The financial statements of the UIC 401(k) Retirement Savings Plan (the Plan) have been prepared on the accrual basis of accounting.
Investments in mutual funds are reported at current redemption value. Investments in common stocks, including the United Industrial Corporation (UIC, the Company or Employer) Common Stock, are reported at fair value, based on published market prices. Listed securities for which no sale was reported on that date are valued at the average of the last reported bid and ask prices. Participant loans represent the outstanding principal balances of the loans and are valued at cost, which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
The UIC Common Stock Fund (the Fund) is tracked on a unitized basis. The Fund consists of UIC common stock and funds held in the Fidelity Cash Reserves Fund sufficient to meet the Fund’s daily cash needs. Unitizing the Fund allows for daily trades. The value of a unit reflects the combined market value of UIC common stock and the cash investments held by the Fund. At December 31, 2003, 164,199 units were outstanding with a net asset value of $19.90 per unit (126,252 units were outstanding with a value of $17.73 per unit at December 31, 2002).
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates that affect amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
The Plan is a defined contribution plan. The purpose of the Plan is to encourage employees to save regularly and to provide additional funds upon retirement. United Industrial Corporation is the named fiduciary, which controls and manages the operations of the Plan and designated the UIC 401(k) Retirement Savings Plan Committee as the Plan Administrator. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Additional information about the Plan and the eligibility, vesting and benefit provisions is contained in the Plan document. Copies are available from the Company’s Human Resources department.
Eligibility
Full-time employees are eligible to participate in the Plan at anytime, following attainment of age 18. Part-time employees who have attained the age of 18 are eligible to participate in the Plan upon completion of 1,000 hours of service during their first 12 months of employment. If 1,000 hours of service are not completed during the first 12 months of employment, part-time employees may participate when they have completed 1,000 hours of service in any Plan year beginning after their date of hire.
Contributions
Participating employees contribute to the Plan on a pre-tax basis through payroll deductions, in amounts of at least 2% up to the annual Internal Revenue Service (IRS) limit. In addition, participating employees who turn 50 in any calendar year may elect to make catch-up contributions to the Plan up to the annual IRS limit ($2,000 for 2003).
Employer matching contributions are based on the participants’ years of service as of January of the Plan year in which Employer matching contributions are made, in an amount equal to a percentage of compensation contributed as salary reduction contributions, up to a maximum range between 3% and 8% (subject to the maximum percentage of compensation permitted by the Plan).
In lieu of the foregoing, certain participants’ Employer matching contributions are 50% of the employees’ salary reduction contributions up to 6% of compensation. Additionally, these same participants who have at least one hour of service during the year are eligible for an Employer contribution equal to 3% of compensation plus 3% of compensation in excess of the Social Security taxable wage base, as defined. This latter contribution amounted to approximately $157,000 in 2003, of which approximately $151,000 is receivable at December 31, 2003.
Upon enrollment, participants may direct employee and employer contributions in 1% increments to any of the Plan’s 15 investment fund options, one of which is a self-directed brokerage account, and another is a group of funds called the Fidelity Freedom Funds. Two investment options, the Templeton Foreign A Fund and the Invesco Total Return Fund are frozen for any further contributions. Generally, participants may change their investment options at any time.
Vesting
Effective January 1, 2001, participants are immediately 100% vested in Employer contributions.
Employer contributions received prior to January 1, 2001 vest according to a five-year vesting schedule.
Participants are immediately vested in their pretax salary reduction plus earning thereon.
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Payment of Benefits
Upon termination of service or attainment of 59-1/2 years of age, participants may elect to receive a lump-sum distribution equal to their vested account balance. Participants may also receive hardship withdrawals, subject to certain restrictions as defined in the Plan document.
A participant’s beneficiary is entitled to a lump-sum distribution of the participant’s vested account balance, if not yet distributed to the participant, following the participant’s death. If the value of a participant’s vested account balance is $5,000 or less, such benefit will be automatically distributed following the participant’s termination of service.
Participant Loans
Participants may borrow from their plan accounts up to 50% of their vested account balance subject to a minimum of $1,000 and a maximum of $50,000. The loans are secured by the balance in the participant’s account and bear interest at a rate determined by the Company. Principal and interest is paid ratably through payroll deductions and must be repaid over a period not to exceed sixty months, except in the case of loans incurred for the purchase of a primary residence where the term may be up to fifteen years.
Participant Accounts
Each participant account is credited with the participant’s contributions, the Employer’s contributions and allocation of investment income or loss based on account balances. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account.
Administrative Expenses
The Company paid administrative expenses associated with the Plan, including the amount paid to Fidelity Institutional Retirement Service Company for acting as trustee of the investments of the Plan, of $36,606 in 2003.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA.
Risk and Uncertainties
The Plan is comprised of investments in mutual funds and other investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with certain investment securities, it is possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported therein the statements of net assets available for benefits.
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3. Investments
All Plan assets are participant directed.
During 2003, the Plans’ investments (including investments bought, sold, and held during the year) appreciated in aggregate fair value as determined by quoted market prices as follows:
Mutual funds | | $ | 15,118,060 | |
United Industrial Corporation common stock fund | | | 397,146 | |
Other common stocks | | | (18,000 | ) |
| |
|
| |
| | $ | 15,497,206 | |
| |
|
| |
Investments that represent 5% or more of fair value of the Plans’ net assets are as follows:
| | December 31 | |
| |
| |
| | 2003 | | 2002 | |
| |
| |
| |
Fidelity Magellan Fund | | $ | 34,778,893 | | $ | 27,138,513 | |
Fidelity Managed Income Portfolio | | $ | 21,318,877 | | $ | 19,780,448 | |
Fidelity Growth & Income Fund | | $ | 15,172,477 | | $ | 12,121,861 | |
Fidelity Contrafund | | $ | 12,655,475 | | $ | 9,899,159 | |
Fidelity Low Priced Stock Fund | | $ | 6,379,854 | | | | |
The market volatility of equity based investments can substantially impact the value of such investments at any given time. It is possible the value of the Plan’s investments, both in total and in individual participant accounts, has declined since December 31, 2003.
4. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service dated October 2, 2002, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the Code) and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax-exempt.
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5. Differences Between Financial Statements and Form 5500
The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:
| | December 31 | |
| |
| |
| | 2003 | | 2002 | |
| |
| |
| |
Net assets available for benefits per the financial statements | | $ | 114,263,308 | | $ | 89,310,780 | |
Amounts allocated to withdrawn participants | | | 0 | | | (260 | ) |
| |
|
| |
|
| |
Net Assets available for benefits per Form 5500 | | $ | 114,263,308 | | $ | 89,310,520 | |
| |
|
| |
|
| |
Amounts allocated to withdrawn participants are recorded on the Form 5500 for benefit claims that have been processed and approved for payment prior to year-end 2002, but not yet paid.
The following is a reconciliation of the benefits paid to participants per the financial statements to the Form 5500 for the year ended December 31, 2003:
Benefits paid to participants per the financial statements | | $ | 4,772,121 | |
Less: Amounts allocated to withdrawn participants at December 31, 2002 | | | 260 | |
| |
|
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Benefits paid to participants per the Form 5500 | | $ | 4,771,861 | |
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|
| |
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UIC 401 (k) Retirement Savings Plan
EIN: 95-2081809
Plan #002
Schedule H, Line 4i
Schedule of Assets Held
End of Year
(December 31, 2003)
| | Description of Investment
Including Maturity Date,
Rate of Interest, Collateral
Par or Maturity Value | | Cost** Current Value | |
| |
| |
| |
*Fidelity Magellan Fund | | | 355,831 | | | Shares | | $ | 34,778,893 | |
*Fidelity Managed Income Portfolio | | | 21,318,877 | | | Shares | | | 21,318,877 | |
* Fidelity Retirement Government Money Market Fund | | | 3,394,251 | | | Shares | | | 3,394,251 | |
* Fidelity Growth & Income Fund | | | 425,834 | | | Shares | | | 15,172,477 | |
* Fidelity Contrafund | | | 256,443 | | | Shares | | | 12,655,475 | |
* Fidelity Investment Grade Bond Fund | | | 531,899 | | | Shares | | | 4,015,839 | |
* Fidelity Diversified International Fund | | | 63,818 | | | Shares | | | 1,539,294 | |
Alger Mid Cap Growth Fund | | | 141,987 | | | Shares | | | 2,169,568 | |
* Fidelity Low Priced Stock Fund | | | 182,386 | | | Shares | | | 6,379,854 | |
Spartan US Equity Index | | | 69,727 | | | Shares | | | 2,747,959 | |
Janus Balance Fund | | | 50,135 | | | Shares | | | 999,683 | |
Janus Mercury Fund | | | 53,670 | | | Shares | | | 1,046,560 | |
* Fidelity Freedom Income Fund | | | 982 | | | Shares | | | 10,888 | |
* Fidelity Freedom 2000 Fund | | | 25,667 | | | Shares | | | 302,354 | |
* Fidelity Freedom 2010 Fund | | | 34,662 | | | Shares | | | 451,296 | |
* Fidelity Freedom 2020 Fund | | | 7,991 | | | Shares | | | 104,043 | |
* Fidelity Freedom 2030 Fund | | | 2,842 | | | Shares | | | 36,801 | |
* Fidelity Freedom 2040 Fund | | | 1,704 | | | Shares | | | 12,880 | |
Templeton Foreign A Fund | | | 9,919 | | | Shares | | | 105,543 | |
Invesco Total Return Fund | | | 5,277 | | | Shares | | | 126,338 | |
| | | | | | | |
|
| |
| | | | | | | | | 107,368,873 | |
| | | | | | | | | | |
*United Industrial Corporation Common Stock Fund | | | 164,199 | | | Units | | | 3,160,417 | |
| | | | | | | | | | |
*Fidelity Cash Reserves Fund | | | 107,137 | | | Shares | | | 107,137 | |
| | | | | | | | | | |
Self-directed brokerage accounts | | | | | | | | | 1,188,574 | |
| | | | | | | | | | |
* Participant loans | | | Interest rates from
4.0% - 4.25%:
Maturities to February 2019 | | | 2,287,717 | |
| | | | | | | |
|
| |
| | | | | | | | $ | 114,112,718 | |
| | | | | | | |
|
| |
* Party-in-Interest
** Historical cost has not been presented as all Investments are participant directed
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the 401(k) Committee of the United Industrial Corporation 401(k) Retirement Savings Plan (the “Plan”), which administers the Plan, has duly caused this annual report to be signed on its behalf by the undersigned, hereunto duly authorized, on the 28th day of June, 2004.
| By: | /s/ JAMES H. PERRY |
|
|
| James H. Perry |
| Committee Member |
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EXHIBIT INDEX
Exhibit No. | | Description |
| |
| |
23.1 | | Consent of Independent Registered Public Accounting Firm |
| | |
23.2 | | Consent of Independent Registered Public Accounting Firm |
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