10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2004
	or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from                                                                to
Commission File Number: 1-4252

UNITED INDUSTRIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware	95-2081809
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
124 Industry Lane, Hunt Valley, Maryland	21030
(Address of principal executive offices)	(Zip Code)
(410) 628-3500
(Registrant’s telephone number, including area code )
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   x No   o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes   x No   o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  12,998,151 shares of common stock as of August 1, 2004.

UNITED INDUSTRIAL CORPORATION

INDEX

			Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
		Consolidated Condensed Balance Sheets - June 30, 2004 (unaudited) and December 31, 2003	2
		Consolidated Condensed Statements of Operations (Unaudited) - Three Months and Six Months Ended June 30, 2004 and 2003	3
		Consolidated Condensed Statements of Cash Flows (Unaudited) - Six Months Ended June 30, 2004 and 2003	4
		Notes to Consolidated Condensed Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		25
Item 4.	Controls and Procedures		25
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings		26
Item 2.	Changes in Securities and Use of Proceeds		26
Item 4.	Submission of Matters to a Vote of Security Holders		26
Item 6.	Exhibits and Reports on Form 8-K		27

1

PART I - FINANCIAL INFORMATION

Item 1. - Financial Statements

UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS

(Dollars in thousands)	June 30, 2004			December 31, 2003
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	24,812		$	24,138
Trade receivables		40,637			33,377
Inventories
Finished goods and work-in-process		29,887			15,902
Materials and supplies		1,082			1,066
		30,969			16,968
Deferred income taxes		5,326			6,757
Prepaid expenses and other current assets		4,436			2,660
Assets of discontinued operations		4,763			5,089
Total Current Assets		110,943			88,989
Deferred income taxes		12,010			10,886
Other assets		7,681			7,710
Insurance receivable - asbestos litigation		20,256			20,317
Property and equipment - less accumulated depreciation (2004-$92,023; 2003-$89,372)		23,047			22,216
	$	173,937		$	150,118
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	18,133		$	10,117
Accrued employee compensation and taxes		13,440			11,920
Customer advances		3,127			2,452
Federal income taxes payable		2,854			—
Reserve for contract losses		1,795			1,681
Other current liabilities		10,827			5,654
Liabilities of discontinued operations		14,681			15,561
Total Current Liabilities		64,857			47,385
Postretirement benefits other than pension and other long-term liabilities		23,308			23,436
Minimum pension liability		8,824			6,755
Reserve for asbestos litigation		31,437			31,595
Shareholders’ Equity
Preferred stock, par value $1.00 per share; authorized 1,000,000 shares; none issued and outstanding		—			—
Common stock, par value $1.00 per share; authorized 30,000,000 shares; outstanding 12,972,518 and 13,267,218 shares at June 30, 2004 and December 31, 2003, respectively (net of shares in treasury)		14,374			14,374
Additional capital		85,212			88,125
Retained deficit		(7,925	)		(22,095	)
Treasury stock, at cost, 1,401,630 and 1,106,930 shares at June 30, 2004 and December 31, 2003, respectively		(18,665	)		(11,345	)
Accumulated other comprehensive loss		(27,485	)		(28,112	)
Total Shareholders’ Equity		45,511			40,947
	$	173,937		$	150,118

See Notes to Consolidated Condensed Financial Statements.

2

UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2004			2003			2004			2003
	(Unaudited)
Net sales	$	109,560		$	86,037		$	191,208		$	158,479
Cost of sales		82,511			68,532			147,508			126,928
Gross profit		27,049			17,505			43,700			31,551
Selling and administrative expenses		11,074			10,601			20,571			21,852
Asbestos litigation expense		—			425			—			667
Other operating expenses - net		90			81			186			161
Total operating income		15,885			6,398			22,943			8,871
Non-operating income and (expense):
Interest income		66			32			130			40
Other income		—			64			123			136
Interest expense		(13	)		—			(26	)		(24	)
Equity in net income of joint venture		45			9			60			9
Other expenses		(31	)		(17	)		(35	)		(33	)
		67			88			252			128
Income from continuing operations before income taxes		15,952			6,486			23,195			8,999
Provision for income taxes		5,734			2,292			8,360			3,167
Income from continuing operations		10,218			4,194			14,835			5,832
Loss from discontinued operations - net of income tax benefit of $102 and $693 for the three months and $358 and $1,217 for the six months ended June 30, 2004 and 2003, respectively		(190	)		(1,286	)		(665	)		(2,260	)
Net income	$	10,028		$	2,908		$	14,170		$	3,572
Basic earnings per share:
Income from continuing operations	$	0.79		$	0.32		$	1.14		$	0.45
Loss from discontinued operations		(0.01	)		(0.10	)		(0.05	)		(0.17	)
Net income	$	0.78		$	0.22		$	1.09		$	0.27
Diluted earnings per share:
Income from continuing operations	$	0.77		$	0.31		$	1.11		$	0.43
Loss from discontinued operations		(0.01	)		(0.09	)		(0.05	)		(0.17	)
Net income	$	0.76		$	0.21		$	1.06		$	0.26

See Notes to Consolidated Condensed Financial Statements.

3

UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)

	Six Months Ended June 30,
	2004			2003
	(Unaudited)
OPERATING ACTIVITIES:
Net income	$	14,170		$	3,572
Adjustments to reconcile net income to net cash provided by operating activities:
Loss from discontinued operations, net of income tax benefit		665			2,260
Pension expense		1,923			2,765
Income tax refund		—			16,822
Depreciation and amortization		2,762			2,591
Deferred income taxes		934			(594	)
Equity in net income of joint venture		(60	)		(9	)
Changes in operating assets and liabilities:
(Increase) decrease in trade receivables		(7,260	)		2,364
Increase in inventories		(14,001	)		(12,620	)
Increase in prepaid expenses and other current assets		(1,776	)		(1,026	)
Increase (decrease) in customer advances		675			(989	)
Increase in accounts payable, accruals and other current liabilities		17,677			2,864
Decrease (increase) in other assets - net		39			(128	)
Decrease in long-term liabilities		(140	)		(46	)
Net cash provided by continuing operations		15,608			17,826
Net cash used in discontinued operations		(1,219	)		(11,405	)
Net cash provided by operating activities		14,389			6,421
INVESTING ACTIVITIES:
Purchase of property and equipment		(3,482	)		(3,101	)
FINANCING ACTIVITIES:
Proceeds from exercise of stock options		2,862			1,043
Dividends paid		(2,609	)		(2,614	)
Purchase of treasury shares		(10,486	)		—
Net cash used in financing activities		(10,233	)		(1,571	)
Increase in cash and cash equivalents		674			1,749
Cash and cash equivalents at beginning of year		24,138			3,635
Cash and cash equivalents at end of period	$	24,812		$	5,384

See Notes to Consolidated Condensed Financial Statements.

4

UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Note A - Basis of Presentation

The accompanying unaudited consolidated condensed financial statements of United Industrial Corporation and subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included.  Operating results for the six-month period ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.  For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

Certain prior year balances have been reclassified to conform to the current year presentation.

Note B - Segment Information - Continuing Operations

(Dollars in thousands)	Defense		Energy		Other			Totals
Three Months Ended June 30, 2004
Revenues from external customers	$	101,561	$	7,999	$	—		$	109,560
Equity income in joint venture		45		—		—			45
Segment profit (loss)		14,536		1,464		(48	)		15,952
Income before income taxes								$	15,952
Six Months Ended June 30, 2004
Revenues from external customers	$	176,367	$	14,841	$	—		$	191,208
Equity income in joint venture		60		—		—			60
Segment profit (loss)		21,215		2,273		(293	)		23,195
Income before income taxes								$	23,195
Three Months Ended June 30, 2003
Revenues from external customers	$	78,415	$	7,622	$	—		$	86,037
Equity income in joint venture		9		—		—			9
Segment profit (loss)		6,117		805		(436	)		6,486
Income before income taxes								$	6,486
Six Months Ended June 30, 2003
Revenues from external customers	$	143,890	$	14,589	$	—		$	158,479
Equity income in joint venture		9		—		—			9
Segment profit (loss)		8,307		1,556		(864	)		8,999
Income before income taxes								$	8,999

5

Note C - Stock-Based Compensation

The Company has elected to continue to account for its stock-based compensation plans in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, whereby compensation cost for stock options is recognized in income based on the excess, if any, of the quoted market price of the stock at the grant date of the award or other measurement date over the amount an employee must pay to acquire the stock.  Had compensation cost been determined consistent with the fair value method set forth under Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation”, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure”, for all awards under the plans, net income and earnings per share from continuing operations would have decreased to the pro forma amounts indicated below:

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands, except per share data)	2004			2003			2004			2003
Income from continuing operations:
As reported	$	10,218		$	4,194		$	14,835		$	5,832
Deduct: Total employee stock-based compensation expense determined under fair value method for all awards, net of tax		(156	)		(161	)		(252	)		(354	)
Pro forma	$	10,062		$	4,033		$	14,583		$	5,478
Earnings per share from continuing operations:
As reported:
Basic	$	0.79		$	0.32		$	1.14		$	0.45
Diluted		0.77			0.31			1.11			0.43
Pro forma:
Basic	$	0.78		$	0.31		$	1.12		$	0.42
Diluted		0.76			0.29			1.09			0.40

Note D - Weighted Average Shares

	Three Months Ended June 30,				Six Months Ended June 30,
	2004		2003		2004		2003
Weighted average shares - basic		12,929,104		13,140,418		13,032,784		13,104,168
Dilutive effect of stock options		332,575		536,816		301,440		576,973
Weighted average shares - diluted		13,261,679		13,677,234		13,334,224		13,681,141

6

Note E - Other Operating Expenses - Net, Other Income, and Other Expenses

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2004			2003			2004			2003
OTHER OPERATING EXPENSES - NET
Amortization of intangibles	$	56		$	56		$	111		$	111
Amortization of facility consolidation costs		73			77			146			154
Amortization of deferred compensation liability		(24	)		(52	)		(56	)		(104	)
Other income, net		(15	)		—			(15	)		—
Total other operating expenses - net	$	90		$	81		$	186		$	161
OTHER INCOME
Royalties and commissions	$	19		$	39		$	56		$	53
(Loss) gain on sale of assets		—			(14	)		—			33
Rental income		14			14			28			28
Other (expense) income, net		(33	)		25			39			22
Total other income	$	—		$	64		$	123		$	136
OTHER EXPENSES
Miscellaneous items, none of which are significant	$	31		$	17		$	35		$	33
Total other expenses	$	31		$	17		$	35		$	33

Note F - Pension and Other Postretirement Benefits

The following table provides the components of net periodic pension benefit cost:

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2004			2003			2004			2003
Service cost	$	751		$	619		$	1,500		$	1,238
Interest cost		2,491			2,552			5,143			5,084
Expected return on plan assets		(3,237	)		(2,817	)		(6,314	)		(5,655	)
Net amortization and deferral:
Amortization of net transition asset		—			(2	)		—			(4	)
Amortization of prior service cost		45			47			90			94
Amortization of actuarial loss		846			1,101			1,687			2,202
Net periodic pension benefit cost	$	896		$	1,500		$	2,106		$	2,959

7

The following table provides the components of other postretirement benefit cost:

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2004			2003			2004			2003
Service cost	$	50		$	60		$	100		$	120
Interest cost		363			448			727			896
Net amortization and deferral:
Amortization of prior service cost		(10	)		(10	)		(20	)		(20	)
Amortization of actuarial loss		30			23			60			46
Other postretirement benefit cost	$	433		$	521		$	867		$	1,042

The following table provides the Company’s contributions to and benefits paid under pension and other postretirement benefit plans:

	Pension Benefits Six Months Ended June 30,				Other Postretirement Benefits Six Months Ended June 30,
(Dollars in thousands)	2004		2003		2004		2003
Expected fiscal year contributions reported at the end of the prior year:
Employer	$	259	$	118	$	2,572	$	1,901
Employee		—		—		172		127
		259		118		2,744		2,028
Actual contributions made in the current year (1)		37		—		1,372		1,014
Remaining contributions expected to be made in the current year		222		118		1,372		1,014
Total expected current year contributions		259		118		2,744		2,028
Difference from expectations at end of the prior year	$	—	$	—	$	—	$	—

(1) Actual employer and employee contributions for Other Postretirement Benefits are not currently available.  Therefore, the amounts reported in the table above for “Actual contributions made in the current year” for Other Postretirement Benefits are based on the expected fiscal year contributions reported at the end of the prior year.

On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (“the Medicare Act of 2003”) was signed into law.  In January 2004, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) No. 106-1, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (“FSP 106-1”).  As permitted under FSP 106-1, the Company has elected to defer recognition and accounting for the effects of the Medicare Act of 2003 until the FASB issues authoritative guidance.  Accordingly, the accumulated postretirement benefit obligation and net periodic postretirement benefit cost do not reflect any potential benefit associated with the Federal subsidy.  Upon issuance and adoption of such guidance, the Company may have to adjust amounts previously reported in its financial statements.  See Note H for recent developments pertaining to the accounting for the effects of the Medicare Act of 2003.

8

Note G - Comprehensive Income

The following table sets forth the components of other comprehensive income and total comprehensive income:

	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	2004		2003		2004		2003
Net income	$	10,028	$	2,908	$	14,170	$	3,572
Other comprehensive income:
Minimum pension liability, net of tax of $627 in 2004		627		—		627		—
Total comprehensive income	$	10,655	$	2,908	$	14,797	$	3,572

Note H - Recent Accounting Developments

On December 8, 2003, the Medicare Act of 2003 was signed into law.  The Medicare Act of 2003 introduces a prescription drug benefit under Medicare (“Medicare Part D”) as well as a Federal subsidy to sponsors of retiree healthcare benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D.  In January 2004, the FASB issued FSP 106-1.  As permitted under FSP 106-1, the Company has elected to defer recognition and accounting for the effects of the Medicare Act of 2003 as well as in making disclosures related to its plans as required by SFAS No. 132 (Revised 2003), “Employer’s Disclosures about Pensions and Other Postretirement Benefits”, until the FASB issues authoritative guidance on the accounting for the Federal subsidy.  On May 19, 2004, the FASB issued FSP No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Act of 2003” (“FSP 106-2”).  FSP 106-2 provides guidance on the accounting for the effects of the Act for companies that sponsor a single-employer defined benefit postretirement healthcare plan, and also provides guidance for the disclosures about the effects of the subsidy for sponsors that have not been able to determine whether or not their plans provide a medical benefit that is actuarial equivalent to Medicare Part D.  FSP 106-2 is effective for most companies as of the first interim or annual period beginning after June 15, 2004, at which time it supersedes FSP 106-1.  The Company is currently evaluating the possible economic effect of the Medicare Act of 2003, if any, on its postretirement benefit plan accounting and, accordingly, has not included the effect of the subsidy in the measures of its accumulated postretirement benefit obligation and net periodic postretirement benefit cost included in the Company’s Consolidated Financial Statements and Notes thereto.

9

Note I - Discontinued Transportation Operations

Assets and liabilities of the discontinued transportation operations, which have been reclassified and summarized in the accompanying Consolidated Condensed Balance Sheets as Assets and Liabilities of discontinued operations, are as follows:

(Dollars in thousands)	June 30, 2004			December 31, 2003
Current Assets
Trade receivables from ETI	$	39,322		$	39,322
Less allowances		(39,322	)		(39,322	)
Inventories		—			10
Prepaid expenses and other current assets		51			51
Deferred taxes		4,712			5,028
Other receivables from ETI		7,964			9,111
Less allowances		(7,964	)		(9,111	)
Total Current Assets	$	4,763		$	5,089
Current Liabilities
Accounts payable	$	298		$	376
Accrued employee compensation and taxes		332			617
Provision for contract losses		11,023			10,216
Other		3,028			4,352
Total Current Liabilities	$	14,681		$	15,561

Summary results of the discontinued transportation operations, which have been classified separately as discontinued operations, were as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2004			2003			2004			2003
Revenue	$	—		$	4,661		$	—		$	8,143
Loss before income taxes	$	(292	)	$	(1,979	)	$	(1,023	)	$	(3,477	)
Benefit from income taxes		(102	)		(693	)		(358	)		(1,217	)
Loss from discontinued transportation operations, net of income tax benefit	$	(190	)	$	(1,286	)	$	(665	)	$	(2,260	)

	Six Months Ended June 30,
(Dollars in thousands)	2004			2003
Net cash used in discontinued operations:
Net loss	$	(665	)	$	(2,260	)
Changes in operating assets and liabilities		(353	)		(8,096	)
Deferred income taxes		316			482
Decrease in provision for contract losses and other		(517	)		(1,531	)
Net cash used in discontinued transportation operations	$	(1,219	)	$	(11,405	)

10

Note J - Commitments and Contingencies

In the normal course of its continuing and discontinued business, various lawsuits, claims and procedures have been or may be instituted or asserted against or by the Company.  Except as set forth below, there have been no material changes in litigation since the Company filed its Annual Report on Form10-K for the year ended December 31, 2003.  Based on currently available facts, except as otherwise set forth below, the Company believes that the disposition of matters pending or asserted against the Company will not have a material adverse effect on the Company’s financial position, results of operations or liquidity.

ASBESTOS

History

The Company and Detroit Stoker Company (“Detroit Stoker”), a wholly-owned subsidiary of the Company, have been named as defendants in asbestos-related personal injury litigation. Neither the Company nor Detroit Stoker fabricated, milled, mined, manufactured or marketed asbestos, and neither the Company nor Detroit Stoker made or sold insulation products or other construction materials that have been identified as the primary cause of asbestos-related disease in the vast majority of claimants. Rather, the Company and Detroit Stoker made several products, some of the parts and components of which used asbestos-containing material fabricated and provided by third parties. The Company and Detroit Stoker stopped the use of asbestos-containing materials in connection with its products in 1981.

As of this date, the Company and Detroit Stoker have not gone to trial with respect to any asbestos-related personal injury claims, although there is no assurance that trials may not occur in the future. Accordingly, as of this date, neither the Company nor Detroit Stoker have been required to pay any punitive damage awards, although there can be no assurance this might not occur in the future. Cases involving the Company and Detroit Stoker typically name 80 to 120 defendants, although some cases have as few as 6 and as many as 250 defendants.

Defenses

Management continues to believe that a majority of the claimants in pending cases will not be able to demonstrate that they have been exposed to the Company’s and Detroit Stoker’s asbestos-containing products or suffered any compensable loss as a result of such exposure. This belief is based in large part on two factors: the limited number of asbestos-containing products and betterments manufactured by the Company and Detroit Stoker and the Company’s and Detroit Stoker’s access to historical sales, service, and other historical business records going back over 100 years, which allow the Company and Detroit Stoker to determine to whom Detroit Stoker’s products were sold, the date of sale, the installation site and the date products were removed from service. In addition, because of the limited and restricted placement of the asbestos containing products, even at sites where a claimant can verify his or her presence during the same period those products were installed, liability of the Company and Detroit Stoker cannot be presumed because even if an individual contracted an asbestos-related disease, not everyone who was employed at a site was exposed to the Company’s and Detroit Stoker’s asbestos-containing products.

These factors have allowed the Company and Detroit Stoker to effectively manage their asbestos-related claims.

Settlements

Settlements of claims against the Company and Detroit Stoker are made without any admission of liability by the Company or Detroit Stoker. Settlement amounts may vary depending upon a number of factors, including the jurisdiction where the action was brought, the nature and extent of the disease alleged and the associated medical evidence, the age and occupation of the claimant, the existence or absence of other possible causes of the claimant’s alleged illness, and the availability of legal defenses, as well as whether the action is brought alone or as part of a group of claimants. Before paying any settlement amount, the Company and Detroit Stoker require proof of exposure to their asbestos-containing products and proof of injury to the plaintiff. In addition, the claimant is required to execute a full and unconditional release of the Company, Detroit Stoker and associated parties, from any liability for asbestos-related injuries or claims.

11

Insurance Coverage

The insurance coverage available to the Company and Detroit Stoker is substantial. Following the institution of asbestos litigation, an effort was made to identify all of the Company’s and Detroit Stoker’s primary and excess insurance carriers from 1940 through 1990. There were approximately 40 such carriers, all of which were put on notice of the litigation. In November of 1999, a Participation Agreement was entered into among the Company, Detroit Stoker and their primary insurance carriers. The Participation Agreement is an advance understanding that supplements all of the contracts of insurance, without altering the coverage of the contracts, that creates an administrative framework within which the insurers and the Company and Detroit Stoker can more efficiently and effectively manage the large quantity of on-going litigation.

Any party may terminate the Participation Agreement, without cause, by giving the other parties 60 days prior written notice. Termination of the Participation Agreement does not affect any rights or obligations of the parties that have accrued under the agreement on or before the effective date of the termination, nor does it affect any rights outside of the agreement.

Although the carriers can opt out of the Participation Agreement on 60 days notice, management does not believe that this will occur in the immediate or near term. For example, unless a carrier professes to have met the limits of its liability, it would have to consider the potentially greater costs of permitting the Company and Detroit Stoker to handle their own cases. Further, opting out of the Participation Agreement does not exculpate liability on the part of the carrier.

The Company retained a consulting firm with expertise in the field of evaluating insurance coverage and the likelihood of recovery for claims, such as costs incurred in connection with asbestos-related injury claims. In 2002, that firm worked with the Company to project the insurance coverage of the Company and Detroit Stoker for asbestos-related claims. The insurance consultant’s conclusions were based primarily on a review of the Company’s and Detroit Stoker’s coverage history, application of reasonable assumptions on the allocation of coverage consistent with industry standards, an assessment of the creditworthiness of the insurance carriers, and the experience of and a review of the report of the asbestos consultant described below. The insurance consultant also considered the Participation Agreement.

Based on the assumptions employed by and the report prepared by the insurance consultant, other variables, and the report prepared by the asbestos consultant, the Company recorded an estimated insurance recovery as of December 31, 2002, of $20,343,000 reflecting the estimate determined to be probable of being available to mitigate the Company’s and Detroit Stoker’s potential asbestos liability through 2012 (see discussion below).

Quantitative Claims Information

As of June 30, 2004, the Company and Detroit Stoker were named in asbestos litigation pending in Illinois, Michigan, Minnesota, Mississippi and North Dakota. As of June 30, 2004, there were approximately 20,490 pending claims, compared to approximately 19,161 pending claims as of December 31, 2003, and approximately 18,476 pending claims as of June 30, 2003.  On July 2, 2004, a single case containing 154 claims was filed against Detroit Stoker in Arkansas. Because claims are often filed and disposed of by dismissal or settlement in large numbers, the amount and timing of settlements and the number of open claims during a particular period can fluctuate from period to period. In addition, most of these lawsuits do not include specific dollar claims for damages, and many include a number of plaintiffs and multiple defendants. Therefore, the Company cannot provide any meaningful disclosure about the total amount of the damages sought. In addition, the direct asbestos-related expenses of the Company and Detroit Stoker for defense and indemnity for the past five years were not material.

A significant increase in the volume of asbestos-related bodily injury cases arose in Mississippi beginning in 2002 and extended through mid-year 2003. This peak in the volume of claims in Mississippi was apparently due to the passage of tort reform legislation (applicable to asbestos-related injuries), which became effective at the end of 2002 and which resulted in a large number of claims being filed in Mississippi by plaintiffs seeking to ensure their claims would be governed by the law in effect prior to the passage of tort reform. The increase in pending claims during the first quarter of 2004 was due to the joinder of the Company and Detroit Stoker into 14 existing 2002 cases naming 1,194 new claimants.  As of June 30, 2004, all but 165 of the 19,988 claims pending in Mississippi were associated with cases filed before January 1, 2003.

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In 2002, the Company engaged a consulting firm with expertise in the field of evaluating asbestos bodily-injury claims to assist the Company in projecting the future asbestos-related liabilities and defense costs of the Company and Detroit Stoker. The methodology used by this asbestos consultant to project future asbestos-related costs is based primarily on estimates of the labor force exposed to asbestos in the Company’s and Detroit Stoker’s products, epidemiological modeling of asbestos-related disease manifestation, and estimates of claim filings and settlement and defense costs that may occur in the future. Using this information, the asbestos consultant estimated the number of future claims that would be filed, as well as the related costs that would be incurred in resolving those claims. The Company’s and Detroit Stoker’s claims history prior to 2002 was not a significant variable in developing the estimates because such history was not significant as compared to the number of claims filed in 2002.

Projecting future asbestos costs is subject to numerous variables that are extremely difficult to predict. In addition to the significant uncertainties surrounding the number of claims that might be received, other variables include the type and severity of the disease alleged by each claimant, the long latency period associated with asbestos exposure, dismissal rates, costs of medical treatment, the impact of bankruptcies of other companies that are co-defendants in claims, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, and the impact of potential changes in legislative or judicial standards. Furthermore, any predictions with respect to these variables are subject to even greater uncertainty as the projection period lengthens. In light of these inherent uncertainties, the Company’s and Detroit Stoker’s limited claims history prior to 2002 and consultation with the asbestos and insurance consultants, the Company believes that ten years is the most reasonable period for recognizing a reserve for future costs, and that costs that might be incurred after that period are not reasonably estimable. As a result, the Company also believes that its ultimate net asbestos-related contingent liability (i.e. its indemnity or other claim disposition costs plus related legal fees less insurance recoveries) cannot be estimated with certainty.

Given the inherent uncertainty in making future projections, the Company plans to have the projections of current and future asbestos claims periodically re-examined, and the Company will update them if needed based on the experience of the Company and Detroit Stoker and other relevant factors such as changes in the tort system and the resolution of bankruptcies of various asbestos defendants.

Based on the assumptions employed by and the report prepared by the asbestos consultant and other variables, the Company recorded an undiscounted liability for its best estimate of bodily injury liabilities for asbestos-related matters in the amount of $31,852,000 as of December 31, 2002, including damages and defense costs.  The Company’s liability of $31,437,000 at June 30, 2004 continues to represent its best estimate of liabilities for asbestos-related matters.  The asbestos liability for the twelve months ended December 31, 2003 decreased by $257,000 to $31,595,000 and decreased by $158,000 to $31,437,000 for the six months ended June 30, 2004 due to the payment of claim-related expenses.

After considering the efforts of both consultants and based upon the facts as now known, including the reasonable possibility that claims will be received and paid over the next 50 year period, the Company believes that although asbestos claims could have a material adverse effect on the Company’s financial condition or results of operations in a particular reporting period, asbestos claims should not have a material adverse effect on the Company’s long term financial condition, liquidity or results of operations. No assurances can be given, however, as to the actual amount of the Company’s and Detroit Stoker’s liability for such present and future claims or insurance recoveries, and the differences from estimated amounts could be material.

Reform Legislation

The outlook for federal legislation to provide national asbestos litigation reform continues to be uncertain. The Company is not certain as to what contributions and the duration of such contributions that the Company and Detroit Stoker would be required to make pursuant to such legislation. No assurances can be given, however, that the proposed bill or any other asbestos legislation will ultimately become law, or when such action might occur.

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STATE OF ARIZONA DEPARTMENT OF ENVIRONMENTAL QUALITY V. UIC, ET AL.

On May 19, 1993, the Company was named as one of three defendants in a civil action brought pursuant to the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”) by the Arizona Department of Environmental Quality (“ADEQ”) in the United States District Court for the District of Arizona. ADEQ sought remediation of a manufacturing site in the State of Arizona operated by U.S. Semiconductor Products, Inc. (“U.S. Semiconductor”), a manufacturer of semiconductors formerly owned by the Company. ADEQ alleged that from 1959 until the Company sold U.S. Semiconductor in 1961, U.S. Semiconductor disposed of tricholoroethylene, a “hazardous substance,” and other hazardous substances under CERCLA, onto the ground and into various pits and drains located on the site.

In 1996, the Company entered into a consent decree with ADEQ. Pursuant to the consent decree, the Company is required to complete a Remedial Investigation/Feasibility Study (“RI/FS”), pay $125,000 for past response costs, pay quarterly Arizona oversight costs (averaging less than $10,000 annually) and pay $125,000 for future response costs plus a graduated percentage of the cleanup costs for the site if those costs are in excess of $10,000,000 but less than $40,000,000. The Company’s liability for future response costs under the consent decree is capped at $1,780,000 in addition to the $125,000 that the Company has already paid. In connection with the RI/FS, the Company has retained a consultant at an average annual cost of $200,000. The Remedial Investigation was submitted to ADEQ for approval on March 31, 2004.  The Company expects a decision from ADEQ regarding the Remedial Investigation in the third quarter of 2004.  Assuming ADEQ approval in that time frame, the Company expects to submit the Feasibility Study in October or November 2004. Management believes that it will reach closure with ADEQ on an acceptable basis to the Company following approval of the Feasibility Study.  No assurances can be given, however, as to the actual extent to which the Company may be determined to have further liability, if at all.

MICHIGAN DEPARTMENT OF NATURAL RESOURCES

Detroit Stoker was notified in March 1992 by the Michigan Department of Natural Resources (“MDNR”) that it is a potentially responsible party in connection with the cleanup of a former industrial landfill located in Port of Monroe, Michigan.  MDNR is treating the Port of Monroe landfill site as a contaminated facility within the meaning of the Michigan Environmental Response Act (“MERA”). Under MERA, if a release or potential release of a discarded hazardous substance is or may be injurious to the environment or to the public health, safety or welfare, MDNR is empowered to undertake or compel investigation and response activities in order to alleviate any contamination threat. Management believes Detroit Stoker would be considered a de minimis potentially responsible party and does not believe that the resolution of this matter will have a materially adverse effect on the Company’s financial condition or results of operations. Detroit Stoker intends to aggressively defend these claims. No assurances can be given, however, as to the actual extent to which Detroit Stoker may be determined to be liable, if at all.

PERFORMANCE GUARANTEES

In connection with certain of its contracts, the Company commits to certain performance guarantees. The ability of the Company to perform under these guarantees may, in part, be dependent on the performance of other parties, including partners and subcontractors. If the Company is unable to meet these performance obligations, the performance guarantees could have a material adverse effect on product margins and the Company’s results of operations, liquidity or financial position. The Company monitors the progress of its partners and subcontractors and does not believe that their performance will adversely affect these contracts as of June 30, 2004. No assurances can be given, however, as to the Company’s liability if the Company’s partners or subcontractors are unable to perform their obligations.

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DISCONTINUED TRANSPORTATION OPERATIONS

In connection with the discontinued transportation operations, AAI Corporation (“AAI”), a wholly-owned subsidiary of the Company, owns a 35% share of Electric Transit, Inc. (“ETI”). Skoda a.s. (“Skoda”), a Czech Republic company, owns the remaining 65% share of ETI. ETI’s one remaining production contract with the San Francisco Municipal Railway (“MUNI”) involves the design and manufacture of 273 electric trolley buses (ETBs). In executing its contract with MUNI, ETI has entered into subcontracts with AAI, certain Skoda operating affiliates and others. Both AAI and the Skoda operating affiliates have essentially completed their initial delivery requirements and are now subject to warranty requirements. At April 13, 2004, ETI had delivered all 273 ETB’s under ETI’s last remaining production contract.  ETI is completing a retrofit program that incorporates final design changes for many of the previously delivered buses. The Company understands that ETI’s retrofit program will be completed during 2004.

The ability of ETI to perform under its obligations is, in part, dependent on the performance of other parties, including AAI, the Skoda operating affiliates and other subcontractors. Thus, the ability to timely perform under the MUNI contract is, to a significant extent, outside of ETI’s control. Skoda’s operating affiliates have delivered products and services under their subcontracts with ETI through July 2004. Following the bankruptcy declaration by Skoda in 2001 in the Czech Republic, effective in 2002, the discontinued transportation operations of the Company began recording 100%, instead of 35%, of ETI’s losses. This was necessitated by the Company’s and AAI’s various indemnity obligations described in detail below, which exceed the amount of the losses recorded. The additional losses recorded by the Company for Skoda’s 65% share of ETI’s losses totaled $16,171,000 during 2003 and $215,000 during the first six months of 2004. Since January 1, 2002, AAI has recorded $33,650,000 of losses related to ETI that represent Skoda’s 65% share.

Although AAI has essentially completed its subcontract with ETI on the MUNI program, it has continued to support ETI as a provider of secunded services to allow ETI to satisfy its remaining commitments to MUNI. The apparent inability of Skoda to fund its obligations to ETI under the shareholders’ agreement, coupled with the additional losses expected to be incurred by ETI, caused the Company to reassess its continued support of ETI while ETI pursued opportunities to mitigate the cost growth of the MUNI program.

As of April 22, 2004, ETI and MUNI finalized an agreement, under which MUNI relieved ETI of its warranty, performance and related bonding obligations, as well as other obligations under its electric trolley bus contract with MUNI, except for the performance of a defined scope of work related to modifications of electric trolley bus hardware. AAI had previously agreed to indemnify the surety under ETI’s bonding obligations described below and, as a result of ETI’s agreement, AAI’s further indemnification obligations were cancelled. In a related action, AAI also finalized in April 2004 a guaranty agreement with MUNI that assures performance of specific obligations of ETI arising under its agreement, required a $500,000 cash payment to MUNI and provided other consideration, in exchange for a release from AAI’s subcontractor warranty and all further obligations under AAI’s subcontract with ETI.  The Company believes that its obligations related to these agreements have been adequately provided for within existing loss reserves. No assurances can be given, however, as to the actual amount of the Company’s liability to exit the discontinued transportation operations.

As noted above, the Company and AAI had agreed to certain indemnification obligations related to surety bonds required by the MUNI customer.

The first of these surety bond indemnification obligations was associated with advance payments received by ETI that related to the MUNI contract. In January 2003, this advance payment bond was reduced from $22,000,000 to $9,100,000 and reduced again in August of 2003 to $1,350,000. In February 2004, MUNI released this bond in its entirety.

In addition, there was a surety bond that guaranteed ETI’s performance under the MUNI contract. AAI had agreed to indemnify the surety, if necessary, for up to approximately $14,800,000 (or 35% of the original bond amount). Pursuant to the agreements discussed above, AAI’s indemnification obligation has been cancelled.

Finally, there is a surety bond that guarantees payment to subcontractors and vendors for labor and materials provided to ETI under the MUNI contract, for which AAI has also agreed to indemnify the surety, if necessary, for approximately $14,800,000 (again, 35% of the original bond amount). During the fourth quarter of 2003, it became apparent that ETI would be unable to pay AAI amounts due on its subcontract and secunded services receivable. At June 30, 2004, the Company believes it has adequately provided for the uncollectibility of these receivables. As a result of the non-payment of

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the receivables, AAI filed a claim with the surety of the labor and materials bond seeking recovery to the full extent of the bond. Because the Company and AAI have indemnification obligations of approximately $14,800,000 under this bond, the maximum potential recovery under the bond is approximately $32,100,000.  Because the claim is still pending, the Company cannot at this time estimate the amount of such a recovery, if any, or when it may be received. Consequently, the Company has not recorded a receivable with respect to this surety claim.

On July 26, 2002, the Company sold two transportation overhaul contracts with the New Jersey Transit Corporation and Maryland Transit Administration, and related assets and liabilities, to ALSTOM Transportation, Inc. (“ALSTOM”). The Company agreed to indemnify ALSTOM against certain breaches by AAI of representations and covenants pursuant to the Master Agreement (“the ALSTOM Agreement”).  The ALSTOM Agreement provided that certain of such indemnity claims are subject to a requirement that notice of the claim be given within nine months of the closing and to a maximum exposure of $4,250,000.

On March 3, June 5 and November 5, 2003, and on January 15, 2004, ALSTOM raised indemnification matters regarding the ALSTOM Agreement totaling approximately $8,500,000 to the Company to be discussed by ALSTOM’s and the Company’s respective managements.  These indemnification matters are alleged not to be subject to the nine-month post-closing notice requirement or the $4,250,000 cap discussed above.   Both ALSTOM and the Company have retained outside counsel.  ALSTOM’s counsel has agreed to submit a reorganized statement of claim, together with underlying documentation, shortly.  Until the Company receives the reorganized material, it is unable to determine whether the Company may have any liability with respect thereto, and if so, to what extent. AAI is also evaluating its counterclaims against ALSTOM. If the respective senior management representatives should fail to resolve the issues informally, the ALSTOM Agreement requires the parties to submit to mediation and, should that fail to resolve the issues, then binding arbitration in lieu of litigation.

Note K - Dividends

On May 5, 2004, the Company announced that its Board of Directors declared a dividend of $0.10 per share.

Note L - Preferred Stock

At the Company’s Annual Meeting of Shareholders held on June 10, 2004 (the “2004 Annual Meeting”), the shareholders voted to approve an amendment to the Company’s Restated Certificate of Incorporation to create an authorized class of 1,000,000 shares of preferred stock.  The preferred stock is available for future issuance in series and with such voting rights, designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as the Board of Directors may determine for each series issued from time to time.

See “Submission of Matters to a Vote of Security Holders” in Part II - Item 4 of this Quarterly Report on Form 10-Q for a discussion of all of the matters submitted to a vote of shareholders at the 2004 Annual Meeting.

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Note M - Repurchases of Equity Securities

In November 2003, the Board of Directors of the Company authorized the repurchase of up to $10,000,000 of the Company’s common stock.  On January 27, 2004, the purchases under this plan were effectively completed with approximately $1,000 remaining available under the authorization.  At that date, the Company had repurchased 576,100 shares for an aggregate amount of $9,999,000, or $17.36 per share.  On March 10, 2004, the Company’s Board of Directors extended the plan for one additional year and authorized the repurchase of up to an additional $10,000,000 of common stock pursuant to this plan.  The exact number of shares to be repurchased will depend on market conditions.  During the second quarter of 2004, 168,400 shares were purchased under the additional authorization for an aggregate amount of $3,345,388, or $19.87 per share.  For the six months ended June 30, 2004, 341,600 shares have been repurchased under the additional authorization for an aggregate amount of $6,523,106, or $19.10 per share.

ISSUER PURCHASES OF EQUITY SECURITIES

Period	(a) Total Number of Shares (or Units) Purchased		(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
April 1, 2004 – April 30, 2004		89,200		$19.79		89,200		$5,058,615
May 1, 2004 – May 31, 2004		79,200		$19.96		79,200		$3,478,076
June 1, 2004 – June 30, 2004		—		—		—		$3,478,076
Total		168,400		$19.87		168,400		$3,478,076

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Item 2. - Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements are based on management’s expectations, estimates, projections and assumptions.  Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements which include, but are not limited to, projections of revenues, earnings, segment performance, cash flows and contract awards.  These forward-looking statements are subject to risks and uncertainties, which could cause the Company’s actual results or performance to differ materially from those expressed or implied in such statements.  These risks and uncertainties include, but are not limited to, the following: the Company’s successful execution of internal performance plans; performance issues with key suppliers, subcontractors and business partners; the ability to negotiate financing arrangements with lenders; outcome of current and future litigation; the accuracy of the Company’s analysis of its potential asbestos related exposure and insurance coverage; product demand and market acceptance risks; the effect of economic conditions; the impact of competitive products and pricing; product development, commercialization and technological difficulties; capacity and supply constraints or difficulties; legislative or regulatory actions impacting the Company’s Defense segment, Energy segment or discontinued transportation operations; changing priorities or reductions in the U.S. Government defense budget; contract continuation and future contract awards; and U.S. and international military budget constraints and determinations.  The Company makes no commitment to update any forward-looking statement or to disclose any facts, events, or circumstances after the date hereof that may affect the accuracy of any forward-looking statements.  See “Risk Factors” under Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2003 for important factors that could cause the Company’s actual results to differ materially from those suggested by the forward-looking statements contained in this report.

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Results of Operations

The continuing operations of the Company are grouped into two business segments: Defense and Energy.  The following information primarily relates to the continuing operations of the Company and its consolidated subsidiaries.  The transportation business is reflected as a discontinued operation in the Company’s Consolidated Condensed Financial Statements as of and for the three month and six month periods ended June 30, 2004 and 2003.

The following information should be read in conjunction with the Company’s Consolidated Financial Statements and Notes thereto and the discussion included in its Annual Report on Form 10-K for the year ended December 31, 2003.

Net Sales

	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	2004		2003		2004		2003
Defense	$	101,561	$	78,415	$	176,367	$	143,890
Energy		7,999		7,622		14,841		14,589
Total	$	109,560	$	86,037	$	191,208	$	158,479

The Company’s consolidated net sales of $109,560,000 for the three months ended June 30, 2004 increased by $23,523,000, or 27.3%, compared to consolidated net sales of $86,037,000 for the corresponding period in the prior year.  The increase in consolidated net sales for the second quarter of 2004 is primarily due to higher sales in the Defense segment.  Sales in the Defense segment increased $23,146,000, or 29.5%, in the second quarter of 2004 compared to the same period in 2003 primarily due to higher volume, including approximately $13,242,000 higher revenues generated as the result of a higher level of logistical support for Shadow 200 Tactical Unmanned Aerial Vehicle (“TUAV”) systems deployed in Operation Iraqi Freedom, and approximately $4,200,000 higher volume from its C-17 maintenance trainer program.  In addition, approximately $900,000 of award fee revenue and income was recorded in the second quarter of 2004 related to the Company’s C-17 maintenance trainer program compared to no such revenue and income in the same period in 2003.  Beginning in 2004, the Company is accruing anticipated award fees for this program now that historical performance has provided a reasonable basis to estimate future revenue and income.  Prior to 2004, the Company recorded such revenue and income for its C-17 program upon notification of the award evaluation.  These awards were generally recognized at the end of the contractual award fee period which primarily coincided with the Company’s third or fourth quarter. 

The Company’s consolidated net sales of $191,208,000 for the six months ended June 30, 2004 increased by $32,729,000, or 20.7%, compared to consolidated net sales of $158,479,000 for the corresponding period in the prior year.  The increase in consolidated net sales for the six months ended June 30, 2004 is primarily due to higher sales in the Defense segment.  Sales in the Defense segment increased $32,477,000, or 22.6%, in the first six months of 2004 compared to the same period in 2003 primarily due to higher volume for the Company’s Unmanned Aerial Vehicle (“UAV”) programs, including approximately $17,430,000 higher revenues generated as the result of a higher level of logistical support for Shadow 200 TUAV systems deployed in Operation Iraqi Freedom, and approximately $7,400,000 higher sales volume from its C-17 maintenance trainer program.  Additionally, in the first six months of 2004, the Company recorded approximately $2,500,000 of award fee revenue and income related to its C-17 maintenance trainer program, including $1,600,000 related to performance under contracts whereby performance targets can now be reliably predicted, $400,000 related to prior year performance, and $400,000 related to a new contract for which performance targets could not be reliably predicted, but notification of award evaluation was received in the second quarter of 2004.  As discussed above, the Company did not record any such award fee revenue or income from its C-17 maintenance trainer program for the six months ended June 30, 2003.

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Gross Profit

	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	2004		2003		2004		2003
Defense	$	23,998	$	14,510	$	37,987	$	25,706
Energy		3,051		2,995		5,713		5,845
Total	$	27,049	$	17,505	$	43,700	$	31,551

The Company’s gross profit for the three months ended June 30, 2004 of $27,049,000 was $9,544,000, or 54.5%, higher than the corresponding period in the prior year, including higher gross profit of $9,488,000 and $56,000 for the Defense segment and Energy segment, respectively.  The increase in gross profit for the Defense segment was generally due to the recognition of a cumulative adjustment that resulted from the favorable resolution of technical risks and production efficiencies experienced on a certain Defense contract that contributed approximately $4,400,000 of additional profit, as well as higher sales volume on UAV and C-17 maintenance trainer programs.  In addition, as discussed in “Net Sales” above, the Company recorded approximately $900,000 of award fee income related to its C-17 maintenance trainer program in the second quarter of 2004 compared to no such income during the like period in 2003.  The favorable impact of these items was partially offset by an additional $1,200,000 loss in the second quarter of 2004 related to a particular fixed price development Defense segment contract that is now nearing completion. The Company recorded a $900,000 loss related to this contract during the second quarter of 2003.  Pension expense included in cost of sales in the Defense segment was $1,334,000 and $1,635,000 in the second quarter of 2004 and 2003, respectively. 

The Company’s gross profit for the six months ended June 30, 2004 of $43,700,000 was $12,149,000, or 38.5%, higher than the corresponding period in the prior year, including $12,281,000 higher gross profit in the Defense segment partially offset by $132,000 lower gross profit in the Energy segment.  The increase in gross profit for the Defense segment was primarily attributable to higher sales volume on UAV and C-17 maintenance trainer programs, and to the recognition of a cumulative adjustment that resulted from the favorable resolution of technical risks and production efficiencies experienced on a certain Defense contract that contributed approximately $4,400,000 of additional profit.  In addition, as discussed in “Net Sales” above, the Company recorded approximately $2,500,000 of award fee income related to its C-17 maintenance trainer program in the first six months of 2004 compared to no such income during the like period in 2003.  The favorable impact of these items was partially offset by an additional $1,200,000 loss in the first six months of 2004 related to a particular fixed price development Defense segment contract that is now nearing completion. The Company recorded a $900,000 loss related to this contract during the corresponding period of 2003.  Pension expense included in cost of sales in the Defense segment was $2,669,000 and $3,230,000 in the first six months of 2004 and 2003, respectively. 

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Selling and Administrative Expenses

	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	2004		2003		2004		2003
Defense	$	9,355	$	8,683	$	17,017	$	18,111
Energy		1,639		1,824		3,554		3,738
Other		80		94		—		3
Total	$	11,074	$	10,601	$	20,571	$	21,852

Selling and administrative expenses in the second quarter of 2004 increased by $473,000, or 4.5%, to $11,074,000 from $10,601,000 in the second quarter of 2003 primarily due to an increase in expenses in the Defense segment.  Selling and administrative expenses in the Defense segment increased by $672,000, or 7.7%, to $9,355,000 in the second quarter of 2004 from $8,683,000 in the second quarter of 2003 primarily due to the timing of research and development, and bid and proposal costs.

Selling and administrative expenses in the six months ended June 30, 2004 decreased $1,281,000, or 5.9%, to $20,571,000 from $21,852,000 in the first half of 2003 primarily due to a decrease in expenses in the Defense segment.  Selling and administrative expenses in the Defense segment in the first half of 2004 decreased $1,094,000, or 6.0%, to $17,017,000 from $18,111,000 in the six months ended June 30, 2003.  During the first six months of 2003, a significant amount of research and development, and bid and proposal costs were incurred in pursuit of a significant proposal opportunity, whereas in the first six months of 2004 certain proposal opportunities were delayed and are now expected to result in a shift of research and development, and bid and proposal costs to the second half of 2004.

Income from Continuing Operations before Income Taxes

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2004			2003			2004			2003
Defense	$	14,536		$	6,117		$	21,215		$	8,307
Energy		1,464			805			2,273			1,556
Other		(48	)		(436	)		(293	)		(864	)
Total	$	15,952		$	6,486		$	23,195		$	8,999

Income from continuing operations before income taxes increased $9,466,000, or 145.9%, in the second quarter of 2004 compared to the same period last year.  The increase is primarily attributable to the higher gross profit, as discussed in “Gross Profit” above.  In the second quarter of 2004, pension plan expense decreased $604,000 to $896,000.  The Company expensed asbestos-related consulting and professional fees of $425,000 in the second quarter of 2003 and none in the second quarter of 2004.

Income before income taxes from continuing operations increased $14,196,000, or 157.8%, in the six months ended June 30, 2004 compared to the same period last year.  The increase is primarily attributable to higher Defense segment gross profit, as discussed in “Gross Profit” above, and the reduction in selling and administrative expenses, discussed in “Selling and Administrative Expenses” above.  In the first six months of 2004, pension plan expense decreased $853,000 to $2,106,000.  The Company expensed asbestos-related consulting and professional fees of $667,000 in the six months ended June 30, 2003 and none in the corresponding period of 2004.

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Funded Backlog

(Dollars in thousands)	June 30, 2004		December 31, 2003
Defense	$	297,573	$	318,307
Energy		6,960		4,880
Total	$	304,533	$	323,187

Since December 31, 2003, the funded backlog, which are orders placed for which funds have been appropriated or purchase orders received, related to continuing operations decreased $18,654,000 or 5.8%.  The Defense segment’s funded backlog was $297,573,000 at June 30, 2004 compared to $318,307,000 at December 31, 2003.  The decrease was generally due to the timing of certain contract awards.  The Energy segment’s funded backlog was $6,960,000 at June 30, 2004 compared to $4,880,000 at December 31, 2003.

Discontinued Transportation Operations

There were no sales in the discontinued transportation operations during the three months and six months ended June 30, 2004 as AAI has essentially completed its subcontract with Electric Transit Inc. (“ETI”), a 35% owned affiliate of AAI Corporation (“AAI”), a wholly-owned subsidiary of the Company.  Skoda a.s. (“Skoda”), a bankrupt Czech Republic company, owns the remaining 65%.  Sales were $4,661,000 and $8,143,000 for the three months and six months ended June 30, 2003, respectively.  At April 13, 2004, ETI delivered all of the 273 electric trolley buses to the San Francisco Municipal Railway (“MUNI”) under ETI’s last remaining production contract. The loss before income taxes decreased by $1,687,000 to $292,000 in the second quarter of 2004 compared to the second quarter of 2003, and decreased by $2,454,000 to $1,023,000 in the six months ended June 30, 2004 compared to the same period in 2003.  The decrease in loss before taxes is primarily due to lower shutdown costs as the result of reduced activities.

The Company recorded provisions for losses by ETI for the three months and six months ended June 30, 2004 of $150,000 and $330,000, respectively.  These loss provisions represent 100% of the losses incurred by ETI, which are primarily related to ETI’s general and administrative expenses incurred during 2004, as it is unlikely that Skoda will have the financial capability to fund its 65% share of such losses.

As of April 22, 2004, ETI and MUNI finalized an agreement, under which MUNI relieved ETI of its warranty, performance and related bonding obligations, as well as other obligations under its electric trolley bus contract with MUNI, except for the performance of a defined scope of work related to modifications of electric trolley bus hardware. AAI had previously agreed to indemnify the surety under ETI’s bonding obligations and, as a result of ETI’s agreement, AAI’s further indemnification obligations were cancelled. In a related action, AAI also finalized in April 2004 a guaranty agreement with MUNI that assures performance of specific obligations of ETI arising under its agreement, required a $500,000 cash payment to MUNI and provided other consideration, in exchange for a release from AAI’s subcontractor warranty and all further obligations under AAI’s subcontract with ETI.  The Company believes that its obligations related to these agreements have been adequately provided for within existing loss reserves.  No assurances can be given, however, as to the actual amount of the Company’s liability to exit the discontinued operations.

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Liquidity and Capital Resources

Cash and cash equivalents increased $674,000 to $24,812,000 at June 30, 2004 from $24,138,000 at December 31, 2003.  Net cash provided by operating activities of the Company’s continuing operations was $15,608,000 in the first six months of 2004.  Net cash used in operating activities by the discontinued operations was $1,219,000 in the first six months of 2004, which included overdue payments received for services provided to ETI.  Net cash used in investing activities by the continuing operations was $3,482,000 for purchases of property and equipment.  Net cash used in financing activities for the six months ended June 30, 2004 was $10,233,000, which included $10,486,000 for the repurchase of the Company’s common stock under its previously announced repurchase programs and $2,609,000 for the payment of dividends, partially offset by cash receipts of $2,862,000 from the exercise of stock options.  Changes in operating assets and liabilities of the Company’s continuing operations used cash of $4,786,000 during the six months ended June 30, 2004, including an increase in inventory of $14,001,000 due to higher production levels, an increase in accounts receivable of $7,260,000, an increase in prepaid and other current assets of $1,776,000, and a net decrease in long-term liabilities and other assets - net of $101,000, partially offset by increases in accounts payable of $8,016,000, other current liabilities of $5,287,000, income taxes of $2,854,000, employee compensation accruals of $1,520,000, and customer advances of $675,000.

The Company does not anticipate having to contribute cash to the UIC Retirement Pension Plan during 2004.  However, it plans to contribute $259,000 to the union plan in the Energy segment.

The Company currently has no significant fixed commitment for capital expenditures.  However, the Company expects to acquire about $6,600,000 in capital assets and incur $1,700,000 of other costs over the next four years related to the implementation of a new enterprise resource planning information system, of which about $1,600,000 is anticipated to be spent in 2004.  The cash required to completely exit the discontinued transportation operations subsequent to June 30, 2004, including AAI’s agreements with MUNI, is expected to be approximately $12,000,000 through 2008 of which $6,000,000 is expected to be expended during the last two quarters of 2004.  No assurances can be given, however, as to the actual amount of the Company’s liability to exit the discontinued transportation operations.

In November 2003, the Board of Directors of the Company authorized the repurchase of up to $10,000,000 of the Company’s common stock.  On January 27, 2004, the purchases under this plan were effectively completed with approximately $1,000 remaining available under the authorization.  On March 10, 2004, the Company’s Board of Directors extended the plan for one additional year and authorized the repurchase of up to an additional $10,000,000 of common stock pursuant to this plan.  The exact number of shares to be repurchased will depend on market conditions.  During the first six months of 2004, the Company repurchased 560,100 shares of common stock for an aggregate amount of $10,486,000, or $18.72 per share.

On June 28, 2001, the Company and certain of its subsidiaries entered into a Loan and Security Agreement (the “Credit Agreement”) with Bank of America Business Capital (formerly Fleet Capital Corporation).  The Credit Agreement had an original term of three years and provides for letters of credit and cash borrowings, subject to a borrowing base.  The Credit Agreement provides for up to $25,000,000 of credit advances, with a sub limit of $10,000,000 for cash borrowings.  Credit advances may increase to $32,000,000 provided that amounts in excess of $25,000,000 are cash-collateralized.  At June 30, 2004, there were no cash borrowings under the Credit Agreement.  The letter of credit obligations outstanding at June 30, 2004 under the Credit Agreement were $6,675,000.  During 2003, amendments to the Credit Agreement were entered into whereby, among other things, the financial covenants were modified, the amount of the Company’s common stock that may be repurchased during the term of the Credit Agreement was increased from $5,000,000 to $20,000,000, and a borrowing base reserve of $6,000,000 on the total credit facility was instituted, with a $3,000,000 reserve being applied to the $10,000,000 cash sub limit.  The covenants that the Company agreed to included a minimum ratio of total liabilities to tangible net worth, a limitation to the pre-tax losses of the discontinued transportation operations and a minimum amount of tangible net worth.  On May 18, 2004, the Credit Agreement was further amended to, among other things, extend its original term from a June 28, 2004 maturity date to March 31, 2005, eliminate the borrowing base reserve, modify certain of the existing financial covenants, and establish a new covenant to not permit the net cash payments relating to the Transportation Division to exceed $11,500,000 for the year ending December 31, 2004 and $6,000,000 for the year ending December 31, 2005.  Management believes that the extension of the Credit Agreement positions the Company to explore longer-term financing arrangements and that the Company will be successful it its ability to negotiate a new financing arrangement with Bank of America Business Capital or another party.

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Detroit Stoker also has a $2,000,000 line of credit with a bank that may be used for cash borrowings or letters of credit.  The term of this financing arrangement, previously set to expire on July 1, 2004, was extended for one year and expires on July 1, 2005.  At June 30, 2004, Detroit Stoker had no cash borrowings and $840,000 of letters of credit outstanding.

Based on the existing Credit Agreement and current initiatives and operations, the Company expects that available cash and existing lines of credit will be sufficient to meet its cash requirements for the next twelve months.

On April 15, 2004, the Company entered into a contract to sell approximately 26 acres of undeveloped property adjacent to its Hunt Valley, Maryland facility for $8,000,000. Closing is expected to occur no later than January 14, 2005.  However, the Company can elect to accelerate the close. By contract, the Company has received a non-refundable $150,000 deposit. No assurances can be given, however, as to whether the contract will be closed or the timing of the sale.

In accordance with its previously disclosed strategic initiatives, the Company is exploring the sale of non-core assets, seeking to maximize efficiency, evaluating a recapitalization, and considering select acquisitions to grow its core defense businesses.  Accordingly, in October 2003 the Company engaged Imperial Capital LLC to assist the Company in a potential sale of the Detroit Stoker energy segment.  No assurances can be given regarding whether Detroit Stoker will be sold nor the timing or proceeds from any such sale.

Contingent Matters

Off-Balance Sheet Arrangements

In connection with certain of its contracts, the Company commits to certain performance guarantees.  The ability of the Company to perform under these guarantees may, in part, be dependent on the performance of other parties, including partners and subcontractors. If the Company is unable to meet these performance obligations, the performance guarantees could have a material adverse effect on product margins and the Company’s results of operations, liquidity or financial position.  The Company monitors the progress of its partners and subcontractors and does not believe that their performance will adversely affect these contracts as of June 30, 2004.  No assurances can be given, however, as to the Company’s liability if the Company’s partners or subcontractors are unable to perform their obligations.

Other Contingent Matters

The Company is involved in various lawsuits and claims, including asbestos-related litigation and one environmental matter.  There have been no material changes in litigation since the Company filed its Annual Report on Form 10-K for the year ended December 31, 2003.  For further information, refer to the Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003 and to Note J to the financial statements included in this Quarterly Report on Form 10-Q.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions.  These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period.  Judgments and assessments of uncertainties are required in applying the Company’s accounting policies in many areas.  Actual results could differ from these estimates.

There have been no revisions to the Critical Accounting Policies as filed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

Recent Accounting Developments

See Note H to the Consolidated Condensed Financial Statements included in this Quarterly Report on Form 10-Q for a discussion of recent accounting developments.

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Item 3. - Quantitative and Qualitative Disclosures about Market Risk

A portion of the Company’s operations consists of manufacturing and sales activities in foreign jurisdictions, and some of these transactions are denominated in foreign currencies.  As a result, the Company’s financial results could be affected by changes in foreign exchange rates.  To mitigate the effect of changes in these rates, the Company has entered into foreign exchange contracts.  There has been no material change in the firmly committed sales exposures and related derivative contracts from December 31, 2003 (see Item 7A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003).

Item 4. - Controls and Procedures

(a) The Company’s management evaluated, with the participation of the Company’s principal executive and principal financial officers, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of June 30, 2004.  Based on their evaluation, the Company’s principal executive and principal financial officers concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2004.

There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the Company’s fiscal quarter ended June 30, 2004, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. - Legal Proceedings

Reference is made to the information contained in the section entitled “Contingent Matters” under Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth above and to Note J to the Consolidated Condensed Financial Statements included herein, which information is incorporated herein by reference.

Item 2. - Changes in Securities and Use of Proceeds

For information regarding the Company’s purchases of its equity securities, please reference Note M to the Consolidated Condensed Financial Statements included herein, which information is incorporated herein by reference.

For information regarding the shareholders’ approval of an amendment to the Company’s Restated Certificate of Incorporation to create an authorized class of 1,000,000 shares of preferred stock, please reference Note L to the Consolidated Condensed Financial Statements included herein, which information is incorporated herein by reference.

Item 4. - Submission of Matters to a Vote of Security Holders

(a)  The Company held its 2004 Annual Meeting of Shareholders on June 10, 2004.  The meeting was adjourned until June 17, 2004 with respect to one proposal, at which time the meeting was reconvened and concluded.

(b)  Warren G. Lichtenstein and General Richard I. Neal (USMC, Retired) were elected as directors of the Company at the meeting for terms ending at the annual meeting of shareholders in 2005.  The other directors continuing in office after the meeting are Thomas A. Corcoran, Richard R. Erkeneff, Glen M. Kassan and Robert F. Mehmel.

(c)  The following matters were voted upon at the meeting:

(i)	The first item considered at the meeting on June 10, 2004 was a proposal to amend the Company’s Restated Certificate of Incorporation (the “Charter”) to declassify the Board of Directors so that all directors are elected annually, which was approved with 12,280,116 shares voted in favor of such proposal, 151,325 shares voted against such proposal, holders of 30,783 shares abstaining and no broker non-votes.
(ii)	The second item considered was a proposal to amend the Company’s Bylaws to allow the Board of Directors to fix the number of directors by resolution, which was approved with 12,146,952 shares voted in favor of such proposal, 269,924 shares voted against such proposal, holders of 45,347 shares abstaining and no broker non-votes.
(iii)	The third item considered was a proposal to adjourn the meeting until June 17, 2004 at 5:00 p.m. at the Company’s offices at 124 Industry Lane, Hunt Valley, Maryland, with respect to a proposal to amend the Charter to eliminate Article Twelfth thereof relating to certain transactions with certain related persons.  This proposal was approved with 10,089,464 shares voted in favor of such proposal, 364,267 shares voted against such proposal, and holders of 76,179 shares abstaining and 1,932,009 broker non-votes.
(iv)	The fourth item considered was a proposal to amend the Charter to change the name of the Company to AAI Corporation at such time as the Board of Directors determines to do so, which was approved with 12,235,500 shares voted in favor of such proposal, 165,978 shares voted against such proposal, and holders of 60,745 shares abstaining and no broker non-votes.
(v)	The fifth item considered was a proposal to amend the Charter to create an authorized class of 1,000,000 shares of preferred stock, which was approved with 7,869,859 shares voted in favor of such proposal, 2,601,692 shares voted against such proposal, holders of 58,359 shares abstaining and 1,932,009 broker non-votes.

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(vi)	The sixth item considered was a proposal to amend the Charter to eliminate cumulative voting in the election of directors, which was approved with 7,384,825 shares voted in favor of such proposal, 3,089,803 shares voted against such proposal, holders of 55,283 shares abstaining and 1,932,009 broker non-votes.
(vii)	The seventh item considered was a proposal to adopt the Company’s 2004 Stock Option Plan, which was approved with 9,256,204 shares voted in favor of such proposal, 1,190,819 shares voted against such proposal, holders of 82,887 shares abstaining and 1,932,009 broker non-votes.
(viii)	The eighth item considered was the election of two directors of the Company to serve until the 2005 annual meeting of shareholders, and the results of such voting was as follows:

Nominees	Votes For		Withheld
Warren G. Lichtenstein		11,930,436		531,483
General Richard I. Neal		11,980,304		481,615

(ix)	The ninth item considered was a proposal to ratify KPMG LLP as the Company’s independent auditors for 2004, which was approved with 11,937,504 shares voted in favor of such proposal, 486,145 shares voted against such proposal, holders of 38,575 shares abstaining and no broker non-votes.
After this item the meeting was adjourned until June 17, 2004 in accordance with the third item above.
On June 17, 2004 the meeting was reconvened and the shareholders considered the final item of business, a proposal to amend the Charter to eliminate Article Twelfth thereof relating to certain transactions with certain related persons, which was approved with 10,458,311 shares voted in favor of such proposal, 394,545 shares voted against such proposal, holders of 86,083 shares abstaining and no broker non-votes.

Item 6. - Exhibits and Reports on Form 8-K

(a)	Exhibits:
	3.1	Restated Certificate of Incorporation of United Industrial Corporation.
	3.2	Bylaws of United Industrial Corporation.
	10.1	Eighth Amendment dated as of May 18, 2004 among the Company and certain of its subsidiaries, as Borrowers, and Fleet Capital Corporation, as Lender, to the Loan Agreement.
	31.1	Rule 13a - 14(a) Certification of Chief Executive Officer of the Company.
	31.2	Rule 13a - 14(a) Certification of Chief Financial Officer of the Company.
	32.1	Section 1350 Certification of the Chief Executive Officer of the Company.
	32.2	Section 1350 Certification of the Chief Financial Officer of the Company.

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(b)	Reports on Form 8-K:
	The Company filed a current report on Form 8-K dated April 5, 2004 to announce that the Audit Committee of the Company’s Board of Directors decided to change independent accountants from Ernst & Young to KPMG LLP.
	The Company filed a current report on Form 8-K dated May 7, 2004 containing its press release announcing its financial results for the first quarter ended March 31, 2004.

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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.

	UNITED INDUSTRIAL CORPORATION
	By:	/s/ JAMES H. PERRY
Date:  August 6, 2004
		James H. Perry Chief Financial Officer, Vice President and Treasurer (as duly authorized officer and principal accounting officer)

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INDEX OF EXHIBITS FILED HEREWITH

Exhibit No.
	3.1	Restated Certificate of Incorporation of United Industrial Corporation.
	3.2	Bylaws of United Industrial Corporation.
	10.1	Eighth Amendment dated as of May 18, 2004 among the Company and certain of its subsidiaries, as Borrowers, and Fleet Capital Corporation, as Lender, to the Loan Agreement.
	31.1	Rule 13a - 14(a) Certification of the Chief Executive Officer of the Company.
	31.2	Rule 13a - 14(a) Certification of the Chief Financial Officer of the Company.
	32.1	Section 1350 Certification of the Chief Executive Officer of the Company.
	32.2	Section 1350 Certification of the Chief Financial Officer of the Company.

EX-99

Exhibit 3.1

RESTATED CERTIFICATE OF INCORPORATION
OF
UNITED INDUSTRIAL CORPORATION

               UNITED INDUSTRIAL CORPORATION, a corporation organized and existing under the laws of the State of Delaware, does hereby certify as follows:

               1.  The name of the corporation is United Industrial Corporation (the “Corporation”) and the name under which the Corporation was originally incorporated is Topp Industries Corporation.

               2.  The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on September 14, 1959.

               3.  This Restated Certificate of Incorporation restates and integrates and further amends the Certificate of Incorporation of the Corporation by (a) creating a class of 1,000,000 authorized shares of preferred stock, (b) declassifying the board of directors, (c) eliminating cumulative voting in the election of directors by deleting Paragraph A of Article FOURTH in its entirety and re-lettering the remainder of the Article accordingly, and (d) deleting Article TWELFTH in its entirety and re-numbering the remaining Articles accordingly. 

               4.  The text of the Certificate of Incorporation as amended and supplemented heretofore is further amended to read as herein set forth in full:

“FIRST.  The name of the Corporation is United Industrial Corporation.
SECOND.  The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name and address of the registered agent of the Corporation in the State of Delaware is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.
THIRD.  The nature of the business, or objects or purposes to be transacted, promoted or carried on are:
	A. To manufacture, purchase or otherwise acquire, invest in, own, mortgage, pledge, sell, assign and transfer or otherwise dispose of, trade, deal in and deal with aircraft component parts and goods, wares and merchandise and personal property of every class and description.
	B. To conduct researches, investigations and examinations of businesses and enterprises of every kind and description throughout the world with the aim of securing information and particulars for the investment and employment of capital.

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               C. To undertake and transact all kinds of business relating to the gathering and distribution of financial and investment information and statistics throughout the world.

               D. To carry on the general business of managing and operating businesses, investment companies, plants, properties, investments, real estate and tangible and intangible personal property of every class and description in any of the States, districts, territories or colonies of the United States, and in any and all foreign countries, subject to the laws of such State, district, territory, colony or country.

               E. To maintain executive and operating personnel for the purpose of advising and assisting others in accordance with the purposes hereof.

               F. To furnish plans and programs, to propose policies and generally to advise and assist under contracts, or otherwise, others in the management of their businesses, plants, properties, investments, real estate and tangible and intangible personal property of every class and description.

               G. To conduct investigations in the fields of business, engineering, mechanics and inventions, and to make reports thereon.

               H. To engage in consultant and advisory work in connection with the organization, financing, management, operation and reorganization of industrial and commercial enterprises.

               I. To manage and to provide management for and to conduct, operate and supervise all or part of any and every kind of business and to contract or arrange with any corporation, association, partnership or individual for the management, conduct, operation and supervision of all kinds of businesses.

               J. To acquire, and pay for in cash, stock or bonds of this Corporation or otherwise, the good will, rights, assets and property, and to undertake or assume the whole or any part of the obligations or liabilities of any person, firm, association or corporation.

               K. To apply for, obtain, register, purchase, lease or otherwise acquire, and to hold, use, pledge, lease, sell, assign, or otherwise dispose of formulae, secret processes, distinctive marks, improvements, processes, trade names, trade-marks, copyrights, patents, licenses, concessions and the like, whether used in connection with or secured under Letters Patent of or issued by any country or authority; and to issue, exercise, develop and grant licenses in respect thereof or otherwise turn the same to account.

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               L. To acquire by purchase, subscription or otherwise, and to receive, hold, own, guarantee, sell, assign, exchange, transfer, mortgage, pledge or otherwise dispose of or deal in and with any of the shares of the capital stock, or any voting certificates in respect of the shares of capital stock, scrip, warrants, rights, bonds, debentures, notes, trust receipts, and other securities, obligations, choses in action and evidences of indebtedness or interest issued or created by any corporations, joint stock companies, syndicates, associations,  firms, trusts or persons, public or private, or by the government of the United States of America, or by any foreign government, or by any state, territory, province, municipality or other political subdivision or by any governmental agency, and as owner thereof to possess and exercise all the rights, powers and privileges of ownership, including the right to execute consents and vote thereon, and to do any and all acts and things necessary or advisable for the preservation, protection, improvement and enhancement in value thereof.

               M. To promote, cause to be organized, finance and aid by loan, subsidy, guaranty or otherwise, any corporation, association, partnership, syndicate, entity, person, or governmental, municipal or public authority, domestic or foreign, located in or organized under the laws of any authority in any part of the world, any security of which is held directly or indirectly by or for the Corporation, or in the business, financing or welfare of which the Corporation shall have any interest; and in connection therewith to guarantee or become surety for the performance of any undertaking or obligation of any of the foregoing, and to guarantee by endorsement or otherwise the payment of the principal of, or interest or dividends on, any such security, and generally to do any acts or things designed to protect, preserve, improve, or enhance the value of any such security.

               N. To have one or more offices, to carry on all or any of its operations and business and without restriction or limit as to amount to purchase or otherwise acquire, hold, own, mortgage, sell, convey or otherwise dispose of, real and personal property of every class and description in any of the states, districts, territories or colonies of the United States, and in any and all foreign countries, subject to the laws of such state, district, territory, colony or country.

               O. To enter into any lawful arrangement for sharing profits, union of interest, reciprocal concession or cooperation with any corporation, association, partnership, syndicate, entity, person, or governmental, municipal or public authority, domestic or foreign, located in or organized under the laws of any authority in any part of the world, in the carrying on of any business which the Corporation is authorized to carry on, or any business or transaction deemed necessary, convenient or incidental to carrying out any of the purposes of the Corporation.

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	P. To enter into, make and perform contracts of every kind and description with any person, firm, association, corporation, municipality, county, state, body politic or government or colony or dependency thereof.
	Q. To borrow or raise moneys for any of the purposes of the Corporation and, from time to time without limit as to amount, to draw, make, accept, endorse, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures and other negotiable or non-negotiable instruments and evidences of indebtedness, and to secure the payment of any thereof and of the interest thereon by mortgage upon or pledge, conveyance or assignment in trust of the whole or any part of the property of the Corporation, whether at the time owned or thereafter acquired, and to sell, pledge or otherwise dispose of such bonds or other obligations of the Corporation for its corporate purposes.
	R. To lend money, either without any collateral security or on the security of real or personal property.
	S. To make any guaranty respecting securities, indebtedness, dividends, interest, contracts or other obligations so far as the same may be permitted to be done under the laws of the State of Delaware.
	T. To purchase or otherwise acquire, hold, sell, pledge, transfer or otherwise dispose of, and to reissue or cancel the shares of its own capital stock or any securities or other obligations of the Corporation in the manner and to the extent now or hereafter permitted by the laws of the State of Delaware.
	U. To do everything necessary, proper, advisable or convenient for the accomplishment of any of the purposes or the attainment of any of the objects or the furtherance of any of the powers herein set forth and to do every other act and thing incidental thereto or connected therewith, provided the same be not forbidden by the laws of the State of Delaware.
	V. In general, to carry on any business and to have and exercise all of the powers conferred by the laws of the State of Delaware; and to do any and all the acts and things herein set forth to the same extent as natural persons could do, and in any part of the world, as principal, factor, agent, contractor, trustee or otherwise, either alone or in syndicates or otherwise in conjunction with any person, entity, syndicate, partnership, association or corporation, governmental, municipal, or public authority, domestic or foreign; to establish and maintain offices and agencies and to exercise all or any of its corporate powers and rights throughout the world.
The foregoing clauses shall be construed as powers as well as objects and purposes, and the matters expressed in each clause shall, unless herein otherwise expressly provided, be in nowise limited by reference to or inference from the terms of any other clause, but shall be regarded as independent objects, purposes and powers;

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and the enumeration of specific objects, purposes and powers shall not be construed to limit or restrict in any manner the meaning of general terms or the general powers of the Corporation; nor shall the expression of one thing be deemed to exclude another not expressed, although it be of like nature.
FOURTH.  The total number of shares of capital stock which the Corporation shall have the authority to issue is thirty-one million (31,000,000) shares, of which thirty million (30,000,000) shares shall be Common Stock, par value one dollar ($1.00) per share, and one million (1,000,000) shares shall be Preferred Stock, par value one dollar ($1.00) per share, with such voting powers, if any, preferences and relative, participating, optional and other special rights of each such series and the qualifications, limitations and restrictions thereof, if any, as the Board of Directors shall, in the exercise of its business judgment, deem advisable.
	A. No holder of shares of any class of stock of the Corporation shall be entitled, as such, to any preemptive rights to subscribe for the purchase of or to receive any part of any issue of shares or of bonds, notes, debentures or other securities convertible into shares of the Corporation whether now or hereafter authorized or issued; and the Corporation shall have the right from time to time, without offering the same to the holders of shares of any class then outstanding, to issue and sell shares of any class or any such bonds, notes, debentures or other securities convertible into shares, to such person or persons as the Board of Directors shall from time to time determine.  As used in this Paragraph A, the expression “securities convertible into shares” shall be deemed to include all bonds, notes, debentures or other evidences of indebtedness to which are attached, or with which are issued, warrants or other instruments evidencing the right to purchase or otherwise acquire shares of any class of stock of the Corporation.
	B.  The number of directors of the Corporation shall be determined as set forth in the bylaws and may be altered from time to time as set forth therein, but in no event shall the number of directors of the Corporation be less than five nor more than twenty.
FIFTH.  The Corporation is to have perpetual existence.
SIXTH. The private property of the stockholders shall not be subject to the payment of corporate debts to any extent whatever.
SEVENTH. For the management of the business and for the conduct of the affairs of the Corporation it is further provided:
	A. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized:

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               1. To make, alter or repeal the by-laws of the Corporation, but any by-laws so made, altered or amended by the Board of Directors may be altered, amended and repealed by either the Board of Directors or the stockholders of the Corporation.

               2. To authorize and cause to be executed mortgages and liens upon the real and personal property of the Corporation.

               3. By resolution passed by a majority of the whole Board, to designate one or more committees, each committee to consist of two or more of the directors of the Corporation, which, to the extent provided in the resolution or in the by-laws of the Corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be stated in the by-laws of the Corporation or as may be determined from time to time by resolution adopted by the Board of Directors.

               4. To fix and determine and vary from time to time the amount of working capital and reserve funds of the Corporation; to determine whether any and, if any, what part of the net profits of the Corporation or of its surplus or of its net assets in excess of its capital shall be declared in dividends and paid to the stockholders, and to direct and determine the use and disposition of any such net profits or of any such surplus or of any such net assets in excess of capital.

               5. To set apart out of any of the funds of the Corporation available for dividends on any class of stock of the Corporation a reserve or reserves of any proper purpose and to abolish any such reserve in the manner in which it was created.

               6. To determine, from time to time, whether and to what extent, and at what times and places and under what conditions and regulations, the accounts and books of the Corporation (other than the stock ledger) or any of them shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any account, book or document of the Corporation, except as conferred by the laws of the State of Delaware, unless authorized by resolution of the Board of Directors of the Corporation.

               7. From time to time, to the extent now or hereafter permitted by the laws of the State of Delaware, to sell, lease, exchange, or otherwise dispose of any part of the property and assets of this Corporation which the Board of Directors deems it expedient and for

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	the best interests of the Corporation to dispose of, or disadvantageous to continue to own, without assent of the stockholders by vote or otherwise; and, pursuant to the written consent of the holders of a majority of the shares of stock issued and outstanding having voting power, or pursuant to the affirmative vote of the holders of a majority of stock issued and outstanding having voting power, given at a stockholders’ meeting duly called for that purpose, the Board of Directors shall have power and authority, at any meeting, to sell, lease or exchange all of the property and assets of the Corporation, including its good-will and its corporate franchises, upon such terms and conditions as the Board of Directors deems expedient and for the best interests of the Corporation.
	8. To remove at any time, for cause or without cause, any officer or employee of the Corporation, or to confer such power on any Committee or officer; provided, however, that any officer elected or appointed by the Board of Directors may be removed only by the affirmative vote of a majority of the Board of Directors then in office.
	9. To establish bonus, profit-sharing or other types of incentive or compensation plans for the employees (including officers) of the Corporation and to fix the amount of profits to be distributed or shared and to determine the persons to participate in any such plans and the amounts of their respective participations.
B. No director or officer of this Corporation shall, in the absence of fraud and after disclosure, be disqualified by his office from dealing or contracting with this Corporation either as vendor, purchaser or otherwise, nor, in the absence of fraud, shall any transaction or contract of this Corporation be void or voidable or affected by reason of the fact that any such director or officer, or in any firm of which any such director or officer is a member or an employee or any corporation of which any such director or officer is an officer, director, stockholder or employee, has any interest in such transaction or contract, whether or not adverse to the interest of the Corporation, even though the vote of the director or directors or officer or officers having such interest shall have been necessary to obligate the Corporation upon such contract or transaction; and no director or directors or officer or officers having such interest shall be liable to the Corporation or to any stockholder or creditor thereof or to any other person for any loss incurred by it under or by reason of any such contract or transaction; or shall any such director or directors or officer or officers be accountable for any gains or profits realized thereon.
C. Any contract, transaction or act of the Corporation or of the Board of Directors or any Committee which shall be approved, ratified or adopted by a majority of quorum of the stockholders entitled to vote at any annual meeting or at any special meeting called for such purpose, shall be as valid and binding as though ratified by every stockholder of the Corporation, provided, however, that the fact that any such

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	contract, transaction or act shall not have been so approved, ratified or adopted, shall not be deemed in any way to invalidate the same or to deprive the Corporation, its directors or officers, of their right to proceed with such contract, transaction or action.
	D. The Corporation shall indemnify any and all of its directors or officers or former directors or officers or any person who may have served at its request as a director or officer of another corporation in which the Corporation owns shares of capital stock or of which it is a creditor against expenses actually and necessarily incurred by them in connection with the defense of any action, suit or proceeding in which they, or any of them, are made parties, or a party, by reason of being or having been directors or officers or a director or officer of the Corporation, or of such other corporation, except in relation to matters as to which any such director or officer or former director or officer or person shall be adjudged in such action, suit or proceeding to be liable for negligence or misconduct in the performance of duty. Such indemnification shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, vote of stockholders, or otherwise. The Corporation shall have the right to intervene in and to defend all such actions, suits or proceedings brought against any such director or officer or former director or officer or person. Whenever in this paragraph a director or officer or former director or officer or a person is referred to, such reference shall be inclusive of his heirs, executors and administrators.
	E. Each director of the Corporation and each member of any committee designated by the Board of Directors shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or reports made to the Corporation by any of its officials, or by an independent certified public accountant, or by an appraiser, selected with reasonable care by the Board of Directors or by any such committee, or in relying in good faith upon other records of the Corporation.
	F. At all meetings of stockholders the voting for the election of directors may be viva voce, but any qualified voter may demand a stock vote whereupon such stock vote shall be taken by ballot, each of which shall state the name of the stockholder voting and the number of shares voted by him, and if such ballot be cast by proxy, it shall also state the name of such proxy.
	This Corporation may by its by-laws confer powers on the Board of Directors in addition to the foregoing and in addition to the powers and authorities expressly conferred by law.
EIGHTH. Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this Corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or

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receivers appointed for this Corporation under the provisions of section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.

               NINTH.  Meetings of stockholders and directors may be held outside the State of Delaware, if the by-laws so provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the by-laws of the Corporation.

               TENTH.  The Board of Directors may from time to time offer for subscription, or otherwise issue or sell, or grant options for the subscription to or purchase of, any or all of the authorized stock of the Corporation not then issued or which may have been issued and reacquired as Treasury stock by the Corporation, except as provided in Article FOURTH, and any or all of any increased stock of any class that may hereafter be authorized, for such consideration as the directors may determine. The Board of Directors may, at the time of such issue and sale, or at the time of granting of such options, specify in amount or value the part of the consideration received on such issue and sale over and above the par value of such stock, which shall be capital, and which shall be surplus, respectively. Bonds, debentures, certificates of indebtedness, or other securities may be issued, sold or disposed of pursuant to resolution of the Board of Directors, for such consideration and upon such terms and conditions as may be deemed advisable by the Board of Directors in the exercise of its discretion.

               ELEVENTH. If so determined by the Board of Directors, the Corporation may from time to time receive money and/or other property as a contribution to surplus, which contribution may consist of an undivided part of moneys and/or other property, for another undivided part of which money and/or other property, bonds, debentures, obligations and/or shares of stock, with and/or without par value, of any class or classes of the Corporation are issued. Against any surplus there may be charged from time to time any losses incurred by the Corporation or any items of debt or stock discount and expense. Such surplus may also be reduced from time to time by dividends or by transfer to capital or to some other appropriate account, and the amount of capital may be increased from time to time by the capitalization of surplus or net profits without the issuance of additional shares.

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               TWELFTH. The Corporation reserves the right to create any additional  referred or special stocks or to amend, alter, change or repeal any provisions contained in this instrument, or any amendment of the provisions thereof, in the manner now or hereafter provided by the laws of the State of Delaware, and all rights of the stockholders of the Corporation, except as in this instrument otherwise provided, are granted subject to these reservations.

               THIRTEENTH.  No director shall be personally liable to the Corporation or any stockholder for monetary damages for breach of fiduciary duty as a director, except for any matter in respect of which such director shall be liable under Section 174 of Title 8 of the Delaware Code (relating to the Delaware General Corporation Law) or any amendment thereto or successor provision thereto or shall be liable by reason that, in addition to any and all other requirements for such liability, he (i) shall have breached his duty of loyalty to the Corporation or its stockholders, (ii) shall not have acted in good faith or, in failing to act, shall not have acted in good faith, (iii) shall have acted in a manner involving intentional misconduct or a knowing violation of law or, in failing to act, shall have acted in a manner involving intentional misconduct or a knowing violation of law or (iv) shall have derived an improper personal benefit. Neither the amendment nor repeal of this Article THIRTEENTH, nor the adoption of any provision of the Certificate of Incorporation inconsistent with this Article THIRTEENTH, shall eliminate or reduce the effect of this Article THIRTEENTH, in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article THIRTEENTH, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.”

               5.  This Restated Certificate of Incorporation was duly adopted by the Board of Directors and the stockholders of the Corporation in accordance with Section 242 and Section 245 of the General Corporation Law of Delaware.

               6.  This Restated Certificate of Incorporation shall be effective upon filing with the Secretary of State of the State of Delaware pursuant to Section 103 of the General Corporation Law of Delaware.

               IN WITNESS WHEREOF, UNITED INDUSTRIAL CORPORATION has caused this Restated Certificate of Incorporation to be signed by Frederick M. Strader, its President and Chief Executive Officer, this 17th day of June, 2004.

UNITED INDUSTRIAL CORPORATION
By:	/s/ FREDERICK M. STRADER
	Frederick M. Strader President and Chief Executive Officer

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EX-99

Exhibit 3.2

BYLAWS

OF

UNITED INDUSTRIAL CORPORATION
(a Delaware corporation)
(As amended through June 10, 2004)

ARTICLE  I

OFFICES

          SECTION 1.  Registered Office.  The registered office of UNITED INDUSTRIAL CORPORATION (the “Corporation”) in the State of Delaware shall be at 1209 Orange Street, in the city of Wilmington, County of New Castle and its registered agent at such address shall be The Corporation Trust Company, or such other office or agent as the Board of Directors of the Corporation (the “Board”) shall from time to time select.

          SECTION 2.  Other Offices.  The Corporation may also have an office or offices, and keep the books and records of the Corporation, except as may otherwise be required by law, at such other place or places, either within or without the State of Delaware, as the Board may from time to time determine or the business of the Corporation may require.

ARTICLE II

MEETING OF STOCKHOLDERS

          SECTION 1.  Place of Meeting.  All meetings of the stockholders of the Corporation shall be held at the office of the Corporation or at such other places, within or without the State of Delaware, as may from time to time be fixed by the Board.

          SECTION 2.  Annual Meetings.  The annual meeting of the stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year at such date and time, within or without the State of Delaware, as the Board shall determine.

          SECTION 3.  Special Meetings.  Except as otherwise required by law or the restated Certificate of Incorporation of the Corporation (the “Certificate”), special meetings of the stockholders for any purpose or purposes may be called by the majority of the entire Board or by stockholders holding together at least twenty percent (20%) of all the shares of the Corporation entitled to vote at the meeting and shall be held only for such business and at such date and time, within or without the State of Delaware, as is specified in the notice of any such special meeting of the stockholders.

          SECTION 4.  Notice of Meetings.  Except as otherwise provided by law, written notice of each meeting of the stockholders, whether annual or special, shall be given, either by personal delivery or by mail, not less than 10 nor more than 60 days before the date of the meeting to each stockholder of record entitled to notice of the meeting.  If mailed, such notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation.  Each such notice shall state the place, date and hour of the meeting, and the purpose or purposes for which the meeting is called.  Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy without protesting, prior to or at the commencement of the meeting, the lack of proper notice to such stockholder, or who shall sign a written waiver of notice thereof, whether before or after such meeting.  Notice of adjournment of a meeting of stockholders need not be given if the time and place to which it is adjourned are announced at such meeting, unless the adjournment is for more than 30 days or, after adjournment, a new record date is fixed for the adjourned meeting.

          SECTION 5.  Order of Business.  (a) At each meeting of the stockholders, the Chairman of the Board, if any, or if none or in the absence of the Chairman of the Board, the Vice-Chairman, if any, or if none or in the absence of the Vice-Chairman, such person as shall be selected by the Board shall act as chairman of the meeting.  The order of business at each such meeting shall be as determined by the chairman of the meeting.  The chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, the establishment of procedures for the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the Corporation, restrictions on entry to such meeting after the time prescribed for the commencement thereof, and the opening and closing of the voting polls.

          (b)  At any annual meeting of stockholders, only such business shall be conducted as shall have been brought before the annual meeting (i) by or at the direction of the chairman of the meeting, (ii) pursuant to the notice provided for in Section 4 of this Article II or (iii) by any stockholder who is a holder of record at the time of the giving of such notice provided for in this Section 6, who is entitled to vote at the meeting and who complies with the procedures set forth in Section 6.

          (c) For business properly to be brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation (the “Secretary”) and such business must be a proper matter for stockholder action under the Delaware General Corporation Law (“DGCL”).  To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year’s annual meeting of stockholders; provided, however, that if the date of the annual meeting is advanced

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more than 30 days prior to or delayed by more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the 90^th day prior to such annual meeting and not later than the close of business on the later of the 60^th day prior to such annual meeting or the 10^th day following the day on which public announcement of the date of such meeting is first made.  To be in proper written form, a stockholder’s notice to the Secretary shall set forth in writing as to each matter the stockholder purposes to bring before the annual meeting:  (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) the name and address of the stockholder proposing such business and all persons or entities acting in concert with the stockholder; (iii) the class and number of shares of the Corporation which are beneficially owned by the stockholder and all persons or entities acting in concert with such stockholder; and (iv) any material interest of the stockholder in such business.  The foregoing notice requirements shall be deemed satisfied by a stockholder if the stockholder has notified the Corporation of his or her intention to present a proposal at an annual meeting and such stockholder’s proposal has been included in a proxy statement that has been prepared by management of the Corporation to solicit proxies for such annual meeting; provided, however, that if such stockholder does not appear or send a qualified representative to present such proposal at such annual meeting, the Corporation need not present such proposal for a vote at such meeting, notwithstanding that proxies in respect of such vote may have been received by the Corporation.  Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 6.  The chairman of an annual meeting shall, if the facts warrant, determine that business was not properly brought before the annual meeting in accordance with the provisions of this Section 6 and, if the chairman should so determine, the chairman shall so declare to the annual meeting and any such business not properly brought before the annual meeting shall not be transacted.

          SECTION 7.  List of Stockholders.  It shall be the duty of the Secretary or other officer who has charge of the stock ledger to prepare and make, at least 10 days before each meeting of the stockholders, a complete list of the stockholders entitled to vote thereat, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in such stockholder’s name.

          SECTION 8.  Voting.  (a)  At each meeting of the stockholders, every stockholder shall be entitled to vote in person or by proxy appointed by instrument in writing, subscribed by each stockholder or by such stockholder’s duly authorized attorney-in-fact (but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period), and, unless the Certificate provides otherwise, shall have one vote for each share of stock entitled to vote registered in the name of such stockholder on the books of the Corporation on the applicable record date fixed pursuant to these Bylaws.  At all elections of directors the voting may but need not be by ballot and a plurality of the votes cast shall elect.  Except as otherwise required by law or the Certificate, any other action shall be authorized by a majority of the votes cast.

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          (b)     Any action required or permitted to be taken at any meeting of stockholders may, except as otherwise required by law or the Certificate, be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of record of the issued and outstanding capital stock of the Corporation having a majority of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, and the writing or writings are filed with the permanent records of the Corporation.  Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

          SECTION 9.  Inspectors.  The Board, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof.  If an inspector or inspectors are not so appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors.  In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the Board in advance of the meeting or at the meeting by the person presiding thereat.  Each inspector, if any, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability.  The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots, or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders.  On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by such inspector or inspectors and execute a certificate of any fact found by such inspector or inspectors.

ARTICLE III

BOARD OF DIRECTORS

          SECTION 1.  General Powers.  The business and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Certificate directed or required to be exercised or done by the stockholders.

          SECTION 2.  Number and Tenure.  The Board of Directors shall be six (6) in number, which number may be changed pursuant to a resolution of the Board of Directors, subject to the Corporation’s certificate of incorporation.  Each director shall be

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elected to a term of office to expire at the next annual meeting of shareholders.  The Board shall keep full and fair records of its acts and proceedings and transactions.  Directors need not be stockholders.

          SECTION 3.  Notification of Nomination.  Nominations for the election of directors may be made by the Board or by any stockholder who is a stockholder of record at the time of giving of the notice of nomination provided for in this Section 3 of this Article III and who is entitled to vote for the election of directors.  Any stockholder of record entitled to vote for the election of directors at a meeting may nominate persons for election as directors only if timely written notice of such stockholder’s intent to make such nomination is given, either by personal delivery or by United States mail, postage prepaid, to the Chairman of the Nominating and Corporate Governance Committee.  To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation (i) with respect to an election to be held at an annual meeting of stockholders, not less than 60 days nor more than 90 days prior to the first anniversary date of the preceding year’s annual meeting of stockholders; provided, however, that if the date of the annual meeting is advanced more than 30 days prior to or delayed by more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the 90^th day prior to such annual meeting and not later than the close of business on the later of the 60^th day prior to such annual meeting or meeting is first made and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, not earlier than the 90^th day prior to such special meeting and not later than the close of business on the later of the 60^th day prior to such special meeting or the 10^th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be selected at such meeting.  Each such notice shall set forth:  (i) the name and address of the stockholder who intends to make the nomination, of all persons or entities acting in concert with the stockholder, and of the person or persons to be nominated; (ii) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (iii) a description of all arrangements or understandings between the stockholder and each nominee and any other person or entities acting in concert with the stockholder (naming such person or entities) pursuant to which the nomination or nominations are to be made by the stockholder; (iv) such other information regarding each nominee proposed by the stockholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had each nominee been nominated, or intended to be nominated, by the Board; (v) the class and number of shares of the Corporation that are beneficially owned by the stockholder and all persons or entities acting in concert with the stockholder; and (vi) the consent of each nominee to being named in a proxy statement as nominee and to serve as a director of the Corporation is so elected.  The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure.  Only such persons who are nominated in accordance with the procedures set forth in this Section 3 of this Article III shall be eligible to serve as directors of the Corporation.

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          Notwithstanding anything in the third sentence of this Section 3 of Article III to the contrary, in the event that the number of directors to be elected to the Board is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board made by the Corporation at least 70 days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by these Bylaws shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10^th day following the day on which such public announcement is first made by the Corporation.

          For purposes of this section, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the company with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended.

          SECTION 4.  Quorum and Manner of Acting.  Except as otherwise provided by law, the Certificate or these Bylaws, a majority of the entire Board shall constitute a quorum for the transaction of business at any meeting of the Board, and, except as so provided, the vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board.  The chairman of the meeting or a majority of the directors present may adjourn the meeting to another time and place whether or not a quorum is present.  At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called.

          SECTION 5.  Place of Meeting.  The Board may hold its meetings at such place or places within or without the State of Delaware as the Board may from time to time determine or as shall be specified or fixed in the respective notice or waivers of notice thereof.

          SECTION 6.  Annual Meeting.  Following the annual meeting of stockholders, the newly elected Board shall meet for the purpose of the election of officers and the transaction of such other business as may properly come before the meeting.  Such meeting may be held without notice immediately after the annual meeting of stockholders at the same place at which such stockholders’ meeting is held or at such other place as the Chairman of the Board, if any, or the Board shall determine.

          SECTION 7.  Regular Meetings.  Regular meetings of the Board shall be held at such times and places as the Chairman of the Board, if any, or the Board shall from time to time by resolution determine.

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          SECTION 8.  Special Meetings.  Special meetings of the Board shall be held whenever called by the Chairman of the Board or by a majority of the directors then in office.

          SECTION 9.  Notice of Meetings.  Notice need not be given of regular meetings of the Board held at times and places fixed by resolution of the Board or of any adjourned meeting thereof.  Notice of each special meeting of the Board shall be given by overnight delivery service or mailed to each director, in either case addressed to such director at such director’s residence or usual place of business, at least two days before the day on which the meeting is to be held or shall be sent to such director at such place by telegraph or telecopy or be given personally or by telephone, not later than the day before the meeting is to be held, but notice need not be given to any director who shall, either before or after the meeting, submit a signed waiver of such notice or who shall attend such meeting other than for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened.  Every such notice shall state the time and place but need not state the purpose of the meeting.

          SECTION 10.  Organization.  At all meetings of the Board, the Chairman, if any, or if none or in the Chairman’s absence or inability to act, the Vice-Chairman, if any, or if none or in the Vice-Chairman’s absence or inability to act, a chairman chosen by the directors, shall preside.  The Secretary of the Corporation shall act as secretary at all meetings of the Board when present, and, in the Secretary’s absence, the presiding officer may appoint any person to act as secretary.

          SECTION 11.  Rules and Regulations.  The Board may adopt such rules and regulations not inconsistent with the provisions of law, the Certificate or these Bylaws for the conduct of its meetings and management of the affairs of the Corporation as the Board may deem proper.

          SECTION 12.  Participation in Meeting by Means of Communication Equipment.  Any one or more members of the Board or any committee thereof may participate in any meeting of the Board or of any such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.

          SECTION 13.  Action without Meeting.  Any action required or permitted to be taken at any meeting of the Board or any committee thereof may be taken without a meeting if all of the members of the Board or of any such committee consent thereto in writing and the writing or writings are filed with the minutes or proceedings of the Board or of such committee.

          SECTION 14.  Resignations.  Any director of the Corporation may at any time resign by giving written notice to the Chairman of the Board, if any, the Vice-Chairman, if any, the President or the Secretary.  Such resignation shall take effect at

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the time specified therein or, if the time be not specified therein, upon receipt thereof; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

          SECTION 15.  Removal of Directors.  Any director (including all members of the Board) may be removed from office at any time, with or, except as otherwise required by law or the Certificate, without cause, by the affirmative vote of the holders of a majority of the voting power of all of the shares of capital stock of the Corporation then entitled to vote generally in the election of directors.

          SECTION 16.  Vacancies.  Except as otherwise required by law, the Certificate or these Bylaws, any vacancy in the Board for any reason and any newly created directorship resulting by reason of any increase in the number of directors may be filled only by the Board, by resolution adopted by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum (or by a sole remaining director); provided, however, that if the directors then in office shall constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), upon application of any stockholder or stockholders holding at least ten percent (10%) of the total number of shares of the capital stock of the Corporation at the time outstanding having the right to vote for directors, an election to fill any such vacancy or vacancies or newly created directorship, or to replace the director or directors chosen by the directors then in office as aforesaid may be held as provided in Section 223 of the DGCL.  If not so filled, any such vacancy shall be filled by the stockholders at the next annual meeting or at a special meeting called for that purpose.  Any director so appointed shall hold office until such future annual meeting of stockholders as is appropriate for the class of directors to which he or she is elected and until his or her successor shall be duly elected and qualified.

          SECTION 17.  Compensation.  Each director, in consideration of such person serving as a director, shall be entitled to receive from the Corporation such amount per annum and such fees for attendance at meetings of the Board, or of committees of the Board, or both, as the Board shall from time to time determine.  In addition, each director shall be entitled to receive from the Corporation reimbursement for the reasonable expenses incurred by each such person in connection with the performance of such person’s duties as a director.  Nothing contained in this Section 17 of this Article III shall preclude any director from serving the Corporation or any of its subsidiaries in any other capacity and receiving proper compensation therefore.

ARTICLE IV

COMMITTEES OF THE BOARD OF DIRECTORS

          SECTION 1.  Establishment of Committees of the Board of Directors.  The Board may, in accordance with and subject to the DGCL, from time to time establish committees of the Board to exercise such powers and authorities of the Board, and to

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perform such other functions, as the Board may from time to time determine and specify in the resolution of appointment.  Each committee must consist of two or more directors of the Corporation.

          SECTION 2.  Procedure; Meetings; Quorum.  Regular meetings of committees of the Board, of which no notice shall be necessary, may be held at such times and places as shall be fixed by resolution adopted by a majority of the members thereof.  Special meetings of any committee of the Board shall be called at the request of a majority of the members thereof.  Notice of each special meeting of any committee of the Board shall be given by overnight delivery service or mailed to each member, in either case addressed to such member at such member’s residence or normal place of business, at least two days before the day on which the meeting is to be held or shall be sent to such members at such place by telegraph or telecopy or be given personally or by telephone, not later than the day before the meeting is to be held, but notice need not be given to any member who shall, either before or after the meeting, submit a signed waiver of such notice or who shall attend such meeting other than for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened.  Any special meeting of any committee of the Board shall be a legal meeting without any notice thereof having been given, if all members thereof shall be present thereat.  Notice of any adjourned meeting of any committee of the Board need not be given.  Any committee of the Board may adopt such rules and regulations not inconsistent with the provisions of the law, the Certificate or these Bylaws for the conduct of its meetings as such committee of the Board may deem proper.  A majority of the members of any committee of the Board shall constitute a quorum for the transaction of business at any meeting, and the vote of a majority of the members thereof present at any meeting at which a quorum is present shall be the act of such committee.  Each committee of the Board shall keep written minutes of its proceedings and shall report on such proceedings to the Board.

          SECTION 3.  Action by Written Consent.  Any action required or permitted to be taken at any meeting of any committee of the Board may be taken without a meeting if all the members of the committee consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the committee.

          SECTION 4.  Term; Termination.  In the event of any person shall cease to be a director of the Corporation, such person shall simultaneously therewith cease to be a member of any committee appointed by the Board.

ARTICLE V

OFFICERS

          SECTION 1.  Number; Term of Office.  The Board shall elect the officers of the Corporation, which shall include a President and a Secretary, and may include,

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by election or appointment, a Chairman of the Board, a Vice-Chairman of the Board, one or more Vice-Presidents (any one or more of whom may be given an additional designation of rank, such as “Executive Vice-President” or “Senior Vice-President,” or function), a Treasurer and such Assistant Secretaries, such Assistant Treasurers and such other officers as the Board may from time to time deem proper.  Each officer shall have such powers and duties as may be prescribed by these Bylaws and as may be assigned by the Board or the President.  Any two or more offices may be held by the same person.  The Board may from time to time authorize any officer to appoint and remove any such other officers and agents and to prescribe their powers and duties.  The Board may require any officer or agent to give security for the faithful performance of such person’s duties.

          SECTION 2.  Term of Office; Removal; Remuneration.  Each officer shall hold office for such term as may be prescribed by the Board and until such person’s successor shall have been chosen and shall qualify, or until such person’s death or resignation, or until such person’s removal in the manner hereinafter provided.  Any officer may be removed, either with or without cause, by the Board.  The remuneration of each officer shall be fixed by the Board or in such manner as the Board shall provide.

          SECTION 3.  Resignation.  Any officer may resign at any time by giving notice to the Board, the President or the Secretary.  Any such resignation shall take effect at the date of receipt of such notice or at any later date specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

          SECTION 4.  Vacancies.  A vacancy in any office because of death, resignation, removal or any other cause may be filled for the unexpired portion of the term by the Board.

          SECTION 5.  Chairman of the Board; Powers and Duties.  The Chairman of the Board, if any, shall preside at all meetings of the stockholders and the Board and shall have such other powers and duties as may from time to time be assigned by the Board.

          SECTION 6.  Vice-Chairman of the Board; Powers and Duties.  In case of the absence or disability of the Chairman of the Board or a vacancy in the office, the Vice-Chairman of the Board, if any, shall perform the duties of the Chairman of the Board.  The Vice-Chairman shall have such other powers and duties as may from time to time be assigned by the Board.

          SECTION 7.  President and Chief Executive Officer.  The President shall be the chief executive officer of the Corporation and shall have general management and supervision of the property, business and affairs of the Corporation and over its other officers and may execute and deliver in the name of the Corporation powers of attorney, contracts, bonds and other obligations and instruments and shall have such

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other powers and perform such other duties as customarily pertain to that office and as may be assigned by the Board or the Chairman of the Board, if any.

          SECTION 8.  Vice-President; Powers and Duties.  A Vice-President may execute and deliver in the name of the Corporation powers of attorneys, contracts, bonds and other obligations and instruments pertaining to the regular course of the duties of said office and shall have such other powers and perform such other duties as may be assigned by the President or the Board.

          SECTION 9.  Secretary and Assistant Secretary; Powers and Duties.  The Secretary shall attend all meetings of the stockholders and the Board and shall keep the minutes for such meetings in one or more books provided for that purpose.  The Secretary shall be custodian of the corporate records, except those required to be in the custody of the Treasurer or the Controller, shall keep the seal of the Corporation, and shall execute and affix the seal of the Corporation to all documents duly authorized for execution under seal on behalf of the Corporation, and shall perform all of the duties incident to the office of the Secretary, as well as such other duties as may be assigned by the President or the Board.

          The Assistant Secretaries shall perform such of the Secretary’s duties as the Secretary shall from time to time direct.  In case of the absence or disability of the Secretary or a vacancy in the office, an Assistant Secretary designated by the Chairman of the Board, if any, or by the Secretary, if the office is not vacant, shall perform the duties of the Secretary.

          SECTION 10.  Treasurer and Assistant Treasurers; Powers and Duties.  The Treasurer shall have care and custody of the funds and securities of the Corporation, shall deposit such funds in the name and to the credit of the Corporation with such depositories as the Treasurer shall approve, shall disburse the funds of the Corporation for proper expenses and dividends, and as may be ordered by the Board, taking proper vouchers for such disbursements, as well as such other duties as may be assigned by the President of the Board.

          The Assistant Treasurers shall perform such of the Treasurer’s duties as the Treasurer shall from time to time direct.  In case of the absence or disability of the Treasurer or a vacancy in the office, an Assistant Treasurer designated by the Chairman of the Board, if any, or by the Treasurer, if the office is not vacant, shall perform the duties of the Treasurer.

ARTICLE VI

INDEMNIFICATION

          SECTION 1.  Scope of Indemnification.  (a) Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any

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action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee’s heirs, executors and administrators; provided, however, that, except as provided in Section 3 of this Article VI with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board.

          (b)      If an indemnitee is not entitled to indemnification with respect to a portion of any liabilities to which such person may be subject, the Corporation shall nonetheless indemnify such indemnitee to the maximum extent for the remaining portion of the liabilities.

          (c)     The termination of a proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the indemnitee is not entitled to indemnification.

          (d)     To the extent permitted by law, the payment of indemnification provided for by this Article, including the advancement of expenses pursuant to Section 2 of this Article VI, with respect to proceedings other than those brought by or in the right of the Corporation, shall be subject to the conditions that the indemnitee shall give the Corporation prompt notice of any proceeding, that the Corporation shall have complete charge of the defense of such proceeding and the right to select counsel for the indemnitee, and that the indemnitee shall assist and cooperate fully in all matters respecting the proceeding and its defense or settlement.  The Corporation may waive any or all of the conditions set forth in the preceding sentence.  Any such waiver shall be applicable only to the specific payment for which the waiver is made and shall not in any way obligate the Corporation to grant such waiver at any future time.  In the event of a conflict of interest between the indemnitee and the Corporation that would disqualify the Corporation’s counsel from representing the indemnitee under the rules of professional conduct applicable to attorneys, it shall be the policy of the Corporation to

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waive any or all of the foregoing conditions subject to such limitations or conditions as the Corporation shall deem to be reasonable in the circumstances.

          SECTION 2.  Advancing Expenses.  The right to indemnification conferred in Section 1 of this Article VI shall include the right to be paid by the Corporation the expenses incurred in defending any proceeding for which such right to indemnification is applicable in advance of its final disposition (hereinafter an “advancement of expenses”); provided, however, that, if required by the DGCL, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a “final adjudication”) that such indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise.  No advance shall be made by the Corporation if a determination is reasonably and promptly made by a majority vote of disinterested directors, even if the disinterested directors constitute less than a quorum, or (if such a quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs) by independent legal counsel in a written opinion, that, based upon the facts known to the Board or counsel at the time such determination is made, the indemnitee has acted in such a manner as to permit or require the denial of indemnification pursuant to the provisions of Section 1 of this Article VI.

          SECTION 3.  Right of Indemnitee to Bring Suit.  The rights to indemnification and to the advancement of expenses conferred in Sections 1 and 2 of this Article VI shall be contract rights.  If a claim under Sections 1 and 2 of this Article VI is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim.  If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit.  In any suit brought by (a) the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to advancement of expenses) it shall be a defense that the indemnitee has not met the applicable standard of conduct; and (b) the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the indemnitee has not met any applicable standard for indemnification set forth in the DGCL.  Neither the failure of the Corporation (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its board of directors,

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independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit.  In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Section or otherwise shall be on the Corporation.

          SECTION 4.  Non-Exclusivity of Rights.  The rights to indemnification and to the advancement of expenses conferred in this Article VI shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Certificate, bylaw, agreement, vote of stockholders or disinterested directors or otherwise.

          SECTION 5.  Insurance, Contracts and Funding.  The Corporation may purchase and maintain insurance to protect itself and any indemnitee against any expenses, judgments, fines and amounts payable as specified in this Article VI, to the fullest extent permitted by applicable law as then in effect.  The Corporation may enter into contracts with any indemnitee in furtherance of the provisions of this Article VI and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided in this Article VI.

          SECTION 6.  Effects of Amendments.  Neither the amendment or repeal of, nor the adoption of a provision inconsistent with, any provision of this Article VI (including, without limitation, this Section 6) shall adversely affect the rights of any indemnitee under this Article VI with respect to any proceeding commenced or threatened prior to such amendment, repeal or adoption of an inconsistent provision.

          SECTION 7.  Severability.  If any provision or provisions of this Article VI shall be held to be invalid, illegal or unenforceable for any reason whatsoever:  (a) the validity, legality and enforceability of the remaining provisions of this Article VI (including, without limitation, all portions of any paragraph of this Article VI containing any such provision held to be invalid, illegal or unenforceable, that are not themselves valid, illegal, or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Article VI (including, without limitation, all portions of any paragraph of this Article VI containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

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ARTICLE VII

CAPITAL STOCK

          SECTION 1.  Share of Ownership.  (a) Holders of shares of stock of the Corporation shall be recorded on the books of the Corporation and ownership of such stock shall be evidenced by a certificate or other form as shall be approved by the Board.  Certificates representing shares of stock of each class shall be signed by, or in the name of, the Corporation by the President or any Vice President and by the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer of the Corporation, and sealed with the seal of the Corporation, which may be a facsimile thereof.  Any or all such signatures and the signatures of any transfer agent or registrar may be facsimiles.  Although any officer, transfer agent or registrar whose manual or facsimile signature is affixed to such a certificate ceases to be such officer, transfer agent or registrar before such certificate has been issued, the certificate may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent or registrar were still such at the date of its issue.

          (b)  The stock ledger and blank share certificates shall be kept by the Secretary or by a transfer agent or by a registrar or by any officer or agent designated by the Board.

          SECTION 2.  Transfer of Shares.  Transfers of shares of stock of each class of the Corporation shall be made only on the books of the Corporation by the holder thereof, or by such holder’s attorney thereunto authorized by a power of attorney duly executed and filed with the Secretary or a transfer agent for such stock, if any, and on surrender of the certificate or certificates, if any, for such shares properly endorsed or accompanied by a duly executed stock transfer power (or by proper evidence of succession, assignment or authority to transfer) and the payment of any taxes thereon; provided, however, that the Corporation shall be entitled to recognize and enforce any lawful restriction on transfer.

          SECTION 3.  Registered Stockholders and Addresses of Stockholders.  (a) The Corporation shall be entitled to recognize the exclusive right of a person registered on its records as the owner of shares of stock to receive dividends and to vote as such owner, and shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares of stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by applicable law.

          (b)  Each stockholder shall designate to the Secretary or transfer agent of the Corporation an address at which notices of meetings and all other corporate notices may be delivered or mailed to such person, and, if any stockholder shall fail to designate such address, corporate notices may be delivered to such person by mail directed to such person at such person’s post office address, if any, as the same

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appears on the stock record books of the Corporation or at such person’s last known post office address.

          SECTION 4.  Lost, Stolen, Destroyed and Mutilated Certificates.  The Corporation may issue to any holder of shares of stock the certificate for which has been lost, stolen, destroyed or mutilated a new certificate or certificates for shares, upon the surrender of the mutilated certificate or, in the case of loss, theft or destruction of the certificate, upon satisfactory proof of such loss, theft or destruction.  The Board, or a committee designated thereby, or the transfer agents and registrars for the stock, may, in their discretion, require the owner of the lost, stolen or destroyed certificate, or such person’s legal representative, to give the Corporation a bond in such sum and with such surety or sureties as they may direct to indemnify the Corporation and said transfer agents and registrars against any claim that may be made on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

          SECTION 5.  Regulations.  The Board may make such additional rules and regulations as it may deem expedient concerning the issue and transfer of certificates representing shares of stock of each class of the Corporation and may make such rules and take such action as it may deem expedient concerning the issue of certificates in lieu of certificates claimed to have been lost, destroyed, stolen or mutilated.

          SECTION 6.  Fixing Date for Determination of Stockholders of Record.  (a)  In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting.  If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.  A determination of stockholders entitled to notice of or to vote at a meeting of the stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.

          (b)     In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board.  Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board to fix a record date.  The Board shall promptly, but in all events within 10 days after the date on which such a request is received; adopt a resolution fixing the record date.  If no record date has been fixed by the Board within 10 days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the

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Board is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or any officer or agent of the Corporation having custody of the books in which proceedings of meetings of stockholders are recorded.  Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested.  If no record date has been fixed by the Board and prior action by the Board is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board adopts the resolution taking such prior action.

          (c) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted and which record date shall be not more than 60 days prior to such action.  If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

          SECTION 7.  Transfer Agents and Registrars.  The Board may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars.

ARTICLE VIII

DIVIDENDS

          Subject always to the provisions of law and the Certificate, the Board shall have full power to determine whether any, and, if any, what part of any, funds legally available for the payment of dividends shall be declared as dividends and paid to stockholders; the division of the whole or any part of such funds of the Corporation shall rest wholly within the lawful discretion of the Board, and it shall not be required at any time, against such discretion, to divide or pay any part of such funds among or to the stockholders as dividends or otherwise; and before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board shall think conducive to the interest of the Corporation, and the Board may modify or abolish any such reserve in the manner in which it was created.

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ARTICLE IX

CORPORATE SEAL

          The Board shall provide a corporate seal which shall have inscribed thereon the name of the Corporation and the year of its incorporation, and shall be in such form and contain such other words and/or figures as the Board shall determine.  The corporate seal may be used by printing, engraving, lithographing, stamping or otherwise making, placing or affixing, or causing to be printed, engraved, lithographed, stamped or otherwise made, placed or affixed, upon any paper or document, by any process whatsoever, an impression, facsimile or other reproduction of said corporate seal.

ARTICLE X

FISCAL YEAR

          The fiscal year of the Corporation shall be fixed, and shall be subject to change, by the Board.  Unless otherwise fixed by the Board, the fiscal year of the Corporation shall be the calendar year.

ARTICLE XI

WAIVER OF NOTICE

          Whenever notice is required to be given by these Bylaws, by the Certificate or by law, a written waiver thereof, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice.

ARTICLE XII

BANK ACCOUNTS, DRAFTS, CONTRACTS, ETC.

          SECTION 1.  Bank Accounts and Drafts.  In addition to such bank accounts as may be authorized by the Board, the primary financial officer or any person designated by said primary financial officer, whether or not an employee of the Corporation, may authorize such bank accounts to be opened or maintained in the name and on behalf of the Corporation as he may deem necessary or appropriate, payments from such bank accounts to be made upon and according to the check of the Corporation in accordance with the written instructions of said primary financial officer, or other person so designated by the Treasurer.

          SECTION 2.  Contracts.  The Board may authorize any person or persons, in the name and on behalf of the Corporation, to enter into or execute and deliver any

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and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances.

          SECTION 3.  Proxies:  Powers of Attorney; Other Instruments.  The Chairman, if any, the President or any other person designated by either of them shall have the power and authority to execute and deliver proxies, powers of attorney and other instruments on behalf of the Corporation in connection with the rights and powers incident to the ownership of stock by the Corporation.  The Chairman, if any, the President or any other person authorized by proxy or power of attorney executed and delivered by either of them on behalf of the Corporation may attend and vote at any meeting of stockholders of any company in which the Corporation may hold stock, and may exercise on behalf of the Corporation any and all of the rights and powers incident to the ownership of such stock at any such meeting, or otherwise as specified in the proxy or power of attorney so authorizing any such person.  The Board, from time to time, may confer like powers upon any other person.

          SECTION 4.  Financial Reports.  The Board may appoint the primary financial officer or other fiscal officer and/or the Secretary or any other officer to cause to be prepared and furnished to stockholders entitled thereto any special financial notice and/or financial statement, as the case may be, which may be required by any provision of law.

ARTICLE XIII

AMENDMENTS

           The Board shall have the power to adopt, amend or repeal the Bylaws by the affirmative vote of at least a majority of the members then in office.  Bylaws adopted by the Board may be repealed or changed, and new Bylaws made, by the stockholders, and the stockholders may prescribe that any Bylaw made by them shall not be altered, amended or repealed by the Board.

(As amended through June 10, 2004)

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EX-99

Exhibit 10.1

EIGHTH AMENDMENT AGREEMENT

          THIS EIGHTH AMENDMENT AGREEMENT (this “Agreement”) is made and entered into as of the 18th day of May, 2004, by and among FLEET CAPITAL CORPORATION (“Lender”), a Rhode Island corporation with an office at 200 Glastonbury Boulevard, Glastonbury, Connecticut 06033; and UNITED INDUSTRIAL CORPORATION, a Delaware corporation, and the following of its subsidiaries: AAI CORPORATION (“AAI”), a Maryland corporation, DETROIT STOKER COMPANY, a Michigan corporation; AAI ENGINEERING SUPPORT INC., a Maryland corporation, and AAI/ACL TECHNOLOGIES, INC., a Maryland corporation (each a “Borrower” and collectively the “Borrowers”). Capitalized terms used, but not defined, herein shall have the meanings given to such terms in the Credit Agreement (defined below).

          WHEREAS, the Borrowers and the Lender are parties to the Loan and Security Agreement, dated as of June 28, 2001, as amended by the Waiver, Amendment and Consent Agreement dated as of March 6, 2002,  the Second Amendment and Consent Agreement dated as of June 28, 2002, the Third Amendment and Waiver Agreement dated as of March 21, 2003, the Fourth Amendment to Loan Agreement dated as of March 31, 2003, the Fifth Amendment Agreement dated as of September 30, 2003, the Sixth Amendment Agreement dated as of November 17, 2003, and the Seventh Amendment Agreement dated as of December 31, 2003 (as amended, the “Credit Agreement”); and

          WHEREAS, the Borrowers have requested and the Lender has agreed to amend the Credit Agreement, all on the terms and conditions set forth herein.

          NOW THEREFORE, in consideration of the premises, and in reliance thereon, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

          Section 1.  Amendments.        Subject to the satisfaction in full, on or prior to the Agreement Effective Date, of the conditions precedent set forth in Section 2 below, the Credit Agreement is hereby amended as follows:

(i)      Section 4.1 of the Credit Agreement is amended and restated in its entirety to read as follows:
	4.1 Term of Agreement.   Subject to Lender’s right to cease making Loans to Borrowers upon or after the occurrence of any Default or Event of Default, this Agreement shall be in effect, unless earlier terminated, for a period from the Closing Date through March 31, 2005 (the “Original Term”).
(ii) Clause (iii) of Section 8.2.3 of the Credit Agreement is amended and restated in its entirety to read as follows:
(iii) Obligations to pay Rentals permitted by Section 8.2.14;

(iii)   Section 8.3.1 of the Credit Agreement is amended and restated in its entirety to read as follows:
	8.3.1  Minimum Fixed Charge Coverage Ratio: not permit the Consolidated Fixed Charge Coverage Ratio of UIC and its Subsidiaries to be less than (a) 1.10 to 1.00 for the period of two fiscal quarters ending June 30, 2004; (b) 1.10 to 1.00 for the period of three fiscal quarters ending September 30, 2004; (c) 1.10 to 1.00 for the period of four fiscal quarters ending December 31, 2004; or (d) 1.10 to 1.00 for any period of four fiscal quarters ending after December 31, 2004 (i.e. measured at the end of each fiscal quarter after December 31, 2004 on a trailing four quarter basis).
(iv)    Section 8.3.2 of the Credit Agreement is amended and restated in its entirety to read as follows:
	8.3.2 Maximum Balance Sheet Leverage Ratio:  not permit the ratio of UIC and its Subsidiaries’ (a) total liabilities, as determined on a consolidated basis in accordance with GAAP (but, without duplication, including all LC Amounts as liabilities), to (b) Tangible Total Net Worth, to exceed 3.75 to 1.00 as at the end of any fiscal quarter ending after March 31, 2004.
(v)     Section 8.3.3 of the Credit Agreement is amended and restated in its entirety to read as follows:
	8.3.3 Net Cash Payments Relating to Transportation Division:  not permit the amount of net cash paid by UIC and its Subsidiaries relating to or arising out of the cessation of business of the transportation division to exceed (a) $11,500,000 during the fiscal year ending December 31, 2004, or (b) $6,000,000 during the fiscal year ending December 31, 2005.
(vi)     The following definitions are added in alphabetical order to Appendix A to the Credit Agreement:
		ERP System Assets - hardware, software and other assets purchased (and/or acquired pursuant to a lease that is capitalized for financial reporting purposes in accordance with GAAP) by Borrowers for the purpose of installing a new enterprise resource planning system.
		Consolidated Net Income.  with respect to any Person and any fiscal period, the Consolidated net income (or deficit) of such Person and its Subsidiaries, after deduction of all expenses, taxes, and other proper charges, determined in accordance with GAAP.
		EBITDA.  for any period and for any Person, (a) the Consolidated Net Income of such Person and its Subsidiaries for such period, plus (b) to the extent deducted in calculating Consolidated Net Income, without duplication, (i) income tax expense of such Person and its Subsidiaries during such period, (ii) all interest

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	in respect of Indebtedness accrued or paid by such Person and its Subsidiaries during such period, and (iii) depreciation and amortization.
(vii)      The first paragraph of the definition of “Borrowing Base” in Appendix A to the Credit Agreement is amended and restated in its entirety as follows:
	Borrowing Base - as at the date of determination thereof an amount equal to 75% of the aggregate amount of Eligible Accounts arising from Government Contracts; plus 70% of the aggregate amount of Eligible Accounts arising from Non-Government Contracts; plus 30% of Eligible Inventory; plus up to $2,703,000 of Appraised Machinery and Equipment; plus up to $10,000,000 of Cash or Cash Equivalents to be held at the Bank or such higher amount as is required by the third sentence of Section 1.1.1 of the Agreement; plus the Real Property Overadvance; minus, at any time that any contracts or transactions are outstanding under any foreign exchange facility provided by the Bank or the Lender or any Affiliate thereof to any of the Borrowers up to $750,000; minus the aggregate amount of Landlord Waiver Reserves; provided that the Borrowing Base shall be increased by an amount equal to the Real Property Valuation in accordance with Section 10.3 hereof and shall be decreased by the amount of any payments of the Real Property Overadvance pursuant to Section 3.3.1 or any other provision of this Agreement.
(viii)   The following definitions appearing in Appendix A of the Credit Agreement are amended and restated in their entirety as follows:
	Consolidated Fixed Charge Coverage Ratio – means for the period in question, the ratio of (a) the sum of EBITDA plus (in each case to the extent deducted from income for the purpose of calculating EBITDA) accruals for pension liabilities and losses incurred due to the cessation of business of the transportation division, minus Unfunded Capital Expenditures of UIC and its Subsidiaries, divided by (b) the sum of cash taxes, dividends, scheduled principal payments of the Loans and any other Indebtedness, including Capitalized Lease Obligations, all interest in respect of Indebtedness accrued or paid (whether or not actually paid during such period) and all fees and expenses payable under this Agreement, cash payments related to asbestos litigation claims, cash payments to fund underfunded pension liabilities, and net cash payments relating to or arising from the cessation of the transportation division, each case with respect to UIC and its Subsidiaries as determined in accordance with GAAP.
	Permitted Purchase Money Indebtedness – collectively, the Purchase Money Indebtedness of any Borrower existing on or incurred after the date hereof which is secured by a Purchase Money Lien and which, when aggregated with the principal amount of all other such  Purchase Money Indebtedness and Capitalized Lease Obligations of such Borrower at the time outstanding, does not exceed (a) $6,000,000 with respect to Purchase Money Indebtedness incurred for the payment of part of the purchase price of the ERP System Assets, and (b) $1,000,000 with respect to all other Purchase Money Indebtedness.  For the

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		purposes of this definition, the principal amount of any Purchase Money Indebtedness consisting of capitalized leases shall be computed as a Capitalized Lease Obligation.
		Purchase Money Indebtedness – means and includes (i) Indebtedness (other than the Obligations) for the payment of all or any part of the purchase price of any fixed assets or ERP System Assets, (ii) any Indebtedness (other than the Obligations) incurred at the time of or within thirty (30) days prior to or after the acquisition of any fixed assets for the purpose of financing all or any part of the purchase price thereof, and (iii) any renewals, extensions or refinancings thereof, but not any increases in the principal amounts thereof outstanding at the time.
		Purchase Money Lien – a Lien upon fixed assets and/or the ERP System Assets which secures Purchase Money Indebtedness, but only if such Lien shall at all times be confined solely to the fixed assets or ERP System Assets the purchase price of which was financed through the incurrence of the Purchase Money Indebtedness secured by such Lien, and with respect to any Lien upon the ERP System Assets which secures Purchase Money Indebtedness, only if such Lien is subject to the terms of an intercreditor agreement satisfactory to the Lender.
Section 2.  Conditions to Effectiveness of Agreement.  This Agreement shall become effective as of the date that the following conditions shall have been satisfied (the date of satisfaction of such conditions being referred to herein as the “Agreement Effective Date”):
	(i)     The Lender shall have executed this Agreement and shall have received a copy of this Agreement duly executed by the Borrowers.
	(ii)     The Borrowers shall have paid a fee of $10,000 to Lender in consideration of the amendments set forth herein.
	(iii)    The Borrowers shall have paid to counsel for the Lender the amount of reasonable fees and disbursements owed to such counsel in connection with this Agreement and matters related hereto.
	(iv)    The Lender shall have received such other information, approvals, opinions, documents or instruments as it may reasonably request.
Section 3.  Representations and Warranties.  In order to induce the Lender to enter into this Agreement, the Borrowers jointly and severally represent and warrant to the Lender that, as of the Agreement Effective Date, after giving effect to the effectiveness of this Agreement, the following statements are true and correct in all material respects:
	(i)     Authorization of Agreements. The execution and delivery of this Agreement by each Borrower and its performance under the Credit Agreement as amended by this Agreement (the “Amended Agreement”) are within each such

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	Borrower’s corporate powers and have been duly authorized by all necessary corporate action on the part of each such Borrower.
	(ii)     No Conflict. The execution and delivery by each Borrower of this Agreement and the performance by each Borrower of the Amended Agreement do not contravene any such Borrower’s certificate of incorporation or bylaws or any other contractual restriction where such a contravention has a reasonable possibility of having a Material Adverse Effect or contravening any law or governmental regulation or court decree or order binding on or affecting any such Borrower.
	(iii)    Binding Obligation. This Agreement has been duly executed and delivered by each Borrower and this Agreement and the Amended Agreement constitute the legal, valid and binding obligations of each Borrower, enforceable against each Borrower in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally and by general principles of equity.
	(iv)     Governmental Approval, Regulation, etc.  No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other Person is required for the due execution, delivery or performance of this Agreement by any Borrower.
	(v)     Incorporation of Representations and Warranties from Credit Agreement. Other than as amended hereby each of the representations and warranties set forth in Section 7 of the Credit Agreement is true and correct as of the date hereof.
Section 4.  Acknowledgement.  Each Borrower acknowledges and agrees that each of the Security Documents to which it is a party or otherwise bound shall continue in full force and effect. Each Borrower hereby agrees and confirms that each Security Document to which it is a party or otherwise bound and all Collateral encumbered thereby will continue to guaranty or secure, as the case may be, the payment and performance of all obligations guaranteed or secured thereby, as the case may be, and that none of the Borrowers has any defense, offset, counterclaim or right of recoupment with respect to the Obligations of the Borrowers under the Amended Agreement.
	Section 5.  Miscellaneous.
	(i)     Effect on the Credit Agreement and the Other Loan Documents. Except as specifically set forth herein, the terms, provisions and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed and the Borrowers remain bound to pay and perform their obligations thereunder.
	(ii)      Applicable Law. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO SUCH ANY LAWS

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RELATING TO CONFLICTS OF LAWS OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

          (iii)     Headings. The various headings of this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provision hereof.

          (iv)     Counterparts and Incorporation. This Agreement may be executed by the parties hereto in several counterparts and by the different parties on separate counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same instrument.  A facsimile or other electronic copy of an executed counterpart shall have the same effect as the original executed counterpart.  Following execution and delivery of this Agreement, any reference to the Credit Agreement shall be deemed a reference to such document as hereby amended.

          (v)      Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provisions in any other jurisdiction.

[Signatures Follow on Next Page]

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          IN WITNESS WHEREOF, this Eighth Amendment Agreement has been duly executed and delivered as of the day and year first above written.

FLEET CAPITAL CORPORATION
By:	/s/ MATTHEW BOURGEOIS
Name: Matthew Bourgeois
Title:Vice President

UNITED INDUSTRIAL CORPORATION
By:	/s/ JAMES H. PERRY
Name: James H. Perry
Title: Vice President and Chief Financial Officer

AAI CORPORATION
By:	/s/ JAMES H. PERRY
Name: James H. Perry
Title: Vice President and Chief Financial Officer

DETROIT STOKER COMPANY
By:	/s/ JAMES H. PERRY
Name: James H. Perry
Title: Vice President and Chief Financial Officer

AAI ENGINEERING SUPPORT INC.
By:	/s/ JAMES H. PERRY
Name: James H. Perry
Title: Vice President and Chief Financial Officer

AAI/ACL TECHNOLOGIES, INC.
By:	/s/ JAMES H. PERRY
Name: James H. Perry
Title: Vice President and Chief Financial Officer

Signature Page to Eighth Amendment Agreement

EX-99

EXHIBIT 31.1

CERTIFICATION PURSUANT TO
RULE 13a-14(a) OF THE EXCHANGE ACT

I, Frederick M. Strader, certify that:
	1.	I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004 of United Industrial Corporation;
	2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
	3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
	4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
			a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
			b.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
			c.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
	5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
			a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
			b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 6, 2004

/s/ FREDERICK M. STRADER

Frederick M. Strader

Chief Executive Officer

EX-99

EXHIBIT 31.2

CERTIFICATION PURSUANT TO
RULE 13a-14(a) OF THE EXCHANGE ACT

I, James H. Perry, certify that:
	1.	I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004 of United Industrial Corporation;
	2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
	3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
	4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
			a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
			b.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
			c.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
	5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
			a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
			b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 6, 2004

/s/ JAMES H. PERRY

James H. Perry

Chief Financial Officer

EX-99

EXHIBIT 32.1

CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED BY SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002

I, Frederick M. Strader, as Chief Executive Officer of United Industrial Corporation (the “Company”) certify, pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

a.	the accompanying Form 10-Q report for the period ended June 30, 2004 as filed with the U.S. Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13a or 15(d) of the Securities Exchange Act of 1934, as amended; and
b.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 6, 2004

/s/ FREDERICK M. STRADER

Frederick M. Strader

Chief Executive Officer

EX-99

EXHIBIT 32.2

CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED BY SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002

I, James H. Perry, as Chief Financial Officer of United Industrial Corporation (the “Company”) certify, pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

a.	the accompanying Form 10-Q report for the period ended June 30, 2004 as filed with the U.S. Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13a or 15(d) of the Securities Exchange Act of 1934, as amended; and
b.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 6, 2004

/s/ JAMES H. PERRY

James H. Perry

Chief Financial Officer