##### 











UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




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Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934




|                                      |                              
|------------------------------------- | -----------------------------
|For Quarter Ended:     March 31, 2002 | Commission File No. 001-16821



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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 No.)



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1525 Wilson Boulevard,
Suite 700,

Arlington, Virginia, 22209-2411


(703) 312-6100


(Address and telephone number of principal
executive offices of


Registrant and each Co-Registrant)




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Securities registered pursuant to
Section 12(b) of the Act:

|                                       |  |                                     
|-------------------------------------- |  | ------------------------------------
|Title of each class                    |  | Name of exchange on which registered
|                                       |  |                                     
|Common Stock, par value $.01 per share |  | New York Stock Exchange             

Securities registered pursuant to
Section 12(g) of the Act:

None


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, and (2) has been
subject to such filing requirements for the past
90 days.      Yes þ          No o

As of April 15, 2002, the aggregate market
value of the common stock held by non-affiliates of the
registrant was $706,232,798 based on the closing price of $28.41
per share on the New York Stock Exchange on such date.

Common Stock, $.01 par value 51,073,059 Shares
Outstanding as of April 15, 2002



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##### 



UNITED DEFENSE INDUSTRIES, INC.

INDEX

|                                |  |                                                                                                      |    |      |    | 
|------------------------------- |  | ---------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                |  |                                                                                                      |    | Page
|                                |  |                                                                                                      |    |     
|PART I  FINANCIAL
	INFORMATION
|Item 1.                         |  | Unaudited Consolidated Financial
	Statements  United Defense Industries, Inc.                       |    |      |    | 
|                                |  | Unaudited Consolidated Balance Sheets as of
	December 31, 2001 and March 31, 2002                    |    |      | 2  | 
|                                |  | Unaudited Consolidated Statements of Operations
	for the three months ended March 31, 2001 and 2002  |    |      | 3  | 
|                                |  | Unaudited Consolidated Statement of
	Stockholders Equity for the three months ended
	March 31, 2002 |    |      | 4  | 
|                                |  | Unaudited Consolidated Statements of Cash Flows
	for the three months ended March 31, 2001 and 2002  |    |      | 5  | 
|                                |  | Notes to Unaudited Consolidated Financial
	Statements                                                |    |      | 6  | 
|Item 2.                         |  | Managements Discussion and Analysis of the
	Results of Operations and Financial Condition           |    |      | 7  | 
|Item 3.                         |  | Quantitative and Qualitative Disclosures about
	Market Risk                                          |    |      | 11 | 
|PART II  OTHER
	INFORMATION   
|Item 1.                         |  | Legal Proceedings                                                                                    |    |      | 13 | 
|Item 6.                         |  | Exhibits and Reports on Form 8-K                                                                     |    |      | 13 | 
|Signature                       |  |                                                                                                      | 14 |     

1



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##### 



UNITED DEFENSE INDUSTRIES, INC.

UNAUDITED CONSOLIDATED BALANCE
SHEETS

(In thousands)


|                                                |                                                                                                                                                                      |                           |           |                |         |   |           |          |         | 
|----------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | --------- | -------------- | ------- | - | --------- | -------- | ------- | 
|                                                |                                                                                                                                                                      | December 31, 2001         |           | March 31, 2002
|                                                |                                                                                                                                                                      |                           |           |               
|ASSETS                                         
|Current assets:                                 |                                                                                                                                                                      |                           |           |                |         |   |           |         
|                                                | Cash and cash equivalents                                                                                                                                            |                           | $         | 90,535         |         |   | $         | 67,297   |        
|                                                | Trade receivables                                                                                                                                                    |                           |           | 78,387         |         |   |           | 107,811  |        
|                                                | Long-term contract inventories                                                                                                                                       |                           |           | 368,167        |         |   |           | 393,119  |        
|                                                | Other current assets                                                                                                                                                 |                           |           | 14,406         |         |   |           | 16,630   |        
|                                                |                                                                                                                                                                      |                           |           |                |         |   |           |         
|                                                |                                                                                                                                                                      | Total current assets      |           |                | 551,495 |   |           |          | 584,857 | 
|Property, plant and equipment, net              |                                                                                                                                                                      |                           | 90,352    |                |         |   | 86,917    |         
|Goodwill, net                                   |                                                                                                                                                                      |                           | 97,582    |                |         |   | 101,002   |         
|Intangible assets, net                          |                                                                                                                                                                      |                           | 20,982    |                |         |   | 19,056    |         
|Prepaid pension and postretirement benefit cost |                                                                                                                                                                      |                           | 127,828   |                |         |   | 128,231   |         
|Restricted cash                                 |                                                                                                                                                                      |                           | 14,950    |                |         |   | 15,084    |         
|Other assets                                    |                                                                                                                                                                      |                           | 9,103     |                |         |   | 6,538     |         
|                                                |                                                                                                                                                                      |                           |           |                |         |   |           |         
|Total assets                                    |                                                                                                                                                                      | $                         | 912,292   |                |         | $ | 941,685   |         
|                                                |                                                                                                                                                                      |                           |           |                |         |   |           |         
|LIABILITIES AND STOCKHOLDERS EQUITY
	(DEFICIT)
|Current liabilities:                            |                                                                                                                                                                      |                           |           |                |         |   |           |         
|                                                | Current portion of long-term debt                                                                                                                                    |                           | $         | 8,307          |         |   | $         | 8,307    |        
|                                                | Accounts payable, trade and other                                                                                                                                    |                           |           | 88,273         |         |   |           | 75,055   |        
|                                                | Advanced payments                                                                                                                                                    |                           |           | 394,771        |         |   |           | 437,559  |        
|                                                | Accrued and other liabilities                                                                                                                                        |                           |           | 114,807        |         |   |           | 95,458   |        
|                                                |                                                                                                                                                                      |                           |           |                |         |   |           |         
|                                                |                                                                                                                                                                      | Total current liabilities |           |                | 606,158 |   |           |          | 616,379 | 
|Long-term liabilities:                          |                                                                                                                                                                      |                           |           |                |         |   |           |         
|                                                | Long-term debt, net of current portion                                                                                                                               |                           |           | 422,593        |         |   |           | 414,287  |        
|                                                | Accrued pension and postretirement benefit cost                                                                                                                      |                           |           | 22,487         |         |   |           | 23,450   |        
|                                                | Other liabilities                                                                                                                                                    |                           |           | 27,420         |         |   |           | 27,894   |        
|                                                |                                                                                                                                                                      |                           |           |                |         |   |           |         
|Total liabilities                               |                                                                                                                                                                      |                           | 1,078,658 |                |         |   | 1,082,010 |         
|Commitments and contingencies                   |                                                                                                                                                                      |                           |           |                |         |   |           |         
|Stockholders Deficit:                          |                                                                                                                                                                      |                           |           |                |         |   |           |         
|                                                | Common stock $.01 par value, 150,000,000 shares
	authorized; 50,915,689 and 51,066,064 issued and outstanding at
	December 31, 2001 and March 31, 2002, respectively |                           |           | 509            |         |   |           | 510      |        
|                                                | Additional paid-in-capital                                                                                                                                           |                           |           | 167,457        |         |   |           | 168,115  |        
|                                                | Deferred Compensation                                                                                                                                                |                           |           | (648           | )       |   |           | (623     | )      
|                                                | Retained deficit                                                                                                                                                     |                           |           | (329,528       | )       |   |           | (310,510 | )      
|                                                | Accumulated other comprehensive gain                                                                                                                                 |                           |           | (4,156         | )       |   |           | 2,183    |        
|                                                |                                                                                                                                                                      |                           |           |                |         |   |           |         
|                                                | Total stockholders deficit                                                                                                                                          |                           |           | (166,366       | )       |   |           | (140,325 | )      
|                                                |                                                                                                                                                                      |                           |           |                |         |   |           |         
|Total liabilities and stockholders deficit     |                                                                                                                                                                      | $                         | 912,292   |                |         | $ | 941,685   |         
|                                                |                                                                                                                                                                      |                           |           |                |         |   |           |         

See accompanying notes.

2



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##### 



UNITED DEFENSE INDUSTRIES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS

(In thousands, except in shares and per share
data)


|                                                                 |                                                        |                              |        |            |         |   |        |            |         | 
|---------------------------------------------------------------- | ------------------------------------------------------ | ---------------------------- | ------ | ---------- | ------- | - | ------ | ---------- | ------- | 
|                                                                 |                                                        |                             
|                                                                 |                                                        | Three months ended March 31,
|                                                                 |                                                        |                             
|                                                                 |                                                        | 2001                         |        | 2002      
|                                                                 |                                                        |                              |        |           
|Revenue:                                                         |                                                        |                              |        |            |         |   |        |           
|                                                                 | Sales                                                  |                              | $      | 292,080    |         |   | $      | 356,443    |        
|Costs and expenses:                                              |                                                        |                              |        |            |         |   |        |           
|                                                                 | Cost of sales                                          |                              |        | 231,193    |         |   |        | 296,594    |        
|                                                                 | Selling, general and administrative expenses           |                              |        | 42,228     |         |   |        | 28,117     |        
|                                                                 | Research and development                               |                              |        | 4,367      |         |   |        | 5,664      |        
|                                                                 |                                                        |                              |        |            |         |   |        |           
|                                                                 |                                                        | Total expenses               |        |            | 277,788 |   |        |            | 330,375 | 
|                                                                 |                                                        |                              |        |            |         |   |        |           
|Income from operations                                           |                                                        |                              | 14,292 |            |         |   | 26,068 |           
|Other income (expense):                                          |                                                        |                              |        |            |         |   |        |           
|                                                                 | Earnings related to investments in foreign
	affiliates |                              |        | 654        |         |   |        | 904        |        
|                                                                 | Interest income                                        |                              |        | 1,671      |         |   |        | 1,179      |        
|                                                                 | Interest expense                                       |                              |        | (6,194     | )       |   |        | (6,141     | )      
|                                                                 |                                                        |                              |        |            |         |   |        |           
|Total other expense                                              |                                                        |                              | (3,869 | )          |         |   | (4,058 | )         
|Income before income taxes                                       |                                                        |                              | 10,423 |            |         |   | 22,010 |           
|Provision for income taxes                                       |                                                        |                              | 5,293  |            |         |   | 2,750  |           
|                                                                 |                                                        |                              |        |            |         |   |        |           
|Income before extraordinary item                                 |                                                        |                              | 5,130  |            |         |   | 19,260 |           
|Extraordinary item  net loss from
	early extinguishment of debt |                                                        |                              |       |            |         |   | (242   | )         
|                                                                 |                                                        |                              |        |            |         |   |        |           
|Net income                                                       |                                                        | $                            | 5,130  |            |         | $ | 19,018 |           
|                                                                 |                                                        |                              |        |            |         |   |        |           
|Earnings per common share  basic:                               |                                                        |                              |        |            |         |   |        |           
|                                                                 | Income before extraordinary item                       |                              | $      | 0.13       |         |   | $      | 0.38       |        
|                                                                 | Extraordinary item                                     |                              |        |           |         |   |        | (0.01      | )      
|                                                                 |                                                        |                              |        |            |         |   |        |           
|                                                                 | Net income                                             |                              | $      | 0.13       |         |   | $      | 0.37       |        
|                                                                 |                                                        |                              |        |            |         |   |        |           
|                                                                 | Weighted average common shares outstanding             |                              |        | 40,582,501 |         |   |        | 50,997,154 |        
|Earnings per common share  diluted:                             |                                                        |                              |        |            |         |   |        |           
|                                                                 | Income before extraordinary item                       |                              | $      | 0.12       |         |   | $      | 0.37       |        
|                                                                 | Extraordinary item                                     |                              |        |           |         |   |        | (0.01      | )      
|                                                                 |                                                        |                              |        |            |         |   |        |           
|                                                                 | Net income                                             |                              | $      | 0.12       |         |   | $      | 0.36       |        
|                                                                 |                                                        |                              |        |            |         |   |        |           
|                                                                 | Weighted average common shares outstanding             |                              |        | 42,488,715 |         |   |        | 52,721,048 |        

See accompanying notes.

3



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##### 



UNITED DEFENSE INDUSTRIES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS EQUITY

(In thousands)


|                                                                   |  |        |     |            |  |              |         |          |  |               |      |       |  |   |          |   |  |   |        |   |  |   |          |  
|------------------------------------------------------------------ |  | ------ | --- | ---------- |  | ------------ | ------- | -------- |  | ------------- | ---- | ----- |  | - | -------- | - |  | - | ------ | - |  | - | -------- | -
|                                                                   |  |        |     |            |  |              |         |          |  | Accumulated   |      |      
|                                                                   |  |        |     | Additional |  |              |         |          |  | Other         |      |      
|                                                                   |  | Common |     | Paid-In    |  | Deferred     |         | Retained |  | Comprehensive |      |      
|                                                                   |  | Stock  |     | Capital    |  | Compensation |         | Deficit  |  | (Loss)/Gain   |      | Total
|                                                                   |  |        |     |            |  |              |         |          |  |               |      |      
|Balance, December 31, 2001                                         |  | $      | 509 |            |  | $            | 167,457 |          |  | $             | (648 | )     |  | $ | (329,528 | ) |  | $ | (4,156 | ) |  | $ | (166,366 | )
|Amortization of deferred stock compensation                        |  |        |    |            |  |              |        |          |  |               | 25   |       |  |   |         |   |  |   |       |   |  |   | 25       |  
|Exercise of options                                                |  |        | 1   |            |  |              | 658     |          |  |               |     |       |  |   |         |   |  |   |       |   |  |   | 659      |  
|Net foreign currency
	translation                                  |  |        |    |            |  |              |        |          |  |               |     |       |  |   |         |   |  |   | 2,716  |   |  |   | 2,716    |  
|Change in fair value of foreign currency and
	interest rate hedges |  |        |     |            |  |              |        |          |  |               |     |       |  |   |          |   |  |   | 3,623  |   |  |   | 3,623    |  
|Net income for the three months ended
	March 31, 2002              |  |        |     |            |  |              |        |          |  |               |     |       |  |   | 19,018   |   |  |   |       |   |  |   | 19,018   |  
|                                                                   |  |        |     |            |  |              |         |          |  |               |      |       |  |   |          |   |  |   |        |   |  |   |          |  
|Balance, March 31, 2002                                            |  | $      | 510 |            |  | $            | 168,115 |          |  | $             | (623 | )     |  | $ | (310,510 | ) |  | $ | 2,183  |   |  | $ | (140,325 | )
|                                                                   |  |        |     |            |  |              |         |          |  |               |      |       |  |   |          |   |  |   |        |   |  |   |          |  

See accompanying notes.

4



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##### 



UNITED DEFENSE INDUSTRIES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH
FLOW

(In thousands)


|                                                                               |                                                 |                              |         |         |   |   |         |         |  
|------------------------------------------------------------------------------ | ----------------------------------------------- | ---------------------------- | ------- | ------- | - | - | ------- | ------- | -
|                                                                               |                                                 |                             
|                                                                               |                                                 | Three Months Ended March 31,
|                                                                               |                                                 |                             
|                                                                               |                                                 | 2001                         |         | 2002   
|                                                                               |                                                 |                              |         |        
|Operating activities                                                           |                                                 |                              |         |         |   |   |         |        
|Net income                                                                     |                                                 | $                            | 5,130   |         |   | $ | 19,018  |        
|Adjustments to reconcile net income to cash
	provided by operating activities: |                                                 |                              |         |         |   |   |         |        
|                                                                               | Depreciation                                    |                              |         | 6,926   |   |   |         | 6,295   |  
|                                                                               | Amortization                                    |                              |         | 14,854  |   |   |         | 1,174   |  
|                                                                               | Amortization of financing costs                 |                              |         | 1,289   |   |   |         | 680     |  
|                                                                               | Non-cash compensation                           |                              |         |        |   |   |         | 25      |  
|                                                                               | Net loss from early extinguishment of debt      |                              |         |        |   |   |         | 242     |  
|Changes in assets and liabilities:                                             |                                                 |                              |         |         |   |   |         |        
|                                                                               | Trade receivables                               |                              |         | (1,429  | ) |   |         | (27,891 | )
|                                                                               | Inventories                                     |                              |         | (28,480 | ) |   |         | (13,605 | )
|                                                                               | Other assets                                    |                              |         | 2,935   |   |   |         | 507     |  
|                                                                               | Prepaid pension and postretirement benefit cost |                              |         | (587    | ) |   |         | (403    | )
|                                                                               | Accounts payable, trade and other               |                              |         | (22,366 | ) |   |         | (14,014 | )
|                                                                               | Advanced payments                               |                              |         | 20,821  |   |   |         | 33,227  |  
|                                                                               | Accrued and other liabilities                   |                              |         | (12,292 | ) |   |         | (18,044 | )
|                                                                               | Accrued pension and postretirement benefit cost |                              |         | (1,747  | ) |   |         | 963     |  
|                                                                               |                                                 |                              |         |         |   |   |         |        
|Cash used in operating activities                                              |                                                 |                              | (14,946 | )       |   |   | (11,826 | )      
|                                                                               |                                                 |                              |         |         |   |   |         |        
|Investing activities                                                           |                                                 |                              |         |         |   |   |         |        
|                                                                               | Capital spending                                |                              |         | (1,769  | ) |   |         | (2,346  | )
|                                                                               | Disposal of property, plant and equipment       |                              |         | 156     |   |   |         |        |  
|                                                                               | Purchase of Cell ITS                            |                              |         |        |   |   |         | (4,135  | )
|                                                                               |                                                 |                              |         |         |   |   |         |        
|Cash used in investing activities                                              |                                                 |                              | (1,613  | )       |   |   | (6,481  | )      
|                                                                               |                                                 |                              |         |         |   |   |         |        
|Financing activities                                                           |                                                 |                              |         |         |   |   |         |        
|                                                                               | Payments on long-term debt                      |                              |         | (34,814 | ) |   |         | (8,306  | )
|                                                                               | Proceeds from sale of common stock              |                              |         |        |   |   |         | 659     |  
|                                                                               |                                                 |                              |         |         |   |   |         |        
|Cash used in financing activities                                              |                                                 |                              | (34,814 | )       |   |   | (7,647  | )      
|                                                                               |                                                 |                              |         |         |   |   |         |        
|Effect of exchange rate changes on cash and
	marketable securities             |                                                 |                              | 212     |         |   |   | 2,716   |        
|                                                                               |                                                 |                              |         |         |   |   |         |        
|Decrease in cash and marketable securities                                     |                                                 |                              | (51,161 | )       |   |   | (23,238 | )      
|Cash and marketable securities, beginning of year                              |                                                 |                              | 113,357 |         |   |   | 90,535  |        
|                                                                               |                                                 |                              |         |         |   |   |         |        
|Cash and marketable securities, end of period                                  |                                                 | $                            | 62,196  |         |   | $ | 67,297  |        
|                                                                               |                                                 |                              |         |         |   |   |         |        

See accompanying notes.

5



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##### 



UNITED DEFENSE INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS

March 31, 2002


1.  Basis of Presentation

The financial information presented as of any
date other than December 31 has been prepared from the
books and records without audit. Financial information as of
December 31, 2001 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 interim
financial statements contain all adjustments, consisting of
normal recurring adjustments necessary to present fairly the
Companys financial position as of March 31, 2002 and
the results of its operations and cash flows for the three
months ended March 31, 2002 and 2001. The results of
operations are not necessarily indicative of the results that
may be expected for the year ending December 31, 2002.
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, 2001.

2.  Changes in Accounting
Principle

In June 2001, the Financial Accounting Standards
Board issued SFAS No. 141, Business Combinations,
and No. 142, Goodwill and Other Intangible
Assets, (the Statements) effective for fiscal
years beginning after December 15, 2001. Under the new rules,
goodwill and indefinite-lived intangible assets are no longer
amortized but will be subject to annual impairment tests in
accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives.

On January 1, 2002, the Company began to
apply the new rules on accounting for goodwill and other
intangible assets and ceased the amortization of goodwill. The
following information reconciles reported net income and
earnings per share to adjusted net income and earnings per
share, excluding the goodwill amortization previously recognized.

|                                                    |                                            |                              |   |            |  |  |   |            |  
|--------------------------------------------------- | ------------------------------------------ | ---------------------------- | - | ---------- |  |  | - | ---------- | -
|                                                    |                                            |                             
|                                                    |                                            | Three months ended March 31,
|                                                    |                                            |                             
|(In thousands, except in shares and per share data) |                                            | 2001                         |   | 2002      
|                                                    |                                            |                              |   |           
|Net income                                          |                                            |                              |   |            |  |  |   |           
|                                                    | Income before extraordinary item           |                              | $ | 5,130      |  |  | $ | 19,260     |  
|                                                    | Add back goodwill amortization             |                              |   | 2,020      |  |  |   |           |  
|                                                    | Extraordinary item                         |                              |   |           |  |  |   | (242       | )
|                                                    |                                            |                              |   |            |  |  |   |           
|                                                    | Adjusted net income                        |                              | $ | 7,150      |  |  | $ | 19,018     |  
|                                                    |                                            |                              |   |            |  |  |   |           
|Basic earnings per share                            |                                            |                              |   |            |  |  |   |           
|                                                    | Income before extraordinary item           |                              | $ | 0.13       |  |  | $ | 0.38       |  
|                                                    | Add back goodwill amortization             |                              |   | 0.05       |  |  |   |           |  
|                                                    | Extraordinary item                         |                              |   |           |  |  |   | (0.01      | )
|                                                    |                                            |                              |   |            |  |  |   |           
|                                                    | Adjusted net income                        |                              | $ | 0.18       |  |  | $ | 0.37       |  
|                                                    |                                            |                              |   |            |  |  |   |           
|                                                    | Weighted average common shares outstanding |                              |   | 40,582,501 |  |  |   | 50,997,154 |  
|Diluted earnings per share                          |                                            |                              |   |            |  |  |   |           
|                                                    | Income before extraordinary item           |                              | $ | 0.12       |  |  | $ | 0.37       |  
|                                                    | Add back goodwill amortization             |                              |   | 0.05       |  |  |   |           |  
|                                                    | Extraordinary item                         |                              |   |           |  |  |   | (0.01      | )
|                                                    |                                            |                              |   |            |  |  |   |           
|                                                    | Adjusted net income                        |                              | $ | 0.17       |  |  | $ | 0.36       |  
|                                                    |                                            |                              |   |            |  |  |   |           
|                                                    | Weighted average common shares outstanding |                              |   | 42,488,715 |  |  |   | 52,721,048 |  

6



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##### 



UNITED DEFENSE INDUSTRIES, INC.


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company will complete the first of the
required impairment tests of goodwill during the second quarter
of 2002 and does not believe that the effect of these tests will
have a material impact on its earnings or its financial position.

3.  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, although the Company
does not control the joint ventures, it has the ability to
exercise some influence over their operating and financial
policies. Equity in earnings from these investments was
$0.7 million and $0.9 million for the three months
ended March 31, 2001 and 2002. The following table
summarizes financial information for these joint ventures:

|              |  |                    |        |      |  |   |        | 
|------------- |  | ------------------ | ------ | ---- |  | - | ------ | 
|              |  |                   
|              |  | Three months ended
|              |  | March 31,         
|              |  | (In thousands)    
|              |  |                   
|              |  | 2001               |        | 2002
|              |  |                    |        |     
|Sales         |  | $                  | 37,055 |      |  | $ | 26,880 | 
|Cost of sales |  |                    | 21,728 |      |  |   | 14,912 | 
|Net income    |  |                    | 1,243  |      |  |   | 4,424  | 

4.  Sale of Equity Investment in
Saudi Arabian Joint Venture

In view of the declining scale and business
prospects of the Companys Saudi Arabian joint venture,
United Defense Systems Ltd. (UDS), as described in
the Companys Form 10-K Report for the year ended
December 31, 2001, the Company has entered into agreement
with its Saudi Arabian joint venture partner, Al-Hejailan
Projects Company Ltd. (Al-Hejailan), under which the
Company will sell its interest in the joint venture to
Al-Hejailan for approximately $408,000. Completion of the sale
is expected to occur within the next twelve months.

5.  Cell ITS Acquisition

On March 26, 2002, the Company, through its
subsidiary, Bofors Defence, finalized the acquisition of 100% of
the outstanding stock of Cell ITS AB, a company incorporated
under the laws of Sweden and wholly owned by Cell Network AB.
Cell ITS specializes in interactive training and simulation. As
consideration for the purchase, the Company paid its former
owner, Cell Network AB, 45 million Swedish krona (SEK)
(approximately $4.3 million), of which 20 million SEK
was held in escrow as a lien for the fulfillment of certain
receivables. The transaction was accounted for as a purchase.
Accordingly, the financial statements reflect the results of
operations of Cell ITS for the first quarter 2002. Final price
allocation has not yet been determined.



|        |                                                                                                             
|------- | ------------------------------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis
	of the Results of Operations and Financial Condition 
	March 31, 2002

Special Note Regarding Forward Looking
Statements

This report on Form 10-Q 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

7



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##### 



variety of factors, including: the ability of
United Defense Industries, Inc. (the Company) to
design and implement key technological improvements and to
execute its internal performance plans; changing priorities or
reductions in the U.S. government defense budget; the
Companys ability to win and retain government contracts;
changes in defense procurement models; the impact on the
Companys operating results of the timing of manufacturing
and delivery of products under U.S. Government contracts;
termination of government contracts due to unilateral government
action; The Companys ability to make and successfully
integrate acquisitions; performance issues with key suppliers
and subcontractors; developments with respect to contingencies
such as legal proceedings and environmental matters; labor
negotiations; the performance of, and political and other risks
associated with, the Companys international operations and
joint ventures; and the effect on our financial and operating
activity of the Companys significant level of debt. For
additional information, see Risk Factors in the
Companys Registration Statement on Form S-1, SEC File
Number 333-71986.


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 our Annual Report on Form 10-K for
the year ended December 31, 2001.

Overview

United Defense is a leader in the design,
development and production of combat vehicles, artillery, naval
guns, missile launchers and precision munitions used by the U.S.
Department of Defense (DoD) and more than 40 foreign
militaries. For many of our key DoD programs, we are the
sole-source prime contractor and systems integrator. We conduct
global operations through our manufacturing facilities in the
United States and Sweden, through a manufacturing joint venture
in Turkey, and through co-production programs with various other
governments and foreign contractors.

The Carlyle Group formed United Defense
Industries, Inc. in October of 1997 to facilitate the
acquisition of United Defense, L.P., our predecessor entity. The
Carlyle Group continues to own a significant portion of our
common stock. Individuals affiliated with The Carlyle Group are
expected to continue to influence our operations.

Our results of operations, particularly revenue,
gross profits and cash flows, vary significantly from period to
period, depending largely upon the timing of our delivery of
finished products, the terms of our contracts and our level of
export sales. As a result, period-to-period comparisons may show
substantial changes disproportionate to our underlying business
activity.

Our contracts typically fall into two categories,
cost-plus and fixed-price. Our contracts for research,
engineering, prototypes, repair and maintenance, and some other
matters are typically cost-plus arrangements, under which we are
reimbursed for approved costs and also receive a fee. The
production contracts are typically fixed-price arrangements
under which we assume the risk of cost overruns and receive the
benefit of cost savings. All of our U.S. Government contracts,
whether we are the prime contractor or a subcontractor, are
subject to audit and cost controls. As a result, the DoD
typically has the right to object to our costs as not allowable
or as unreasonable, which can increase the costs we bear rather
than allow recovery as costs reimbursed or allowed in our
negotiation of fixed-price contracts.

We recognize sales on fixed-price production
contracts when the risks and rewards of ownership have been
transferred to the customer. For our DoD production contracts,
those criteria are typically met when the manufacture of the
product is completed and the customer has certified it as
meeting the contract specifications and as having passed quality
control tests. However, under recent Bradley production
contracts, sales are not recognized until the U.S. Army fields
individual units because it is at that point that the risks and
rewards of ownership are transferred. This contractual provision
extends the period of time during which these vehicles are
carried as inventory and may result in an uneven distribution of
revenue from these contracts between periods. For our foreign
production contracts, sales are generally recorded upon shipment
of products to the customer, which corresponds to when the risks
and rewards of ownership transfer. We tend to deliver products
to our foreign customers in lots, which also results in an
inventory build-up pending delivery. We record sales under cost
reimbursement contracts as costs are incurred.

8



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We use the contract method of accounting for our
fixed-price contracts and therefore record gross margin on each
unit produced at the time a sale is recognized, based on an
estimate of the margin that will be realized over the life of
the related contract. We currently evaluate estimates of gross
margin three times each year and use the cumulative catch-up
method to recognize changes in estimates of sales and gross
margins during the period in which those changes are determined.
We charge any anticipated losses on a contract to operations as
soon as those losses are determined. The principal components of
our operating costs for production contracts are materials,
subcontractor costs, labor and overhead. The principal operating
costs for engineering and development contracts are compensation
costs for the engineers and designers and related overhead
necessary to support those personnel. All of these operating
costs are charged to inventory as incurred. We also use the
last-in, first-out, or LIFO, method of accounting, which
generally results in higher cost of sales in periods when
current costs of the inventory are higher than comparable costs
in prior periods and a periodic charge to earnings to reflect
changes in the costs of components of inventory. We expense
selling, general, administrative, and research and development
costs in the period incurred. The major components of these
costs include compensation, overhead and amortization of
intangibles.

We are a supplier of armored combat vehicles and
weapons delivery systems to the DoD and a number of allied
military forces worldwide. Our products include critical
elements of the U.S. militarys tactical force structure.
We had a firm funded backlog of approximately $2.1 billion
as of March 31, 2002, a substantial majority of which was
derived from sole-source, prime contracts. Approximately 77% of
the Companys sales for the first three months of 2002 were
to the U.S. government, primarily to agencies of the DoD
(excluding Foreign Military Sales), or through subcontracts with
other government contractors.

There were no material changes to our major
programs from those described in our Form 10-K Report,
other than normal additional funding as new contracts are
negotiated and awarded, except as follows:

Crusader Artillery System
(Crusader):We believe
that the DoD is reviewing the combat mission rationale for and
potential scale (procurement quantity) of a number of major
weapon systems currently in development, including the Crusader.
Our performance under the current Crusader development contract
continues to meet schedule, budget, and performance
requirements, and to date the Army has continued to strongly
support the development completion and large-scale procurement
(480 systems) of Crusader. Nonetheless, we are unable to predict
the final outcome of the DoD review process and its interplay
with the legislative process, which ultimately governs DoD
procurement of major weapon systems. In the event such outcomes
were to result in the cancellation, reduction in scale, or
significant delay of the Crusader system, our revenues and
profits would correspondingly be reduced during the fiscal
periods impacted by any such decisions.

Future Combat Systems
(FCS):Subsequent to the
Lead System Integrator (LSI) award to the Boeing-SAIC team,
as described in our Form 10-K Report for the year ended
December 31, 2001, the LSI has solicited proposals from a
broad range of industrial and academic institutions interested
in participating in FCS. We have submitted a number of
proposals, in an effort to participate in FCS concept
development work under LSIs direction. We expect to be
informed within the next three months as to whether any of our
proposals are accepted.

United Defense Systems 
Arabia:In view of the declining scale
and prospects of the UDS business, as described in our
Form 10-K Report for the year ended December 31, 2001,
we have entered into an agreement with our Saudi partner,
Al-Hejailan Projects Company Ltd., under which we will sell our
interest in UDS to Al-Hejailan for approximately $408,000.

Products and Programs

Our program portfolio consists of a balanced mix
of current production, upgrade and life-cycle support, and
development programs. Revenue generated from each of our major
programs is summarized below.

9



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|                                            |  |                    |       |      |  |   |       | 
|------------------------------------------- |  | ------------------ | ----- | ---- |  | - | ----- | 
|                                            |  |                   
|                                            |  | Three months ended
|                                            |  | March 31          
|                                            |  | (in millions)     
|                                            |  |                   
|                                            |  | 2001               |       | 2002
|                                            |  |                    |       |     
|Bradley Family of Vehicles                  |  | $                  | 56.2  |      |  | $ | 75.9  | 
|Naval Ordnance (a)                          |  |                    | 50.8  |      |  |   | 52.6  | 
|Vertical Launch System                      |  |                    | 23.9  |      |  |   | 31.2  | 
|Crusader                                    |  |                    | 37.5  |      |  |   | 82.7  | 
|Combat, Engineering & Recovery Vehicles (b) |  |                    | 22.2  |      |  |   | 31.2  | 
|M109 Howitzer System                        |  |                    | 16.6  |      |  |   | 3.9   | 
|Assault Amphibious Vehicles                 |  |                    | 17.2  |      |  |   | 11.5  | 
|Other                                       |  |                    | 67.7  |      |  |   | 67.4  | 
|                                            |  |                    |       |      |  |   |       | 
|Total                                       |  | $                  | 292.1 |      |  | $ | 356.4 | 
|                                            |  |                    |       |      |  |   |       | 



---



|    |                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------
|(a) | Includes Mk 45, Advanced Gun Systems
	(AGS), and other naval services and equipment.              
|   
|(b) | Includes vehicles such as the M88 recovery
	vehicle, M9 ACE and other engineering related equipment.

For a more detailed description of our business
and principal operating programs, see the Form 10-K Report
for the year ended December 31, 2001.

Results of Operations



| |                                                                                     
| | ------------------------------------------------------------------------------------
| | Three Months Ended March 31, 2002
	Compared with Three Months Ended March 31,
	2001.

Revenue

Revenue for the three months ended March 31,
2002 was $356.4 million, which was $64.4 million or 22.0%
above the comparable period in 2001. The main drivers for the
increase were higher Crusader program sales and shipments of
Bradley and Hercules vehicles to the U.S. Government, partially
offset by the completion of shipments of Self-Propelled
Howitzers to Egypt in the first quarter of 2001.

Gross
Profit

Gross profit for the three months ended
March 31, 2002 was $59.8 million, which was
$1.0 million less than the prior period. The gross profit
rate declined 4.1 percentage points to 16.8% in 2002 due to
a less profitable mix in 2002 and a favorable profit adjustment
for the Crusader program in 2001. The lower profit Crusader
program was a higher percentage of our total sales in 2002. The
final negotiation of all costs associated with the first phase
of the Crusader program resulted in a one-time upward profit
adjustment of $4.1 million in 2001.

Selling,
General and Administrative Expenses

Selling, general and administrative expenses were
$28.1 million for the three months ended March 31,
2002, a decrease of $14.1 million, or 33%, from the prior
period. The decrease was mainly due to lower amortization of
intangible assets, including goodwill, related to acquisitions.

Research
and Development

Research and development costs increased $1.3
million to $5.7 million for the three months ended
March 31, 2002. The increase was due to higher spending
associated with the DD-X class of ships and Advanced Gun System
programs.

10



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Earnings
from Foreign Affiliates

Earnings from foreign affiliates were
$0.9 million in the three months ended March 31, 2002
compared with $0.7 million for the same period last year.
Earnings recognized from the Turkey joint venture were higher
versus the same period in 2001.

Interest
Expense

Net interest expense was $5.0 million in
2002, a slight increase of $0.4 million from the prior year
resulting from lower income generated by cash balances. Although
the debt level was higher in 2002, interest expense was about
the same as in 2001 because of a lower interest rate.

Net
Income

As a result of the foregoing, we had a net income
of $19.0 million in 2002, after the extraordinary loss of
$0.2 million for the early extinguishment of debt, compared
with $5.1 million in the prior period.

Liquidity, Capital Resources and Financial
Condition

Cash used in operating activities was
$11.8 million for the three-month period ended
March 31, 2002 compared with $14.9 million in the
prior year. The use of cash was required to fund the production
of several major contracts such as Bradley Fighting vehicles,
Crusader program, and Assault Amphibious Vehicles for Korea and
Italy.

Cash used in investing activities was
$6.5 million for the three month period ended
March 31, 2002, compared with $1.6 million in the
prior year. The purchase of Cell ITS AB resulted in the primary
use of cash. Expenditures for computer equipment and software
represent the capital expenditure component of cash used for
investing activities.

Cash used in financing activities was
$7.6 million for the three-month period ended
March 31, 2002, compared with $34.8 million during the
same period in 2001. The primary use of cash used in financing
activities was for debt repayments.

Based on current levels of operations and
anticipated growth, we believe that our cash from operations,
together with other available sources of liquidity, including
borrowings available under the revolving credit facility, will
be sufficient to fund anticipated capital expenditures and make
required payments of principal and interest on debt, including
payments due under our senior credit facility for the
foreseeable future. Our growth and acquisition strategy,
however, may require substantial additional capital, and no
assurance can be given that we will be able to raise any
necessary additional funds through bank financing or the
issuance of equity or debt securities on terms acceptable to us,
if at all.



|        |                                                                             
|------- | ----------------------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures
	About Market Risk  March 31, 2002

All of our financial instruments that are
sensitive to market risk are entered into for purposes other
than trading.

Forward Currency Exchange Risk

We conduct some of our operations outside the
U.S. in functional currencies other than the U.S. dollar. To
mitigate the risk associated with fluctuating currencies on
short-term foreign currency-denominated transactions, Bofors
Defence enters into foreign currency forward exchange contracts.
We do not enter into foreign currency forward exchange contracts
for trading purposes. The following table provides information
concerning the U.S. dollar functional currency of Bofors
forward exchange contracts at March 31, 2002. The table
presents the U.S. dollar equivalent notional amounts and
weighted average contractual exchange rates by

11



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##### 



expected maturity dates. These notional amounts
generally are used to calculate the contractual payments to be
exchanged under the contract.


|                                                          |                                   |                                  |        |       |  |      |       |       |  |            |       |      |  |   |        |       |  |   |        |  | 
|--------------------------------------------------------- | --------------------------------- | -------------------------------- | ------ | ----- |  | ---- | ----- | ----- |  | ---------- | ----- | ---- |  | - | ------ | ----- |  | - | ------ |  | 
|                                                          |                                   |                                  |        |       |  |     
|                                                          |                                   | Expected Maturity Date           |        |       |  |     
|                                                          |                                   |                                  |        |       |  |     
|                                                          |                                   | 2002                             |        | 2003  |  | 2004 |       | Total |  | Fair Value
|                                                          |                                   |                                  |        |       |  |      |       |       |  |           
|                                                          |                                   |                                 
|                                                          |                                   | (U.S. $ equivalent in thousands)
|Receive Swedish krona/pay U.S. dollars Contract
	amount   |                                   | $                                | 10,606 |       |  | $    |      |       |  | $          |      |      |  | $ | 10,606 |       |  | $ | 10,824 | 
|                                                          | Average contractual exchange rate |                                  |        | 10.16 |  |      |       |      |  |            |       |     |  |   |        | 10.16 |  |   |        |  | 
|Receive British pounds/pay Swedish krona
	Contract amount |                                   | $                                | 3,226  |       |  | $    |      |       |  | $          |      |      |  | $ | 3,226  |       |  | $ | 3,261  | 
|                                                          | Average contractual exchange rate |                                  |        | 14.69 |  |      |       |      |  |            |       |     |  |   |        | 14.69 |  |   |        |  | 
|Receive euro/pay Swedish krona
	Contract amount           |                                   | $                                | 1,752  |       |  | $    |      |       |  | $          |      |      |  | $ | 1,752  |       |  | $ | 1,799  | 
|                                                          | Average contractual exchange rate |                                  |        | 8.79  |  |      |       |      |  |            |       |     |  |   |        | 8.79  |  |   |        |  | 
|Receive U.S. dollars/pay Swedish krona Contract
	amount   |                                   | $                                | 28     |       |  | $    |      |       |  | $          |      |      |  | $ | 28     |       |  | $ | 27     | 
|                                                          | Average contractual exchange rate |                                  |        | 10.52 |  |      |       |      |  |            |       |     |  |   |        | 10.52 |  |   |        |  | 
|Receive Swedish krona/pay euro
	Contract amount           |                                   | $                                |       |       |  | $    | 2,731 |       |  | $          | 2,731 |      |  | $ | 5,462  |       |  | $ | 5,243  | 
|                                                          | Average contractual exchange rate |                                  |        |       |  |      |       | 9.54  |  |            |       | 9.54 |  |   |        | 9.54  |  |   |        |  | 

Interest Rate Risk

Borrowings under our senior secured credit
facility are sensitive to changes in interest rates. The
weighted average interest rate on our borrowings outstanding
under the senior secured credit facility as of March 31,
2002 was 4.85%.

In January 2002, we entered into an interest rate
protection agreement to mitigate risks associated with variable
interest rate borrowings under our senior secured credit
facility. The notional amount of this interest rate swap
agreement is $173 million. We entered into this agreement
as a hedge to manage interest costs and risks associated with
fluctuating interest rates. The agreement entitles us to pay a
base interest rate amount of 3.45%, in return for the right to
receive a floating interest rate which is based on three-month
LIBOR as of each quarterly measurement date. In the event the
three-month LIBOR at the measurement date exceeds 6%, the base
interest rate is adjusted to the then effective LIBOR up to a
maximum of 8%. The net cash amounts paid or received on the
agreement are accrued and recognized as an adjustment to
interest expense. The change in fair value of the interest rate
swap agreement was $1.3 million and is included in other
assets and comprehensive income in stockholders equity.

12



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##### 



PART II



OTHER INFORMATION


March 31, 2002

Item 1.     Legal
Proceedings

We are subject to claims and lawsuits arising in
the ordinary course of business. Management believes that the
outcome of any such proceedings to which we are 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.

13



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##### 



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: May 1, 2002

14