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Army Issues Notice of Crusader Contract Cancellation;
United Defense Awarded Contract to Develop New Cannon Artillery
System for the U.S. Army Contact: Jeff Van Keuren, Public Affairs ARLINGTON, VA, August 9, 2002 - United Defense Industries, Inc. (NYSE: UDI) announced today that it received formal notice from the U.S. Army that its Crusader contract had been terminated for the convenience of the government. The termination notice constitutes the Army's implementation of the decision of the Secretary of Defense, announced on May 8, 2002, that the program would be cancelled. The termination is effective immediately and essentially ends all further work on the Crusader program by United Defense and its subcontractors. United Defense also announced it received a contract from the U.S. Army for a new cannon artillery system and its re-supply vehicle. This new artillery system is expected to be the first demonstration of ground combat platforms for the Army's transformation to its long-term future combat force, known as the Objective Force. It reflects Chief of Staff of the Army General Eric Shinseki's assessment that the Army "cannot fully employ objective force operational concepts without this capability [Future Combat System Cannon]." "United Defense and its industry partners welcome the new contract and the challenge of bringing the technological advances matured in the Crusader program to the Objective Force and the Future Combat System," said Keith Howe, Vice President and General Manager of United Defense's Armament Systems Division. "The contract recognizes the tremendous capability and the performance of the over 2,200 employees nationwide that brought Crusader to the Army's Proving Ground and who will now focus their energies and talents on the need to field a less than 20-ton system to the Army by 2008." United Defense and the companies of the Crusader team will now work with the Army to transition many of the more than two dozen cutting edge technologies developed over the past 8 years into the lighter, more deployable and lethal Objective Force Cannon, which is also known as the Non-Line-of-Sight (NLOS) cannon. Work for the remainder of the Government's current fiscal year (2002) will be done under the new $27 million contract. The House and Senate in their respective appropriations bills agreed to provide $368.5 million in funding for fiscal 2003 for the new cannon system. However, the availability of additional funding for the new system will depend upon further legislative action once Congress returns from recess in September, as well as follow-up by the Army and perhaps the Department of Defense. The Objective Force Cannon and the new contract are the result of the efforts of Congress, the Army and industry to highlight the pressing need for organic, indirect fire support for future Army forces in light of the Department of Defense decision to terminate the Crusader program. The analysis presented to the Congress by the Army and the testimony of Army leaders convinced members that an urgent requirement continues to exist for responsive, all-weather, organic cannon artillery and a new howitzer must be fielded by 2008. United Defense indicated that for the year 2002, the combination of the Crusader cancellation and the new cannon contract was not expected to have a significant impact on the company's revenues, profits, or funded contract backlog. The Company also noted that, beyond 2002, the longer-term financial impact of the Crusader and Objective Force cannon developments would depend upon the results of what may be an extended negotiation with the Army over the costs of terminating the Crusader program, as well as whether the Army and Congress continue to support the new cannon system in future years. About United Defense IInformation in this release may involve guidance, expectations, beliefs, plans, intentions or strategies regarding the future. These forward-looking statements involve risks and uncertainties. United Defense information in this release may involve guidance, expectations, beliefs, plans, intentions or strategies regarding the future. These forward-looking statements involve risks and uncertainties. All forward-looking statements included in this release are based upon information available to United Defense Industries, Inc. as of the date of the release, and we assume no obligation to update any such forward-looking statements. The statements in this release are not guarantees of future performance and actual results could differ materially from our current expectations. Numerous factors could cause or contribute to such differences. Please refer to the Company's registration statement dated December 13, 2001 on Form S-1 and in our other reports filed from time to time with the Securities and Exchange Commission for a further discussion of the factors and risks associated with our business.
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