SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ Commission File # 1-4252 UIC 401(K) RETIREMENT SAVINGS PLAN (Full title of the plan) UNITED INDUSTRIAL CORPORATION (Name of the issuer of the securities held pursuant to the plan) United Industrial Corporation 570 Lexington Avenue New York, New York 10022 (Address of principal executive office) REQUIRED INFORMATION Item 4. - ------- The financial statements and schedules of the UIC 401(k) Retirement Savings Plan for the year ended December 31, 1998 (attached). Exhibits - ------- 23.1 Consent of Ernst & Young LLP. 2 AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES UIC 401(K) RETIREMENT SAVINGS PLAN Years ended December 31, 1998 and 1997 with Report of Independent Auditors UIC 401(k) Retirement Savings Plan Audited Financial Statements and Supplemental Schedules Years ended December 31, 1998 and 1997 CONTENTS Report of Independent Auditors...........................................1 Audited Financial Statements Statements of Net Assets Available forBenefits...........................2 Statements of Changes in Net Assets Available forBenefits................3 Notes to Financial Statements............................................4 Supplemental Schedules Line27a--Schedule of AssetsHeld for Investment Purposes.................12 Line27d--Schedule of Reportable Transactions............................13 Report of Independent Auditors Administrative Committee UIC 401(k) Retirement Savings Plan We have audited the accompanying statements of net assets available for benefits of the UIC 401(k) Retirement Savings Plan as of December 31, 1998 and 1997, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 1998 and 1997, and the changes in its net assets available for benefits for the years then ended, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment purposes as of December 31, 1998, and reportable transactions for the year then ended, are presented for the purpose of additional analysis and are not a required part of the financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan's management. The supplemental schedules have been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Ernst & Young LLP Baltimore Maryland May 28, 1999 UIC 401(k) Retirement Savings Plan Statements of Net Assets Available for Benefits DECEMBER 31 1998 1997 ------------------------------------ ASSETS Investments, stated at fair value: Cash $ 14,308 $ 18,894 Fidelity Magellan Fund 38,403,907 29,569,273 Fidelity Managed Income Portfolio 18,921,786 18,245,430 Fidelity Retirement Government Money Market Fund 2,264,569 1,776,549 Fidelity Growth & Income Fund 18,374,335 14,254,151 Fidelity Contrafund 10,069,014 8,190,740 Fidelity Investment Grade Bond Fund 1,488,388 754,347 United Industrial Corporation Common Stock 721,297 801,651 Templeton Foreign A Fund 311,828 - Invesco Total Return Fund 434,338 - Fidelity Low Priced Stock Fund 607,929 - Spartan US Equity Index Fund 1,235,645 - Participant loans 2,037,716 1,707,539 ------------------------------------ Total investments 94,885,060 75,318,574 ------------------------------------ Net assets available for benefits $ 94,885,060 $ 75,318,574 ==================================== See accompanying notes. 2 UIC 401(k) Retirement Savings Plan Statements of Changes in Net Assets Available for Benefits YEAR ENDED DECEMBER 31 1998 1997 ------------------------------------ ADDITIONS Employee contributions $ 5,354,917 $ 5,138,123 Employer contributions 1,878,406 1,491,546 Rollover contributions 312,671 135,149 Investment income: Fidelity Magellan Fund 1,785,532 1,931,746 Fidelity Managed Income Portfolio 1,044,674 1,089,631 Fidelity Retirement Government Money Market Fund 98,619 83,322 Fidelity Growth & Income Fund 987,918 653,678 Fidelity Contrafund 741,751 767,190 Fidelity Investment Grade Bond Fund 73,397 39,013 United Industrial Corporation Stock Fund 31,745 20,466 Templeton Foreign A Fund 30,540 - Invesco Total Return Fund 18,795 - Fidelity Low Priced Stock Fund 49,758 - Spartan US Equity Index Fund 14,655 - Interest on loans to participants 181,391 159,329 ------------------------------------ Total investment income 5,058,775 4,744,375 ------------------------------------ 12,604,769 11,509,193 DEDUCTIONS Withdrawals (5,649,872) (6,606,396) Net realized and unrealized appreciation in aggregate fair value of investments 12,611,589 8,028,130 ------------------------------------ Net increase 19,566,486 12,930,927 Net assets available for benefits at beginning of year 75,318,574 62,387,647 ------------------------------------ Net assets available for benefits at end of year $ 94,885,060 $ 75,318,574 ==================================== See accompanying notes. 3 UIC 401(k) Retirement Savings Plan Notes to Financial Statements December 31, 1998 1. SIGNIFICANT ACCOUNTING POLICIES Investments in mutual funds are reported at current redemption value. The United Industrial Corporation Common Stock is reported at fair value, based on published market prices. Participant loans represent the outstanding principal balances of the loans and are valued at cost, which approximates fair value. The change in the difference between cost and fair value is reflected in the statements of changes in net assets available for benefits as net unrealized appreciation (depreciation) in the aggregate fair value of investments. The realized gain or loss on investments is the difference between the proceeds and the specific cost of the investments. Rollover contributions represent transfers from other qualified retirement plans. Administrative expenses associated with the UIC 401(k) Retirement Savings Plan (the "Plan"), including the amount paid to Fidelity Management Trust Co. for acting as custodian of the investments of the Plan, were paid by United Industrial Corporation (the "Company") in 1998 and 1997. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates that affect amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform to current year presentation. 2. DESCRIPTION OF THE PLAN 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. Contributions are made by employees through payroll deductions and submitted to Fidelity Management Trust Company Cash Reserve Fund, then subsequently deposited in the investment option account(s) selected by the employee. The Company matches employees' contributions in an amount equal to the lesser of 50% of salary deferrals or 4% of Compensation, as defined in the Plan Document. Effective January 1, 1998, the Plan was amended to repeal the profit sharing provision of employer contributions. 4 UIC 401(k) Retirement Savings Plan Notes to Financial Statements (continued) 2. DESCRIPTION OF THE PLAN (CONTINUED) Employer contributions on the statement of changes in net assets available for benefits for the year ended December 31, 1998 include approximately $350,000 of profit sharing contributions related to 1997. Employer contributions are vested after five years of service. The Company is the named fiduciary which controls and manages the operations of the Plan and acts as Administrator. All employees aged 21 or more who have completed one year of continuous employment, consisting of at least 1,000 hours, with the Company (including its participating subsidiaries) are eligible to participate in the Plan. Participating employees contribute to the Plan through payroll deductions in amounts ranging from 2% to 15% of their earnings up to the annual IRS limit. Contributions to the Plan are invested in the available investment options in accordance with the participants' elections. All employee contributions to the Plan are immediately vested. The Company has the right to terminate the Plan at any time. In the event of a termination, the participants accounts shall be distributed to them in cash or in property or in any combination of cash and property. Additional information about the Plan and the vesting and benefit provisions is contained in the Summary Plan Description of the UIC 401(k) Retirement Savings Plan. Copies are available from the Human Resources Department of the Company. 3. INCOME TAX STATUS The Plan has received a determination letter from the Internal Revenue Service dated January 16, 1996, 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. 4. RECONCILIATION TO FORM 5500 Total Plan earnings on investments, as reported on Form 5500 lines 32 b (1) through (10), has been reported as Net realized and unrealized appreciation in aggregate fair value of investments and as investment income in the accompanying financial statements. 5 UIC 401(k) Retirement Savings Plan Notes to Financial Statements (continued) 5. STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION DECEMBER 31, 1998 FIDELITY FIDELITY RETIREMENT FIDELITY FIDELITY MANAGED GOVERNMENT FIDELITY INVESTMENT UIC MAGELLAN INCOME MONEY MARKET GROWTH & FIDELITY GRADE BOND FUNDCOMMON STOCK FUND PORTFOLIO FUND INCOME FUND CONTRAFUND FUND LOAN FUND ------------------------------------------------------------------------------------------------------------------ Investments at fair value: Cash $ - $ - $ - $ - $ - $ - $ 14,308 $ - Mutual Funds 38,403,907 18,921,786 2,264,569 18,374,335 10,069,014 1,488,388 - - UIC Common Stock - - - - - - 721,297 - Participant loans - - - - - - - 2,037,716 ------------------------------------------------------------------------------------------------------------------ Net assets available for benefits $38,403,907 $18,921,786 $2,264,569 $18,374,335 $10,069,014 $1,488,388 $ 735,605 $2,037,716 ================================================================================================================== DECEMBER 31, 1997 FIDELITY FIDELITY RETIREMENT FIDELITY FIDELITY MANAGED GOVERNMENT FIDELITY INVESTMENT UIC MAGELLAN INCOME MONEY MARKET GROWTH & FIDELITY GRADE BOND FUNDCOMMON STOCK FUND PORTFOLIO FUND INCOME FUND CONTRAFUND FUND LOAN FUND ------------------------------------------------------------------------------------------------------------------ Investments at fair value: Cash $ - $ - $ - $ - $ - $ - $ 18,894 $ - Mutual Funds 29,569,273 18,245,430 1,776,549 14,254,151 8,190,740 754,347 - - UIC Common Stock - - - - - - 801,651 - Participant loans - - - - - - - 1,707,539 ------------------------------------------------------------------------------------------------------------------ Net assets available for benefits $29,569,273 $ 18,245,430 $1,776,549 $14,254,151 $8,190,740 $754,347 $820,545 $1,707,539 ================================================================================================================== 6 UIC 401(k) Retirement Savings Plan Notes to Financial Statements (continued) 5. STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION (CONTINUED) DECEMBER 31, 1998 FIDELITY SPARTAN TEMPLETON INVESCO LOW PRICED US FOREIGN TOTAL STOCK EQUITY A FUND RETURN FUND FUND INDEX FUND TOTAL -------------------------------------------------------------------------- Investments at fair value: Cash $ - $ - $ - $ - $ 14,308 Mutual Funds 311,828 434,338 607,929 1,235,645 92,111,739 UIC Stock - - - - 721,297 Participant loans - - - - 2,037,716 -------------------------------------------------------------------------- Net assets available for benefits $ 311,828 $ 434,338 $ 607,929 $1,235,645 $94,885,060 ========================================================================== DECEMBER 31, 1997 FIDELITY SPARTAN TEMPLETON INVESCO LOW PRICED US FOREIGN TOTAL STOCK EQUITY A FUND RETURN FUND FUND INDEX FUND TOTAL -------------------------------------------------------------------------- Investments at fair value: Cash $ - $ - $ - $ - $ 18,894 Mutual Funds - - - - 72,790,490 UIC Common Stock - - - - 801,651 Participant loans - - - - 1,707,539 -------------------------------------------------------------------------- Net assets available for benefits $ - $ - $ - $ - $75,318,574 ========================================================================== 7 UIC 401(k) Retirement Savings Plan Notes to Financial Statements (continued) 6. STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION YEAR ENDED DECEMBER 31, 1998 -------------------------------------------------------------------------------------------------------------- FIDELITY FIDELITY RETIREMENT FIDELITY FIDELITY MANAGED GOVERNMENT FIDELITY INVESTMENT UIC MAGELLAN INCOME MONEY GROWTH & FIDELITY GRADE BOND COMMON FUND PORTFOLIO MARKET FUND INCOME FUND CONTRAFUND FUND STOCK FUND LOAN FUND -------------------------------------------------------------------------------------------------------------- ADDITIONS Employee contributions $ 1,659,799 $ 945,008 $ 189,532 $1,240,480 $ 747,702 $ 155,534 $105,693 $ - Employer contributions 559,744 366,030 121,435 397,542 256,341 69,440 34,567 - Rollover contributions 79,483 25,444 44,473 35,743 41,806 23,988 5,787 - Investment income 1,785,532 1,044,674 98,619 987,918 741,751 73,397 31,745 181,391 -------------------------------------------------------------------------------------------------------------- 4,084,558 2,381,156 454,059 2,661,683 1,787,600 322,359 177,792 181,391 DEDUCTIONS Withdrawals (2,000,196) (1,152,624) (403,846) (1,431,990) (462,120) (62,452) (35,086) (63,621) Net realized and unrealized (depreciation) appreciation in aggregate fair value of investments 7,889,470 - - 3,055,444 1,685,557 17,705 (55,287) - Interfund transfers (1,139,198) (552,176) 437,807 (164,953) (1,132,763) 456,429 (172,359) 212,407 -------------------------------------------------------------------------------------------------------------- Net increase (decrease) 8,834,634 676,356 488,020 4,120,184 1,878,274 734,041 (84,940) 330,177 Net assets available for benefits at beginning of year 29,569,273 18,245,430 1,776,549 14,254,151 8,190,740 754,347 820,545 1,707,539 -------------------------------------------------------------------------------------------------------------- Net assets available for benefits at end of year $38,403,907 $18,921,786 $2,264,569 $18,374,335 $10,069,014 $1,488,388 $735,605 $2,037,716 ============================================================================================================== 8 UIC 401(k) Retirement Savings Plan Notes to Financial Statements (continued) 6. STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION (CONTINUED) YEAR ENDED DECEMBER 31, 1998 -------------------------------------------------------------------------- TEMPLETON INVESCO FIDELITY SPARTAN FOREIGN TOTAL LOW PRICED US EQUITY A FUND RETURN FUND STOCK FUND INDEX FUND TOTAL --------------------------------------------------------------------------- ADDITIONS Employee contributions $ 42,759 $ 45,176 $ 91,728 $ 131,506 $ 5,354,917 Employer contributions 10,990 12,889 19,469 29,959 1,878,406 Rollover contributions 3,604 7,208 7,208 37,927 312,671 Investment income 30,540 18,795 49,758 14,655 5,058,775 --------------------------------------------------------------------------- 87,893 84,068 168,163 214,047 12,604,769 DEDUCTIONS Withdrawals (794) (25,251) (7,635) (4,257) (5,649,872) Net realized and unrealized (depreciation) appreciation in aggregate fair value of investments (61,537) 12,467 (76,576) 144,346 12,611,589 Interfund transfers 286,266 363,054 523,977 881,509 - --------------------------------------------------------------------------- Net increase 311,828 434,338 607,929 1,235,645 19,566,486 Net assets available for benefits at beginning of year - - - - 75,318,574 --------------------------------------------------------------------------- Net assets available for benefits at end of year $ 311,828 $ 434,338 $ 607,929 $1,235,645 $ 94,885,060 =========================================================================== 9 UIC 401(k) Retirement Savings Plan Notes to Financial Statements (continued) 6. STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION (CONTINUED) YEAR ENDED DECEMBER 31, 1997 -------------------------------------------------------------------------------------- FIDELITY FIDELITY RETIREMENT FIDELITY FIDELITY MANAGED GOVERNMENT FIDELITY INVESTMENT MAGELLAN INCOME MONEY GROWTH & FIDELITY GRADE BOND FUND PORTFOLIO MARKET FUND INCOME FUND CONTRAFUND FUND -------------------------------------------------------------------------------------- ADDITIONS Employee contributions $ 1,711,164 $ 1,125,415 $ 198,524 $ 1,161,161 $ 738,627 $131,652 Employer contributions 474,114 339,193 104,766 301,981 207,041 43,912 Rollover contributions 48,493 261 11,900 49,131 24,639 725 Investment income 1,931,746 1,089,631 83,322 653,678 767,190 39,013 -------------------------------------------------------------------------------------- 4,165,517 2,554,500 398,512 2,165,951 1,737,497 215,302 DEDUCTIONS Withdrawals (2,897,011) (2,094,884) (214,493) (827,567) (459,255) (29,029) Net realized and unrealized appreciation in aggregate fair value of investments 4,536,295 - - 2,518,129 613,067 16,639 Interfund transfers (1,366,404) (883,327) 60,031 878,604 1,115,982 69,918 -------------------------------------------------------------------------------------- Net increase (decrease) 4,438,397 (423,711) 244,050 4,735,117 3,007,291 272,830 Net assets available for benefits at beginning of 25,130,876 18,669,141 1,532,499 9,519,034 5,183,449 481,517 year -------------------------------------------------------------------------------------- Net assets available for benefits at end of year $29,569,273 $18,245,430 $1,776,549 $14,254,151 $8,190,740 $754,347 ====================================================================================== TABLE CONTINUED...... ---------------------------------------- UIC COMMON STOCK FUND LOAN FUND TOTAL ---------------------------------------- ADDITIONS Employee contributions $ 71,580 $ - $ 5,138,123 Employer contributions 20,539 - 1,491,546 Rollover contributions - - 135,149 Investment income 20,466 159,329 4,744,375 ---------------------------------------- 112,585 159,329 11,509,193 DEDUCTIONS Withdrawals (29,037) (55,120) (6,606,396) Net realized and unrealized appreciation in aggregate fair value of investments 344,000 - 8,028,130 Interfund transfers 75,225 49,971 - ---------------------------------------- Net increase (decrease) 502,773 154,180 12,930,927 Net assets available for benefits at beginning of 317,772 1,553,359 62,387,647 year ---------------------------------------- Net assets available for benefits at end of year $820,545 $1,707,539 $75,318,574 ======================================== 10 UIC 401(k) Retirement Savings Plan Notes to Financial Statements (continued) 7. YEAR 2000 (UNAUDITED) The Plan Sponsor has determined that it will be necessary to take certain steps in order to ensure that the Plan's information systems are prepared to handle year 2000 dates. The Plan Sponsor is taking a two phase approach. The first phase addressed internal systems that must be modified or replaced to function properly. Both internal and external resources were utilized to replace or modify existing software applications, and test the software and equipment for the year 2000 modifications. The Plan Sponsor anticipates substantially completing this phase of the project by September 1999. Costs associated with modifying software and equipment were not significant and were paid by the Plan Sponsor. For the second phase of the project, Plan management established formal communications with its third party service providers to determine that they have developed plans to address their own year 2000 problems as they relate to the Plan's operations. All third party service providers have indicated that they will be year 2000 compliant by mid-year 1999. If modification of data processing systems of either the Plan, the Plan Sponsor, or its service providers are not completed timely, the year 2000 problem could have a material impact on the operations of the Plan. Plan management has not developed a contingency plan, because they are confident that all systems will be year 2000 ready. 11 UIC 401(k) Retirement Savings Plan EIN:95-2081809 Plan # 002 Line 27a--Schedule of Assets Held for Investment Purposes December 31, 1998 DESCRIPTION CURRENT IDENTITY OF ISSUE OF INVESTMENT COST VALUE - ------------------------------------------------------------------------------------------------------------- Fidelity Management Trust Company Cash Reserve Fund $ 14,308 $ 14,308 Fidelity Magellan Fund 317,860 Shares 25,523,741 38,403,907 Fidelity Managed Income Portfolio 18,921,785 Shares 18,921,785 18,921,786 Fidelity Retirement Government Money Market Fund 2,264,569 Shares 2,264,569 2,264,569 Fidelity Growth & Income Fund 400,836 Shares 12,299,121 18,374,335 Fidelity Contrafund 177,303 Shares 7,842,264 10,069,014 Fidelity Investment Grade Bond Fund 201,406 Shares 1,458,881 1,488,388 United Industrial Corporation Common Stock 73,508 Shares 631,003 721,297 Templeton Foreign A Fund 37,167 Shares 367,189 311,828 Invesco Total Return Fund 13,850 Shares 421,687 434,338 Fidelity Low Priced Stock Fund 26,605 Shares 669,650 607,929 Spartan US Equity Index Fund 28,108 Shares 1,098,235 1,235,645 Participant loans Interest rates from 7% to 14.5%; maturities to October, 2012 - 2,037,716 ----------------------------------- Total assets held for investment purposes $ 71,498,125 $ 94,885,060 =================================== 12 UIC 401(k) Retirement Savings Plan EIC: 95-2081809 Plan # 002 Line 27d--Schedule of Reportable Transactions Year Ended December 31, 1998 TOTAL DOLLAR VALUE TOTAL DOLLAR IDENTITY OF PARTY NUMBER OF OF NUMBER VALUE OF INVOLVED DESCRIPTION OF ASSETS PURCHASES PURCHASES OF SALES SALES NET GAIN - ----------------------------------------------------------------------------------------------------------------------------------- Category (iii)--Series of transactions in excess of 5% of plan assets - --------------------------------------------------------------------- Fidelity Investments Magellan Fund 214 $5,902,855 173 $4,957,690 $1,084,886 Fidelity Investments Contrafund 190 2,913,037 125 2,720,319 453,518 Fidelity Investments Growth & Income Fund 201 4,267,276 140 3,202,536 786,246 Fidelity Investments Managed Income Portfolio 184 4,936,804 176 4,260,449 - There were no category (i), (ii) or (iv) reportable transactions during 1998. 13 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 25th day of June, 1999. By: /s/ James H. Perry -------------------------------- James H. Perry Committee Member 3 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 23.1 Consent of Independent Auditors