receivables                                                    94,847                 101,589
     Inventories-contracts in process                                    330,373                 265,769
     Other current assets                                                  6,998                   5,951
                                                             --------------------------------------------
  Total current assets                                                   467,841                 400,018

Property, plant and equipment, net                                       198,909                 168,363

Intangible assets                                                        433,048                 387,907
Prepaid pension                                                          139,431                 136,617
Other assets                                                               6,854                   5,081
                                                             --------------------------------------------
Total assets                                                          $1,246,083              $1,097,986
                                                             ============================================

LIABILITIES AND EQUITY
Current liabilities:
     Current portion of long term debt                                   $12,000                      $0
     Accounts payable, trade and other                                    93,641                  59,734
     Advanced payments                                                   261,401                 194,182
     Accrued and other liabilities                                        71,002                  80,496
                                                             --------------------------------------------
     Total current liabilities                                           438,044                 334,412

Long term liabilities net of current portion:
    Accrued pension                                                        7,108                     947
    Accrued postretirement benefit                                         3,290                   3,811
    Long term debt                                                       647,800                 618,836
    Other liabilities                                                     13,100                  22,800
                                                             --------------------------------------------
Total liabilities                                                      1,109,342                 980,806

Commitments and contingencies (Note 3)

Stockholders' Equity (Note 4)
    Common Stock $.01 par value, 20.000.000 authorized;
     17,300,000 and 17,840,830 issued and outstanding
     at 12/31/97 and 6/30/98                                                 173                     178
     Additional paid-in-capital                                          172,827                 178,230
     Retained deficit                                                    (36,259)                (61,228)
                                                             --------------------------------------------
     Total Stockholder's Equity                                          136,741                 117,180
                                                             --------------------------------------------
Total liabilities and stockholder's equity                            $1,246,083              $1,097,986
                                                             ============================================
</TABLE>


                                                                               7

<PAGE>

                        UNITED DEFENSE INDUSTRIES, INC.
                UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                 THREE MONTHS        THREE MONTHS        SIX MONTHS          SIX MONTHS
                                                     ENDED              ENDED               ENDED              ENDED
                                                 JUNE 30, 1997      JUNE 30, 1998       JUNE 30, 1997      JUNE 30, 1998
                                           -------------------------------------- --------------------------------------
                                                 (PREDECESSOR)                          (PREDECESSOR)
<S><C>
Revenue:
     Sales                                          $320,191            $316,866           $607,737            $631,670

Costs and expenses:
     Cost of sales                                   257,255             260,792            485,123             541,127
     Selling, general and
      administrative expenses                         26,642              35,369             54,123              86,809
     Research and development                          3,796               3,924              6,278               6,628
                                           -------------------------------------- --------------------------------------
          Total expenses                             287,693             300,085            545,524             634,564

     Earnings related to investments
        in foreign affiliates                          4,453              (9,899)            12,675               5,450
                                           -------------------------------------- --------------------------------------
Income(loss) from operations                          36,951               6,882             74,888               2,556

Other income (expense)
     Interest income                                     497                 227              1,013                 512
     Interest expense                                                    (10,920)                 0             (26,336)
     Miscellaneous, net                                  (42)                  0                  0                   0
                                           -------------------------------------- --------------------------------------
Income(loss) before  taxes                            37,406              (3,811)            75,901             (23,268)
Provision for income taxes                             1,169                 701              1,910               1,701
                                           ====================================== ======================================
Net Income(loss)                                     $36,237             ($4,512)           $73,991            ($24,969)
                                           ====================================== ======================================
</TABLE


                                                                               8

<PAGE>



                        UNITED DEFENSE INDUSTRIES, INC.
                        UNAUDITED CONSOLIDATED STATEMENT
                            OF STOCKHOLDERS' EQUITY

                                 (IN THOUSANDS)



</TABLE>
<TABLE>
<CAPTION>
                                                                     ADDITIONAL
                                                        COMMON         PAID-IN        RETAINED
                                                         STOCK         CAPITAL        DEFICIT         TOTAL
                                                  ------------------------------------------------------------
<S><C>
Balance, December 31, 1997 (Note 4)                         $173       $172,827      $ (36,259)      $136,741

Sale of Common Stock                                           5          5,403                         5,408

Net loss for the six months ended June 30, 1998                                        (24,969)       (24,969)
                                                  ------------------------------------------------------------
Balance, June 30, 1998                                      $178       $178,230       ($61,228)      $117,180
                                                  ============================================================
</TABLE>

                                                                               9


<PAGE>


                         UNITED DEFENSE INDUSTRIES, INC.
                  UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOW

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                SIX MONTHS ENDED          SIX MONTHS ENDED
                                                                                  JUNE 30, 1997            JUNE 30, 1998
                                                                                  -------------            -------------
                                                                                  (PREDECESSOR)
<S><C>
OPERATING ACTIVITIES
Net Income(loss)                                                                      $73,991                  ($24,969)
Adjustments to reconcile net income(loss) to cash
  provided by operating activities:
   Depreciation                                                                        12,636                    34,634
   Amortization                                                                         7,560                    49,388
   Other                                                                               (1,143)                    1,731
Changes in assets and liabilities:
   Trade receivables                                                                   19,760                    (6,742)
   Inventories                                                                          1,523                    64,604
   Other current assets                                                                (3,491)                    1,047
   Prepaid pension cost                                                                (4,176)                    2,814
   Accounts payable, trade and other                                                   (8,645)                  (33,907)
   Advanced payments                                                                    7,303                   (67,219)
   Accrued and other liabilities                                                        1,845                    19,194
   Accrued pension cost                                                                 4,879                    (6,161)
   Accrued post retirement benefits                                                    (2,081)                      521
                                                                      ------------------------ -------------------------
Cash provided by operating activities                                                 109,961                    34,935
                                                                      ------------------------ -------------------------
INVESTING ACTIVITIES
   Capital spending                                                                   (10,279)                  (11,308)
   Disposal of property, plant and equipment                                            5,324                     3,015
   Short term investment with FMC Corporation                                         (35,826)                        0
                                                                      ------------------------ -------------------------
Cash used in investing activities                                                     (40,781)                   (8,293)
                                                                      ------------------------ -------------------------
FINANCING ACTIVITIES
   Payments on long term debt                                                               0                   (40,964)
   Proceeds from sale of common stock                                                       0                     5,408
   Partners' distributions                                                            (69,115)                        0
                                                                      ------------------------ -------------------------
  Cash used in financing activities                                                   (69,115)                  (35,556)
                                                                      ------------------------ -------------------------
Increase (decrease) in cash and marketable securities                                      65                    (8,914)
Cash and marketable securities, beginning of period                                        23                    35,623
                                                                      ------------------------ -------------------------
Cash and marketable securities, end of period                                             $88                   $26,709
                                                                      ======================== =========================
</TABLE>

                                                                              10

<PAGE>


                         United Defense Industries, Inc.

              Notes to Unaudited Consolidated Financial Statements

                                  June 30, 1998

1.       BASIS OF PRESENTATION

United Defense Industries, Inc. (the "Company") is a subsidiary of Iron Horse
Investors, L.L.C. ("Iron Horse") and is organized under the laws of the state of
Delaware and was formed for the primary purpose of facilitating the acquisition
of United Defense, L.P. ("UDLP") by Iron Horse. Iron Horse is owned by an
investment group led by the Carlyle Group ("Carlyle"). On October 6, 1997, the
Company acquired 100% of the partnership interests in UDLP from FMC and Harsco.
As a result of adjustments to the carrying value of assets and liabilities
pursuant to this transaction, the financial position and results of operations
for periods subsequent to the acquisition are not comparable to pre-acquisition
amounts.

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 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 June 30, 1998, and the results of its and UDLP's operations and
its cash flows for the periods ended June 30, 1998 and 1997. The results of
operations are not necessarily indicative of the results that may be expected
for the year ending December 31, 1998. 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 for the year
ended December 31, 1997.

2.       INCOME TAXES

As a limited partnership, income earned by UDLP passed to its partners and was
taxable at that level, except for taxes payable on the income of UDLP's Foreign
Sales Corporation (FSC) subsidiary.

As a corporation, the Company accounts for income taxes under the liability
method. The income tax provision for the 1998 interim periods is for taxes
payable on the income of the Company's FSC subsidiary.

                                                                              11


<PAGE>



                         United Defense Industries, Inc.

              Notes to Unaudited Consolidated Financial Statements
                                   (continued)

3.       COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

Alliant  Techsystems,  Inc.  ("Alliant"),  a subcontractor  to UDLP in
connection with the Paladin howitzer prime contract, filed suit in February 1998
against UDLP, its former owners (FMC and Harsco), and Sechan Electronics, Inc.
("Sechan"), a replacement subcontractor employed on the Paladin program. Alliant
seeks damages in an unspecified amount on breach of contract and other theories.

The dispute arises out of a U.S. Army-directed termination for convenience in
1996 of certain subcontract work, which until the time of termination had been
performed by Alliant, and was thereafter replaced by subcontract work performed
by Sechan. Management does not believe that Alliant's suit will have a material
adverse impact on the Company.

Certain software vendors have claimed UDLP is liable for the cost of software
licenses utilized in the business. UDLP has resolved certain of such claims and
expects to resolve the remaining claims, collectively, for an amount which
management does not believe will have a material adverse impact on the Company.

4.       STOCKHOLDERS' EQUITY

In April 1998, the Company's board of directors approved an increase in the
number of authorized shares to 20 million and authorized a 173 for 1 stock
split. Accordingly, all references in the financial statements to number of
shares and related amounts have been restated to reflect the stock split.

                                                                              12


<PAGE>


                          IRON HORSE INVESTORS, L.L.C.
                         UNITED DEFENSE INDUSTRIES, INC.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

              OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION

                                  JUNE 30, 1998

FORWARD-LOOKING STATEMENTS

         Management's Discussion and Analysis of Financial Condition and Results
of Operations 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 Company's ability 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 United Defense Industries, Inc.'s
international operations and joint ventures; termination of government contracts
due to unilateral government action; and the impact of the "Year 2000" issue on
United Defense Industries, Inc. (the "Company") and its customers and suppliers.
For additional information, see "Risk Factors" in the Company's Registration
Statement on Form S-4, SEC File Number 333-43619 (the "Form S-4").

         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 for the year ended December 31, 1997.

INTRODUCTION

         In October 1997, Iron Horse Investors, L.L.C. ("Iron Horse") was funded
with $173 million of equity capital from Carlyle Investment Fund Partnerships,
which was invested in the Company. On October 6, 1997, the Company acquired (the

                                                                              13

<PAGE>


"Acquisition") directly and through its wholly owned subsidiary, UDLP Holdings
Corp., 100% of the partnership interests in United Defense, L.P. ("UDLP") for
$880.0 million from FMC Corporation ("FMC") and Harsco, Inc. ("Harsco"), subject
to adjustments as provided in the Acquisition Agreement.

         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. and
UDLP, are directly or indirectly wholly owned by the Company and both of those
subsidiary guarantors have guaranteed the Company's 8 3/4% Senior Subordinated
Notes on a full, unconditional and joint and several basis. Any non-guarantor
subsidiaries have assets, equity, income and cash flows on an individual and
combined basis less than 3% of related amounts of the Company. Accordingly,
separate financial statements of those guarantor subsidiaries are not considered
material or provided herein.

OVERVIEW

         The Company is a leading 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 $1.5 billion as of June 30, 1998, a
substantial majority of which is derived from sole-source, prime contracts.
Approximately 75% of the Company's sales for the first six months of 1998 were
to the U.S. government, primarily to agencies of the DoD (excluding Foreign
Military Sales), or through subcontracts with other government contractors.

         For a description of the Company's business and principal operating
programs, see the Form S-4.

         There have been no material changes to the Company's major programs
from those described in the Company's Registration Statement on Form S-4. As
indicated therein, the Company recently completed negotiations with the U.S.
Navy and Lockheed Martin Corporation regarding the U.S. Navy's next VLS
procurement, which will provide production and ancillary VLS work for the
Company from 1998 through 2002.

RESULTS OF OPERATIONS

         THREE MONTHS ENDED JUNE 30, 1998 ("THREE MONTHS 1998") COMPARED TO
THREE MONTHS ENDED JUNE 30, 1997 ("THREE MONTHS 1997")

         REVENUE. Revenue in the Three Months 1998 was $316.9 million, a
reduction of $3.3 million, or 1.0%, from the Three Months 1997. The decline was
due to a shipment in 1997 of a large component for a Seawolf submarine which did
not reoccur in 1998 and reduced deliveries of armored personnel carrier vehicle
upgrades. These declines were

                                                                              14

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partially offset by higher vehicle and kit shipments to certain foreign
customers and an increase in billings for the Crusader development program.

         GROSS PROFIT. Gross profit declined $6.9 million, or 10.9% to $56.1
million for the Three Months 1998 versus the Three Months 1997. The gross profit
rate was also down two percentage points from 19.7% for the Three Months 1997 to
17.7% for the Three Months 1998. The decline resulted primarily from the
amortization of the Acquisition purchase price partially offset by lower
retirement benefit costs.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $35.4 million in the Three Months 1998, an increase
of $8.7 million, or 32.8% from the Three Months 1997. The increase was primarily
due to the amortization of goodwill and other intangible assets established as
part of the Acquisition and partially offset by the lower cost of corporate
overhead for the Three Months 1998 than the overhead charge assessed by FMC for
the Three Months 1997.

         EARNINGS FROM FOREIGN AFFILIATES. The Company's foreign affiliates had
a loss of $9.9 million for the Three Months 1998 compared to a profit of $4.5
million for the Three Months 1997. The reason for the loss was the establishment
of a reserve for a potential offset penalty, which could be assessed by the
Turkish government if the Company's Turkish joint venture does not achieve
certain export sales.

         INTEREST EXPENSE. Net interest expense was $10.7 million for the Three
Months 1998 compared to interest income of $0.5 million for the Three Months
1997. The interest expense is a result of the incurrence of debt to finance the
Acquisition.

         NET INCOME. As a result of the foregoing, including the addition of
interest expense and amortization of the purchase price discussed earlier, there
was a net loss of $4.5 million in the Three Months 1998 compared with net income
of $36.2 million for the Three Months 1997.

         SIX MONTHS  ENDED JUNE 30,  1998 ("SIX  MONTHS  1998")  COMPARED  TO
SIX MONTHS  ENDED JUNE 30, 1997 ("SIX MONTHS 1997")

         REVENUE. Revenue of $631.7 million for the Six Months 1998 was up $23.9
million, or 3.9%, compared with the Six Months 1997. The increase was primarily
due to increased billings for the Crusader development program, higher
deliveries of Paladin upgrades, the addition of FMC's former technology center
to the Company and shipments on a classified contract. The increase was
partially offset by the shipment in 1997 of a large component for the Seawolf
submarine which did not reoccur in 1998.

         GROSS PROFIT. Gross profit declined $32.1 million, or 26.2%, to $90.5
million for the Six Months 1998 versus the Six Months 1997. The gross profit
rate decreased 5.9% from 20.2% for the Six Months 1997 to 14.3% for the Six
Months 1998. The primary reason for the decline in gross profit, as well as the
rate, is the depreciation and amortization of the increased value of assets
established in connection with the allocation of the purchase price for the
Acquisition. Also contributing to the decline was

                                                                              15

<PAGE>


the establishment of reserves for a warranty claim and the shut down of the
Company's foundry operations in Anniston, Alabama and lower profit estimates for
several key contracts. This decline was partially offset by the gross profit
derived from the higher revenue discussed above and by lower retirement benefit
costs.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses rose to $86.8 million in the Six Months 1998, an
increase of $32.7 million or 60.4% compared with the Six Months 1997. The
unfavorable variance is attributable to the amortization of goodwill and other
intangible assets established in conjunction with the Acquisition. The higher
costs were partially offset by lower expense for corporate services and savings
related to the consolidation of staff functions within Ground Systems Division.

         EARNINGS FROM FOREIGN AFFILIATES. Earnings from foreign affiliates were
$5.5 million for the Six Months 1998, down $7.2 million, or 57.0%, from the Six
Months 1997. The decline is due to reduced earnings from the Saudi Arabian joint
venture as this operation has experienced a decline in funding for both of its
contracts. Also, a reserve established for the potential offset penalty for the
joint venture in Turkey negated a year over year increase in dividends received
from the venture.

         INTEREST EXPENSE. Net interest expense for the Six Months 1998 was
$25.8 compared with interest income of $1.0 million for the Six Months 1997. The
interest expense is the result of the debt incurred to finance the Acquisition.

         NET INCOME. As a result of the foregoing, including the addition of
interest expense and non-cash amortization of the purchase price, there was a
net loss of $25.0 million for the Six Months 1998 compared with net income of
$74.0 million for the Six Months 1997.

LIQUIDITY

         During the Six Months 1998, cash provided by operating activities was
$34.9 million compared with $110.0 million for the Six Months 1997. The decline
in cash flow can be attributed principally to (i) interest expense to service
the debt incurred to finance the Acquisition, (ii) the change for the Six Months
1998 in accounts receivable being $26.5 million less than the Six Months 1997 as
the Company experienced collection problems due to new, detailed reconciliation
requirements at the government payment office, and (iii) the change in accounts
payable for the Six Months 1998 was a negative $33.9 million which was $25.3
million more negative than in 1997 due to the timing of spending. Although
inventory contributed $64.6 million to cash from operations in the Six Months
1998, this was offset by a comparable reduction in advanced payments for this
period, as is usually the case for the Company, so that the net change in cash
flow for these two accounts was insignificant.

                                                                              16

<PAGE>


         Cash used in investing activities was $8.3 million for the Six Months
1998, down from $40.8 million for the Six Months 1997, when the Company made
short term investments in its former majority owner FMC.

         Cash used for financing activities was applied to pay down debt in the
Six Months 1998, compared to distributions of funds to the former owners, FMC
and Harsco, as was the case in the Six Months 1997. For the Six Months 1998, $41
million of debt was paid back to the lenders, whereas for the Six Months of
1997, $69.1 million was distributed to FMC and Harsco. Also, in the first half
of 1998, the Company raised $5.4 million from the sale of additional shares of
its common stock to certain officers, directors, and other management members of
the Company and to individuals affiliated with Carlyle.

IMPACT OF YEAR 2000 ("Y2K")

         The Company has a Y2K compliance program underway and is committing
extensive resources to overcome Y2K issues with the intent of minimizing or
eliminating disruption related to this potential computer problem. The Company
expects to spend $30 million repairing or replacing existing business systems so
that they are Y2K compliant. Through June 1998, approximately $10 million of the
foregoing figure has been spent. All of such costs will be financed through
internal cash flow.

         All divisions have completed assessments of internal systems used by
the Company to operate its business and deliver products and services to
customers. Various projects intended to repair, replace, upgrade or dispose of
non-compliant systems are underway or already completed. The most significant
projects addressing Y2K compliance of internal systems are the Integrated
Business Systems Projects being executed at Armament Systems Division and Ground
Systems Division. These projects are projected to be completed in mid-1999 and
will replace mainframe financial, accounting and manufacturing legacy systems
with new Y2K compliant systems.

         Suppliers are being contacted regarding their Y2K issues. Some
suppliers have indicated compliance through certifications, but many suppliers
have indicated that they have Y2K compliance issues which have not been
addressed or resolved. Procurement departments at the Company's various
divisions will continue to communicate with suppliers to attempt to ensure that
they have timely and appropriate plans to resolve Y2K problems. Procurement
documents utilized by the Company now include requirements as to Y2K. Because
the Company has only a limited understanding of the potential Y2K shortcomings
of its many suppliers, the Company is uncertain as to the full nature and extent
of the potential supplier-derived Y2K impact on the Company. However, the
Company is concerned that supplier Y2K problems could interrupt the flow of
components and services to the Company, which could in turn impair the Company's
timely delivery under its own customer contracts.

         United States Government ("USG") agencies that the Company works with
have also been contacted. All of the agencies contacted indicated that they have
Y2K compliance problems which have not been addressed or resolved. Such USG
agencies have indicated to the Company that they are working to resolve their
Y2K problems, but the Company regards their ability to achieve this objective as
uncertain. Because the Company's understanding of the ways in which the USG
could experience Y2K difficulties is inherently limited, the Company is
uncertain as to the full nature and extent of the potential USG-derived Y2K
impact on the Company. However, the Company is concerned that Y2K problems
affecting USG financial administration functions could interrupt or

                                                                              17

<PAGE>


delay the orderly flow of payments to the Company under its USG contracts.
Because of the Company's debt service obligations, any such interruption or
delay could severely impact the Company's financial condition.

         The Company's production equipment, facilities and other infrastructure
assets using embedded computer chips are also being assessed. Results indicate
that there are Y2K problems in some equipment. Projects are underway to resolve
these issues. A cost estimate to correct these problems has not yet been
developed, but the Company believes the cost will be immaterial.

         Assessments at all divisions indicate no Y2K problems with products the
Company produces and sells. Some divisions will do more thorough assessments of
products with complex embedded software to further validate results of existing
tests and studies. Certifications that the Company's products are Y2K compliant
have been provided to customers who have requested the certification.

         To the extent that the Company's results depend upon foreign sales,
such results could also be adversely impacted by Y2K problems which might beset
the foreign customers of the Company or its foreign affiliates. The Company has
not yet developed an adequate understanding of potential foreign government Y2K
problems or compliance efforts. Also, the Company's foreign affiliates are
assessing and operationally addressing their internal Y2K situation, but such
efforts have not yet reached the point where the Company can estimate either the
cost of corrective efforts or the potential impact of non-correction.

         Management believes it is expending appropriate efforts in addressing
the Y2K issue so that it will not incur a disruption to its business operations.
However, there can be no assurance that the Company will not incur Y2K problems
relating to its efforts or those involving its customers or suppliers or that
the costs of such efforts will not be greater than estimated currently.

                                                                              18


<PAGE>


                                    PART II

                               OTHER INFORMATION

                                 JUNE 30, 1998

ITEM 1.       LEGAL PROCEEDINGS

              The Company's Louisville, Kentucky facility is involved in an
administrative proceeding with the Kentucky Department of Environmental
Protection ("KDEP") regarding the Company's 1997 disposition to a local landfill
of old wood flooring materials from the facility. The Company and KDEP disagree
as to whether such materials are sufficiently contaminated by chemical residues
from prior U.S. Navy operations in the facility to constitute "hazardous waste"
within the meaning of applicable Kentucky law. In the course of this
administrative proceeding, KDEP asserted on December 15, 1997 that the disposal
subjects the Company to a civil penalty of $25,000 per day for so long as the
violation continues, a period which could amount to a year or more, depending
upon the duration and ultimate resolution of the proceeding.

              The Company believes that the flooring materials do not constitute
hazardous waste and expects to prevail in the proceeding, and accordingly, that
the likelihood of this matter having a material adverse impact on the Company is
remote. However, no assurance of a favorable outcome can be given. The Company
also notes that (i) the flooring materials acquired whatever environmental
character they may have by virtue of the U.S. Navy operations at the facility
prior to the Company's leasehold takeover thereof in August 1996, and (ii) the
U.S. Navy has undertaken in writing to indemnify the Company regarding certain
environmental consequences of the U.S. Navy's acts and tenure at the facility.

              Alliant  Techsystems,  Inc.  ("Alliant"),  a  subcontractor  to
the  Company in  connection  with the Paladin  howitzer  prime  contract,  filed
suit in February  1998 in the U.S.  District  Court for the  District of
Minnesota,  Case No. 98-764 - MJD/AJB,  captioned Alliant Techsystems,  Inc. v.
United Defense Limited Partnership, FMC Corporation,  Harso Corporation and
Sechan Electronics,  Inc. (Sechan is a replacement  subcontractor  employed on
the Paladin  program).  Alliant seeks damages in an unspecified  amount,  stated
only to be in excess of $75,000 on breach of contract and other theories.  The
Company has filed a motion to dismiss Alliant's lawsuit.

              The dispute arises out of a U.S. Army-directed termination for
convenience in 1996 of certain subcontract work, which, until the time of
termination, had been performed by Alliant and was thereafter replaced by
subcontract work performed by Sechan. Management does not believe that Alliant's
suit will have a material adverse impact on the Company.

                                                                              19


<PAGE>


ITEM 2(c).  RECENT SALE OF UNREGISTERED SECURITIES

              On May 15, 1998, the Company issued an aggregate of 540,830 shares
of its common stock for aggregate proceeds to the Company of $5.4 million. Such
shares were issued to certain officers, directors and other management members
of the Company and to certain individuals employed by or otherwise affiliated
with Carlyle and certain of their relatives. Given the limited nature of the
sales and the individuals to whom the sales were made, such sales were made
under the exemption provided by Section 4(2) and Rule 701 of the Securities Act
of 1933.

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

(a)           Exhibits

              Exhibit 2.1--Purchase Agreement dated as of August 25, 1997 among
              FMC Corporation, Harsco Corporation, Harsco UDLP Corporation and
              Iron Horse Acquisition Corp. (a copy of the schedules to this
              agreement will be furnished supplementally upon the request of the
              Commission)*

              Exhibit 2.2--Supplemental Agreement No. 1 to Purchase Agreement
              dated as of August 25, 1997 among FMC Corporation, Harsco
              Corporation, Harsco UDLP Corporation and Iron Horse Acquisition
              Corp.**

              Exhibit 3.1a--Certificate of Incorporation of Iron Horse
              Acquisition Corp. (n/k/a United Defense Industries, Inc.)*

              Exhibit 3.1b--Certificate of Amendment of Certificate of
              Incorporation Before Payment of Any Part of the Capital of Iron
              Horse Acquisition Corp. (n/k/a United Defense Industries, Inc.)*

              Exhibit 3.1c--Certificate of Amendment of the Certificate of
              Incorporation of United Defense Industries, Inc.*

              Exhibit 3.2--By-laws of United Defense Industries, Inc.*

              Exhibit 3.7--Certificate of Formation of Iron Horse Investors,
              L.L.C.*

              Exhibit 3.8--Limited Liability Company Agreement of Iron Horse
              Investors, L.L.C.*

              Exhibit 10.1--Professional Service Agreement with J.H. Binford
              Peay, III

              Exhibit 10.2--Professional Service Agreement with John M.
              Shalikashvili

              Exhibit 10.3--Executive Compensation Agreement with David V.
              Kolovat

              Exhibit 10.4--Executive Compensation Agreement with Thomas W.
              Rabaut

              Exhibit 10.5--Executive Compensation Agreement with Arthur L.
              Roberts

              Exhibit 10.6--Executive Compensation Agreement with Frederick M.
              Strader

              Exhibit 10.7--Executive Compensation Agreement with Peter C.
              Woglom

              * Incorporated by reference to the identical exhibit number in the
              Company's Registration Statement on Form S-4 (333-43619) filed
              with the Securities and Exchange Commission on December 22, 1997.

              ** Incorporated by reference to the identical exhibit number in
              the Company's Amendment No. 1 to Form S-4 (333-43619) filed with
              the Securities and Exchange Commission on February 6, 1998.

              Financial Data Schedule.

(b)           Reports on Form 8-K

              None.

                                                                              20


<PAGE>


                                   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:   August 12, 1998