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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
[ ] 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 001-31235
INTEGRATED DEFENSE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-4027646
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
110 Wynn Drive, Huntsville, Alabama 35805
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (256) 895-2000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. ( )
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Act). Yes___ No X
As of March 20, 2003, there were 21,327,931 shares of Integrated
Defense Technologies, Inc. Common Stock $0.01 par value outstanding.
The aggregate market value of the voting stock held by nonaffiliates
of the registrant was approximately $281,623,000, computed in
reference to the closing sale price of such stock as reported by The
New York Stock Exchange on June 28, 2002, assuming that all shares
beneficially held by executive officers and members of the
registrant's Board of Directors are shares owned by "affiliates," a
status which each of the executive officers and directors
individually disclaims.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Form 10-K Reference
--------- -------------------
Portions of the Annual Report to
Stockholders for the year ended
December 31, 2002 Part I, Part II, Part IV
Portions of the Company's Proxy Statement
for the 2003 Annual Meeting of
Stockholders Part III
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PART I
ITEM 1. BUSINESS
Overview
Integrated Defense Technologies, Inc. ("IDT" or "the Company")
is a developer and provider of advanced electronics and
technology products to the defense and intelligence industries.
The Company's products are installed on or used in support of a
broad array of military platforms in order to enhance their
operational performance or extend their useful life. The Company
supplies its products to a market that includes, in the United
States alone, approximately 5,000 aircraft, 800 naval vessels,
20,000 combat vehicles, 100,000 transport vehicles, 400 missile
systems and 60 combat training ranges. The Company's installed
product base is found on major military platforms such as the F-
16 and C-17 aircraft, the DDG-51 Destroyer and the Trident
submarine, the M1 Abrams Main Battle Tank and the Light Armored
Vehicle, the High Mobility Multi-purpose Wheeled Vehicle
("HMMWV"), the Bradley Fighting Vehicle, and the Patriot and
Tomahawk missile systems. Most of the Company's products are
vital components of systems that the Company believes are mission
critical or mission essential to the DoD achieving its
operational goals.
The Company offers over 500 products that are incorporated
into approximately 250 programs and which in turn are installed
on or support over 275 platforms. No one product, program or
platform accounted for more than 6% of the Company's revenue for
the year ended December 31, 2002. At December 31, 2002, the
Company employed approximately 547 engineers, which represented
approximately 26% of its workforce. The Company's customers
include all branches of the military, major domestic prime
defense contractors (such as The Boeing Company, General
Dynamics, Lockheed Martin Corporation, Northrop Grumman
Corporation, Raytheon Company and United Defense Industries,
Inc.), foreign defense contractors, foreign governments and U.S.
Government agencies. In 2002, the Company generated revenues of
$304.4 million and an operating income of $26.7 million. At
December 31, 2002, the Company had a total backlog of $402.9
million, of which $285.8 million was funded.
The Company's products can be categorized into the following
families:
Electronic Combat Systems. These products optimize the
performance and readiness of combat pilots, weapon systems, and
military platforms and represented approximately 50.3% of the
Company's 2002 revenues.
Diagnostics & Power Systems. These products enhance vehicle
performance and mobility, fuel efficiency, stealth capability and
survivability and represented approximately 27.6% of the
Company's 2002 revenues.
Communications & Surveillance Systems. These products are
installed in systems that are capable of identifying friend or
foe, jamming enemy communications systems, amplifying radio
communications signals, executing self-destruct signals, and air
and sea monitoring and represented approximately 22.0% of the
Company's 2002 revenues.
Industry Overview
Since the end of the Cold War, the role of the U.S. military has
evolved due to the ongoing federal budget pressures and the need to
meet a new set of strategic and tactical global threats. In
response, the DoD has focused its resources on enhancing readiness
and technological sophistication by incorporating advanced
electronics to improve systems performance, reduce operating costs,
and extend the life expectancy of both existing and future
platforms. This ongoing transformation centers on developing the
networked and improved information and command and control
capabilities needed to significantly enhance coordinated joint
forces operations. With the support of an advanced command,
control, communications, computers, intelligence, surveillance and
reconnaissance, or "C4ISR" common backbone, the U.S. will be
prepared to respond rapidly and decisively to any conflict.
Until the transformational forces that are on the drawing boards
today are available in the next decade, the U.S. government must
invest in maintaining the weapons it has while building the force
of the future. The technical challenges and development schedules
of these requirements, coupled with the demand for lighter, more
capable systems for quick deployment, favor a company with agility,
technical depth, proven record, and technical expertise. The
Company has emphasized the technology and development of programs
that are directed towards transforming capabilities while
simultaneously growing supporting technologies. These supporting
technologies are primarily in capabilities for training,
simulation, and networked joint operations, which require extensive
collaboration and situational awareness due to unprecedented
volumes of critical battlespace information.
The Company believes that the DoD will look to subsystem and
niche suppliers, with strong technical capabilities and a critical
mass of sophisticated products, like IDT, to assist in the
development of critical advanced electronics initiatives. Since IDT
derives its revenues predominantly from contracts with the DoD,
intelligence agencies, large military contractors, and foreign
governments, the funding of the Company's development and
production programs is generally linked to trends in U.S. and
international defense spending. The Bush Administration submitted
to Congress a $399 billion FY 2004 defense budget that reflects a
21.3% increase over the last two years. In addition, the
Administration proposes an increase of approximately 17% in
defense spending between FY 2003 and FY 2009, representing an
increase of approximately 22% above average Cold War levels.
Corporate History
The Company is the product of the acquisition of several
businesses since 1998. The Company's equity sponsor, The
Veritas Capital Fund, L.P., acquired PEI Electronics, Inc.
("PEI") in October 1998. PEI served as the Company's foundation
in acquiring other businesses. In August 1999, the Company
acquired the Sierra Research division of Sierra Technologies,
Inc. and the Zeta division of Sierra Networks, Inc. In September
2000, the Company acquired Tech-Sym Corporation, retaining its
Metric Systems Corporation subsidiary, its Continental
Electronics division, and its Enterprise Electronics Corporation
subsidiary, and concurrently sold two other subsidiaries of Tech-
Sym Corporation to companies owned by The Veritas Capital Fund,
L.P. In November 2002, the Company acquired the BAE SYSTEMS
Advanced Systems Gaithersburg, Maryland operation, now known as
Signia-IDT, Inc. ("Signia"). Concurrent with this acquisition,
the Company's Zeta division was reorganized and combined with
Signia.
The Company's business presently consists of three operating
segments: Electronic Combat Systems, Diagnostics & Power Systems,
and Communications & Surveillance Systems. Metric and Sierra are
included in the Company's Electronic Combat Systems segment, PEI
comprises its Diagnostics & Power Systems segment, and Signia,
Zeta, Enterprise and Continental are included in its
Communications & Surveillance Systems segment.
Business Segments
The Company's reportable segments are defined primarily by
their economic characteristics, the nature of their products and
services, and by their class of customer. Each is discussed in
further detail below. As noted previously, the Company has been
built upon significant acquisitions of business entities,
including the acquisition of Tech-Sym on September 29, 2000.
Since this business acquisition addressed two of the Company's
three operating segments, the Company did not operate in each
business segment in full in 2000. In addition, the Communications
& Surveillance Systems segment includes only two months of
Signia's results of operations in 2002. For additional
information regarding the Company's business segments, including
financial information for the three years ended December 31,
2002, see Management's Discussion and Analysis of Financial
Condition and Results of Operations and Note 15 of Notes to
Consolidated Financial Statements contained in the Company's 2002
Annual Report to Stockholders, which is incorporated herein by
reference.
Electronic Combat Systems
The Electronic Combat Systems segment designs, integrates,
manufactures, and sells electronics and avionics equipment
primarily to the U.S. Government for military, civil and
governmental uses, and designs, manufactures and supports
advanced test and evaluation systems, rangeless air combat
training systems, threat simulation equipment, and control
subsystems for both guided bombs and missile launching systems
for the U.S. Department of Defense, major defense prime contractors
and foreign government defense agencies.
Electronic Combat Systems develops and provides air, ground
and sea-based electronic systems to domestic and foreign armed
forces. These systems optimize the performance and readiness of
weapon systems, military platforms and crew members. The major
Electronics Combat Systems product categories are air combat
training, test and evaluation, shipboard and coastal electronics,
airlift avionics and cargo delivery systems, and
electromechanical products.
Applications for the Electronics Combat Systems segment
include zero-visibility remote formation flying, air and ground-
based electronic training and simulation systems, fiber-optic-
based data systems in naval applications and missile launch
controls.
The following table outlines applications and platforms for the
Company's Electronic Combat Systems segment:
PRODUCT CATEGORIES APPLICATIONS PLATFORMS
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o Air combat training, o Air- and land-based o In support of U.S. and NATO
test and evaluation RF-emitters, simulators Apache helicopters; Halifax
and data collection Class Frigates; EP-3E,
systems used to train EA-6B, A/OA-10, C-130
air crew and evaluate aircraft; and F-4, F-5,
electronic warfare F-14, F-15, F-16, F/A-18,
countermeasures F-22, Hawk, Tornado,
EF-2000, Mirage 2000 and
MIG-29 tactical fighter
aircraft
o Shipboard and coastal o Naval data o Installed in DDG-51 Arleigh
electronics communications and Burke Class Destroyers,
missile launching LAMPS helicopters, CG-47
electronics and Ticonderoga Class Cruisers,
coastal surveillance various foreign vessels
radars and on foreign coastlines
o Airlift avionics and o Avionics for aircraft o Installed in C-17, C-130,
cargo delivery with auto pilot and C-141, CN-235, C-295,
systems auto throttle used to C-212, DHC-5, KC-135 and
locate, identify, MH-47 aircraft
communicate flight data
and maintain relative
positions in all
visibility conditions,
and cargo handling
roller and pallet systems
for cargo aircraft
o Electromechanical o Combat vehicle, missile o Installed in Light Armored
products launching and aircraft Vehicle variants, M1
electromechanical Abrams, Joint Surveillance
systems and Target Attack Radar
Systems Common Ground
Station vehicle and F/A-
18 aircraft
Diagnostics & Power Systems
The Diagnostics & Power Systems segment is a contractor
primarily to the U.S. Government and foreign governments, and
designs, manufactures and supports test equipment, vehicle
electronics systems and energy management systems primarily for
military combat vehicle applications.
Diagnostics & Power Systems develops and provides diagnostics
and power systems for vehicle and missile electronics and hybrid
electric power systems. These products enhance vehicle readiness,
performance and mobility, fuel efficiencies, stealth capability
and survivability. The segment's major product categories are
test equipment, power management, vehicle electronics, or
vetronics, and embedded diagnostics systems.
Applications for Diagnostics & Power Systems' products include
portable and embedded equipment which diagnose critical
electronic systems of platforms and battery-based power systems
which increase vehicle electrical power while reducing fuel
consumption. The segment's self-contained and highly reliable
energy management equipment provides both the power for the
mobility of the applicable vehicle and the specialized pulse
conditioning necessary to operate complex laser weapon systems.
The following table outlines the applications and platforms
for the Diagnostics & Power Systems segment:
PRODUCT CATEGORIES APPLICATIONS PLATFORMS
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o Test equipment o Diagnostics systems o In support of the M1
used for testing Abrams variants, Bradley
electronic components of variants, Light Armored
ground combat vehicles Vehicle variants and
and strategic weapon Minuteman III
systems Intercontinental
Ballistic Missile fleet
o Power management o Hybrid power system o Installed in HMMWV and
(compact generator and commercial delivery
battery pack) replacing vehicles
an internal combustion
engine, achieving higher
fuel efficiency and
mobile power
o Vetronics o Drive-by-wire, video o Installed in the Grizzly
(vehicle electronics) distribution system, Combat Engineers Vehicle,
display panels, power M1 Abrams, Bradley
distribution and mine- Fighting Vehicle and
clearing blade control, MLRS Vehicle
and redesign of analog
electronics to resolve
obsolescence and provide
enhanced diagnostics
o Embedded diagnostics o On-vehicle diagnostics o Installed in the M1 Abrams
adding miniature modules
(sidecars) to existing
analog electrical boxes
Communications & Surveillance Systems
The Communications & Surveillance Systems segment designs and
manufactures meteorological surveillance and analysis systems,
more commonly known as Doppler weather radar systems, air and sea
monitoring systems, advanced electronics systems, subsystems,
components and radio frequency surveillance equipment for the
defense, aerospace and communications industries for U.S. and
foreign government agencies and commercial customers. The
segment's major product categories include radio frequency
transmitters, microwave subsystems, signal intelligence systems,
and weather radar systems.
Communications & Surveillance Systems' products are used in
systems capable of identifying friendly aircraft, jamming enemy
communications systems, amplifying radio communications signals
and executing self-destruct signals. These products are used in
radar systems, missile systems, satellite and space programs and
surveillance systems.
The following table outlines the applications and platforms
for the Company's Communications & Surveillance Systems segment:
PRODUCT CATEGORIES APPLICATIONS PLATFORMS
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o Radio frequency o FM and high-power o In support of national,
transmitters shortwave transmitters, regional and foreign
Very Low Frequency broadcast programming, the
submarine communications U.S. submarine fleet
and UHF launch command and U.S. missile launch
destruct transmitters vehicles
o Microwave subsystems o Standard and specialized o In support of Global Hawk
Low Noise Oscillators, UAV, Predator UAV, Duke
fast switching Class Type 23 Frigate,
Synthesizers, Up and Down Type 45 Air Defense
Frequency Converters and Destroyer, F-16, F-22,
RF power amplifiers Evolved Sea Sparrow,
Patriot and AMRAAM
missiles
o Signal intelligence o Systems capable of o Installed in EA-6B
systems locating, intercepting tactical electronic
and jamming warfare aircraft and
communication signals various U.S. and
foreign government
intelligence collection
systems
o Weather radar o Doppler weather radar o In support of U.S. and
systems used to monitor, foreign military and
interpret and display meteorological
weather data and operations, TV broadcast
patterns programming, research
institutes and the
U.S. National Weather
Service
o Air and sea o Hardware and software o In support of U.S. and
monitoring products for foreign meteorological
meteorological and and hydrographic
hydrographic monitoring monitoring government
data collection projects
Sales and Marketing
The Company's marketing and business development activities
are divided on a business segment or geographical basis with
primary responsibility assigned to a single location. The
Company's marketing strategy is a customer-based approach that
takes advantage of interaction with the customer. This enables
the Company's product teams to employ the feedback and guidance
of customers on a real-time basis. The Company focuses on
supporting and extending its current sole-source contract
relationships. The Company integrates sales and marketing with
its research and development activities. Together, these teams
assess the product's life-cycle and anticipate future
applications for the Company's current technologies. The Company
continuously analyzes the defense and intelligence markets to
anticipate the needs of its existing customers.
In addition to its internal business development staff, the
Company retains sales representatives in the geographical markets
it serves. This structure provides the Company with an efficient,
cost effective and responsive sales force in the non-military
marketplace. Wherever possible, the Company uses sales
representatives that also provide local content to foster close
customer relationships and, in many cases, to meet local content
requirements of the target market. The Company's sales
representatives are paid solely on a commission basis and only
upon successful contract conclusion.
The Company believes that a high level of customer support is
important to the sale of its products and services. Customer
support includes pre-installation guidance, customer training, on-
site installation, and technical support services in addition to
consultative professional services. The Company employs
engineers and technical specialists to provide customer
assistance, maintenance, and training.
Research and Development
The Company devotes a substantial portion of its resources to
developing new products and enhancing existing products. During
the years ended December 31, 2000, 2001, and 2002, the Company's
internally funded research and development costs charged to
expense totaled $7.0 million, $6.1 million, and $6.5 million,
respectively.
Research and development performed both at the Company's
expense and under development contracts with customers is an
important element in the success of the Company's business. As of
December 31, 2002, the Company employed approximately 547
engineers.
The Company views its expertise in developing proprietary
technology and applying this technology to advanced electronic
systems as a core competency. The Company's engineers work
closely with its marketing and business development groups to
identify enhancements or complementary product features required
to capitalize on opportunities in high growth areas.
After the Company develops internally funded proprietary
technologies, its customers typically fund the application of
these technologies to meet their specific requirements. The
Company leverages its existing technologies and its significant
research and development efforts across business segments,
employing an exchange of ideas focused on the best practices
among its existing technologies to create new systems and pursue
new markets. This approach has permitted the Company to establish
a reputation for technological excellence and to develop long-
term relationships with a wide variety of customers in various
defense and intelligence related markets.
Customers and Backlog
The Company's customers are typically prime contractors and
subcontractors on projects where the U.S. Government, typically
the DoD, is the end-user. In addition, the Company has
relationships with many foreign governments. The Company's
customers include all of the U.S. military services, major
domestic prime defense contractors such as The Boeing Company,
General Dynamics, Lockheed Martin Corporation, Northrop Grumman
Corporation, Raytheon Company and United Defense Industries,
Inc., foreign defense contractors, and a number of governments
and militaries of foreign countries. For the years ended
December 31, 2000, 2001, and 2002, direct and indirect sales to
the U.S. Government provided approximately 84%, 77%, and 84%,
respectively, of the Company's total revenues for those periods,
with the remainder of its revenues comprised of sales to foreign
governments and non-defense-related customers. Direct sales to
the U.S. Government totaled approximately $107.2 million (59% of
revenue), $160.8 million (61% of revenue) and $165.7 million (54%
of revenue) in 2000, 2001 and 2002, respectively. These revenues
are attributed primarily to the Electronic Combat Systems and
Diagnostics & Power Systems segments. The U.S. Government was the
only customer accounting for more than 10% of the Company's
consolidated revenue in any of these three years.
As of December 31, 2002, the Company had approximately 250
active contracts representing a total backlog of $402.9 million,
$285.8 million of which was funded. (See "Backlog" in
Management's Discussion and Analysis of Financial Condition and
Results of Operations contained in the Company's 2002 Annual
Report to Stockholders, which is incorporated herein by
reference, for further details of the Company's backlog,
including backlog by business segment at December 31, 2000, 2001,
and 2002.)
Suppliers and Materials
The Company's in-house manufacturing primarily consists of
assembly of purchased parts. Accordingly, the Company does not
use significant amounts of raw materials. The Company purchases
manufactured component parts for its assemblies from various
independent suppliers. These parts are not normally purchased
under long-term contracts unless a long-term sales contract with
one of the Company's customers requires it. The Company is not
dependent on any one supplier and maintains back-up suppliers for
all critical components. However, any delay in the Company's
suppliers' abilities to obtain necessary parts may affect its
ability to meet customer production needs.
Export Sales
There are two principal contracting methods used for export
sales, Direct Foreign Sales ("DFS") and the U.S. Government's
Foreign Military Sales ("FMS"). In a DFS transaction, the
contractor sells directly to the foreign country and assumes all
risks in the transaction. In an FMS transaction, the sale is
funded for, contracted by and made to the U.S. Government, which
in turn sells the product to the foreign country. Licenses are
required from U.S. Government agencies for DFS exports of many of
the Company's products. In addition, the U.S. Government
prohibits or restricts the export of some of the Company's
products.
The Company currently sells several of its products in the
international marketplace. Direct sales to non-U.S. customers
accounted for approximately 13%, 22% and 12% of the Company's
revenue in the years ended December 31, 2000, 2001, and 2002,
respectively. The Company's foreign contracts are generally
payable in U.S. dollars.
Seasonality
The Company's business is seasonal, with a concentration of
revenue in the fourth quarter of the year, because many of the
Company's sales contracts expire on December 31 of each year. As
a result, product sales efforts at year end are expedited to
fulfill funding terms prior to expiration of the contracts.
A summary of the Company's quarterly results of operations for
the years ended December 31, 2001 and 2002 is included in Note 18
of Notes to Consolidated Financial Statements contained in the
Company's 2002 Annual Report to Stockholders, which is
incorporated herein by reference.
Competition
The market for defense electronics is highly competitive. The
Company faces a variety of domestic and foreign competitors
including divisions of The Boeing Company, Harris Corporation,
Lockheed Martin Corporation, BAE Systems, Northrop Grumman
Corporation, Raytheon Company and Thales S.A. Many of the
Company's competitors are larger than the Company and have
substantially greater financial and other resources.
The Company competes on the basis of product offerings, price,
product and systems quality, technology and ongoing customer
service and support. The Company's ability to compete for defense
contracts depends on a variety of factors, including:
o the effectiveness and innovation of its research and
development programs,
o its ability to offer better program performance than its
competitors at a lower cost, and
o the readiness of its facilities, equipment and personnel to
undertake the programs for which it competes.
In programs where the Company is the sole-source provider,
other suppliers may compete against it only if the customer
chooses to reopen the particular program to competition.
Furthermore, the Company's electronic systems and solutions
contain advanced technology derived from internal and customer-
funded research and development, creating high barriers to
entry.
Regulatory Matters and Government Contracts
Substantially all of the Company's revenue is derived from
contracts with the DoD, prime contractors that identify the DoD
as the ultimate purchaser, or other U.S. Government agencies.
U.S. Government business is performed under fixed-price contracts
and cost-plus contracts.
Under U.S. Government regulations, certain costs, including
certain financing costs, portions of research and development
costs, lobbying expenses, certain types of legal expenses, and
certain marketing expenses related to the preparation of bids and
proposals, are not allowed for pricing purposes and calculation
of contract reimbursement rates under flexibly-priced contracts.
The U.S. Government also regulates the methods under which costs
are allocated to U.S. Government contracts. The Company is
subject to a variety of audits performed by U.S. Government
agencies. These include pre-award audits that are performed at
the submission of a proposal to the government. During the
performance of a contract, the U.S. Government has the right to
request and to examine any labor charges, any material purchase,
and any overhead changes to any contract that is active. Upon a
contract's completion, the U.S. Government performs a post award
audit of all aspects of contract performance to ensure that the
Company has performed the contract in a manner consistent with
its proposal.
The Defense Contract Audit Agency ("DCAA") performs these
audits on behalf of the U.S. Government. The DCAA has the right
to perform audits on the Company's incurred costs on all
contracts on a yearly basis. Approval of a submitted yearly cost
can take from one to three years from the date of submission of
the contract cost. All of the Company's incurred costs for U.S.
Government contracts completed prior to 2000 have been approved
by the DCAA.
U.S. Government contracts are, by their terms, subject to
termination by the U.S. Government for either its convenience or
default by the contractor. Fixed-price contracts provide for
payment upon termination for items delivered to and accepted by
the U.S. Government and, if the termination is for convenience,
for payment of fair compensation of work performed plus the costs
of settling and paying claims by terminated subcontractors, other
settlement expenses, and a reasonable profit on the costs
incurred. Cost-plus contracts provide that, upon termination, the
contractor is entitled to reimbursement of its allowable costs
and, if the termination is for convenience, a total fee
proportionate to the percentage of the work completed under the
contract. If a contract termination is for default, however, the
contractor is paid an amount agreed upon for completed and
partially completed products and services accepted by the U.S.
Government. In these circumstances, the U.S. Government is not
liable for the contractor's costs with respect to unaccepted
items, and is entitled to repayment of advance payments and
progress payments, if any, related to the terminated portion of
the contract. The contractor may be liable for excess costs
incurred by the U.S. Government in procuring undelivered items
from another source.
In addition to the right of the U.S. Government to terminate,
U.S. Government contracts are conditioned upon the continuing
availability of Congressional appropriations. Congress usually
appropriates funds for a given program on a September 30 fiscal
year basis, even though contract performance may take many years.
Consequently, at the outset of a major program, the contract is
usually partially funded, and additional monies are normally
committed to the contract by the procuring agency only as
appropriations are made by Congress for future fiscal years.
Environmental Matters
The Company's operations include the use, generation and
disposal of hazardous materials. The Company is subject to
various U.S. federal, state, local and foreign laws and
regulations relating to the protection of the environment,
including those governing the discharge of pollutants into the
air and water, the management and disposal of hazardous
substances and wastes, the cleanup of contaminated sites and the
maintenance of a safe workplace. Except as described under Item
3, Legal Proceedings, the Company believes that it has been and
is in substantial compliance with environmental laws and
regulations and that it has no liabilities under environmental
requirements that it would expect to have a material adverse
affect on its business, results of operations or financial
condition. In the past three years, the Company has not incurred
substantial costs relating to environmental compliance.
Intellectual Property
Although the Company owns a number of patents and has filed
applications for additional patents, the Company does not believe
that the success of its operations depends upon its patents. When
the Company works on U.S. Government contracts, the U.S.
Government has contractual rights to data for the Company's
"core" technologies, source codes, and other developments. In the
Company's research and development process, the Company maintains
records of its data rights in order to claim these rights as its
proprietary technology, but the Company may not always be able to
delineate its proprietary developments from those developed under
U.S. Government contracts. The protection of the Company's data
from use by other U.S. Government contractors is subject to
negotiation from time to time between the Company and the U.S.
Government, and the extent of the Company's data rights in any
particular product generally depends upon the degree to which
that product was developed by the Company without U.S. Government
funds.
Risks and Uncertainties
In addition to those described above and in Item 3, Legal
Proceedings, the Company has risks and uncertainties related to
its business and operating environment. See Management's
Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's 2002 Annual Report to
Stockholders, which is incorporated herein by reference, for
further discussion of these risks and uncertainties.
Employees
At December 31, 2002, the Company had approximately 2,100
employees. Approximately 45% of the Company's employees are
engaged in production, 33% of the Company's employees are engaged
in engineering, research, and development, and 22% are engaged in
sales, marketing, product support, and general administration.
Approximately 7% of the Company's employees are represented by a
union and are covered by a collective bargaining agreement that
expires in May 2003. Approximately 96% of the Company's
employees are based in the United States. The Company has had no
work stoppages due to labor difficulties and considers its
employee relations to be satisfactory.
Recent Developments
On February 27, 2003, the Company announced that it had
retained Bear, Stearns & Co. Inc. to assist the Board of
Directors in evaluating strategic alternatives in order to
maximize stockholder value.
ITEM 2. PROPERTIES
The Company's manufacturing and research and development
activities are located in Huntsville, Alabama; Enterprise,
Alabama; Buffalo, New York; Morgan Hill, California; Fort Walton
Beach, Florida; Gaithersburg, Maryland; Dallas, Texas; and
Kanata, Ontario.
The following table presents certain information on the
Company's leased and owned operating properties as of December
31, 2002:
Lease
Leased or Expiration
Location Sq. Feet Use Owned Date
------------------------------------------------------------------------------
Huntsville, AL 238,246 Corporate headquarters Leased Range from
and Diagnostics & Power July 2003
Systems' engineering, to April
manufacturing and 2013
research and development
Enterprise, AL 52,788 Communications & Owned
Surveillance Systems'
engineering, research
and development,
manufacturing, and
offices
Buffalo, NY 345,120 Electonic Combat Leased March 2007
Systems' offices,
engineering,
manufacturing,and
research and
development
Morgan Hill, CA 52,100 Communications & Leased June 2006
Surveillance Systems'
engineering,
manufacturing, and
research and
development
Fort Walton
Beach, FL 266,000 Electronic Combat 8,000 October 2004
Systems' engineering, sq. ft.
manufacturing and Leased
research and
development
258,000
sq. ft.
Owned
Gaithersburg, MD 170,000 Communications & Owned
Surveillance Systems'
offices, engineering,
manufacturing, and
research and
development
Dallas, TX 148,094 Communications & Owned
Surveillance Systems'
engineering and
manufacturing
Kanata, Ontario 10,917 Electronic Combat Leased February 2008
Systems' engineering
and manufacturing
In addition, the Company owns or leases an additional 35,906
square feet of administrative offices, manufacturing facilities
and warehouse locations throughout the U.S.
The Company considers its facilities to be adequate for the
immediate future.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in various legal actions arising
in the normal course of business, the outcomes of which, in the
opinion of management, neither individually nor in the aggregate
are likely to result in a material adverse effect on the
Company's business, results of operations or financial condition.
Some environmental laws, such as the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
also known as CERCLA or the Superfund law, and similar state
statutes, can impose liability for the entire cost of the cleanup
of contaminated sites upon any of the current or former site
owners or operators (or upon parties who sent waste to these
sites), regardless of the lawfulness of the original activities
that led to the contamination. In July 2000, prior to its
acquisition by the Company, Tech-Sym Corporation received a
Section 104(e) Request for Information from the National Park
Service, or NPS, pursuant to CERCLA regarding a site known as the
Orphan Mine site in the Grand Canyon National Park, Arizona,
which is the subject of an NPS investigation regarding the
presence of residual radioactive materials and contamination.
Tech-Sym Corporation's predecessor operated this uranium mine
from 1956 to 1967. In 1962, the land was sold to the U.S.
Government, although the mining rights for the next twenty-five
years were retained. Tech-Sym Corporation sold the mining rights
in 1967, and the Company believes that the mine was operated
until approximately 1972. The Company believes that there are
several other companies in the chain of title to the mining
rights subsequent to Tech-Sym, and, accordingly, that there are
several other potentially responsible parties, or PRPs, for the
environmental conditions at the site, including the U.S.
Government as owner of the land. The NPS has not yet made a
demand on the Company, nor to the Company's knowledge, on any
other PRP, nor has it listed the Orphan Mine site on the National
Priority List of contaminated sites. Nonetheless, the Company has
retained a technical consultant in connection with this matter,
who has conducted a limited, preliminary review of site
conditions, and has been in communication with the NPS regarding
actions that may be required at the site by all of the PRPs.
While it is too soon to determine the ultimate financial
implications to the Company, based upon the Company's knowledge
of the current facts and circumstances surrounding this matter,
the Company does not believe the total costs to the Company with
respect to this matter will be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
None.
EXECUTIVE OFFICERS OF THE COMPANY
Certain information with respect to the executive officers of
the Company is set forth below. Officers serve at the discretion
of the Board of Directors.
Name Age Position Officer Since
--------------------------- --- -------------------------- -------------
Thomas J. Keenan 61 Chief Executive Officer 1999
and Director
John J. Sciuto 59 President and Chief 2002
Operating Officer
John W. Wilhoite 51 Vice President of Finance 2001
and Chief Financial Officer
Colonel James M. Davis, Jr. 67 Vice President, Business 1999
Development
William E. Collins 51 Vice President, 1999
Administration
Gary A. Smith 53 Vice President and Chief 2000
Technical Officer
Thomas J. Keenan has been the Company's Chief Executive
Officer since August 1999 and a member of the Company's
Board of Directors since November 2001. Mr. Keenan also served as
President of the Company from August 1999 to January 2003 and as
President of the Company's predecessor, PEI Electronics, Inc. He
also served as Senior Vice President and General Manager of Wyle
Labs, an engineering firm, from April to November 1998, and
served as President of Product Services and Support and Vice
President, International at General Dynamics, a defense
manufacturer, from 1996 to 1997. He also served as President of
Teledyne Continental Motors, a defense manufacturer, from 1984 to
1996. Prior to his position with Teledyne, Mr. Keenan worked for
the Department of Defense in the procurement office from 1965 to
1982. Mr. Keenan holds a bachelor's degree in chemistry from the
University of Scranton and a juris doctor degree from the
Catholic University of America, Columbus School of Law.
John J. Sciuto has been the Company's Chief Operating Officer
since September 2002 and President since January 2003. Mr.
Sciuto served most recently as President of Earth Search
Sciences, Inc., a collector of airborne hyperspectral data
located in Kalispell, Montana, from May 2001 to February 2002.
Mr. Sciuto previously served as President and Chief Executive
Officer of Comptek Research, Inc., a manufacturer of surveillance
and communications systems for the defense electronics market
located in Buffalo, New York, from 1996 to 2000. Prior to being
named President and Chief Executive Officer, Mr. Sciuto held many
senior positions within Comptek including President and CEO of
Comptek Federal Systems, Senior Vice President for Defense
Electronics, and Vice President for Surface Navy Electronics
Warfare. Prior to joining Comptek, Mr. Sciuto was the Director
at EW Systems with Engineering Research Associates of McLean, VA
from 1983 to 1986. Mr. Sciuto is a retired Naval Officer and
holds a Bachelor of Applied Science Degree in Aviation
Electronics from Troy State University and is a 1991 graduate of
Stanford University's Senior Executive Institute for the
Management of High Technology Companies.
John W. Wilhoite has been the Company's Vice President of
Finance and Chief Financial Officer since April 2001. Mr.
Wilhoite formerly served as Executive Vice President & Chief
Financial Officer at Intergraph Corporation, a technical
solutions and systems integration services company, from 1985 to
2001 and served on the Executive Management Committee of
Intergraph's Board of Directors. Prior to his position with
Intergraph, Mr. Wilhoite was a Senior Audit Manager at Price
Waterhouse & Co. (now PricewaterhouseCoopers LLP), an accounting
and consulting firm, from 1973 to 1985. He is a member of the
American Institute of Certified Public Accountants and the
Alabama Society of Certified Public Accountants and has been
a Certified Public Accountant since 1975. Mr. Wilhoite holds a
bachelor's degree from the University of Tennessee.
Colonel James M. Davis, Jr. (USA Ret.) has been the Company's
Vice President, Business Development since August 1999. Col.
Davis formerly served as Vice President of the Company's
predecessor, PEI Electronics, Inc. from 1999 to 2000. From 1996
to 1998, he worked as a consultant to defense companies such as
Lockheed Martin Corporation, General Dynamics, Betac and McAleese
& Associates. From 1985 to 1996, Col. Davis served as Vice
President, Business Development and Washington Operations for
Teledyne Vehicle Systems, a defense manufacturer. Col. Davis is a
graduate of the U.S. Military Academy and holds a master's degree
in mechanical engineering from the Georgia Institute of
Technology.
William E. Collins has been the Company's Vice President,
Administration since August 1999. He joined the Company's
predecessor, PEI Electronics, Inc., in 1982, where he served as
Director of Information Systems from June 1994 to January 1997
and as Vice President of Administration from 1997 to 1999. Mr.
Collins is responsible for human resources, information systems,
safety, legal, facilities, and security for the Company's
corporate headquarters. Mr. Collins holds computer science,
business administration, and accounting degrees from Clarion
University.
Gary A. Smith has been the Company's Vice President and Chief
Technical Officer since February 2000. Mr. Smith joined the
Company's subsidiary, Sierra Research, in 1997 as Vice President
of Engineering. From 1978 to 1996, Mr. Smith worked at defense
and civil aviation systems provider Wilcox Electric, Inc., a
subsidiary of the Northrop Corporation, through 1988 and then at
a subsidiary of Thomson-CSF, where he last served as Director of
Advanced Systems. Mr. Smith holds a master's degree in electrical
engineering from the University of Missouri and a bachelor's
degree in electrical engineering from the University of Missouri
at Rolla.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The information appearing under "Dividend Policy" and "Price
Range of Common Stock" in the Company's 2002 Annual Report to
Stockholders is incorporated by reference in this Annual Report
on Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the five years ended December 31,
2002, appearing under "Five-Year Financial Summary" in the
Company's 2002 Annual Report to Stockholders is incorporated by
reference in this Annual Report on Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and
Results of Operations appearing in the Company's 2002 Annual
Report to Stockholders is incorporated by reference in this Annual
Report on Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Information relating to the Company's market risks appearing
under "Quantitative and Qualitative Disclosures about Market
Risk" in Management's Discussion and Analysis of Financial
Condition and Results of Operations appearing in the Company's
2002 Annual Report to Stockholders is incorporated by reference
in this Annual Report on Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and report of independent
auditors appearing in the Company's 2002 Annual Report to
Stockholders are incorporated by reference in this Annual Report
on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information appearing under "Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" in
the Company's Proxy Statement for the 2003 Annual Meeting of
Stockholders is incorporated by reference in this Annual Report
on Form 10-K.
The Company's Board of Directors consists of ten members,
divided into three classes with overlapping three-year terms.
One class of directors is elected each year with terms extending
to the third succeeding annual meeting after election.
Information relating to the executive officers of the Company
appears under "Executive Officers of the Company" in this Annual
Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under "Executive Compensation" in
the Company's Proxy Statement for the 2003 Annual Meeting of
Stockholders is incorporated by reference in this Annual Report
on Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information appearing under "Security Ownership of Certain
Beneficial Owners and Management" in the Company's Proxy Statement
for the 2003 Annual Meeting of Stockholders is incorporated by
reference in this Annual Report on Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under "Certain Transactions and Other
Relationships" appearing in the Company's Proxy Statement for the
2003 Annual Meeting of Stockholders is incorporated by reference
in this Annual Report on Form 10-K.
ITEM 14. CONTROLS AND PROCEDURES
Under the supervision and with the participation of the
Company's management, including its Chief Executive Officer and
Chief Financial Officer, the Company has evaluated the
effectiveness of the design and operation of its disclosure
controls and procedures within 90 days of the filing date of this
Annual Report. Based upon this evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that the
Company's disclosure controls and procedures are adequate and
effective to ensure that material information relating to the
Company and its consolidated subsidiaries is made known to them
by others within those entities, particularly during the period
in which this Annual Report was prepared. There were no
significant changes in the Company's internal controls or in
other factors that could significantly affect these controls
subsequent to the date of their evaluation.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON
FORM 8-K
(a) 1) The following consolidated financial statements
of Integrated Defense Technologies, Inc.
and subsidiaries and the report of independent
auditors thereon are incorporated by reference
from the Integrated Defense Technologies, Inc.
2002 Annual Report to Stockholders:
Consolidated Balance Sheets at
December 31, 2002 and 2001
Consolidated Statements of Operations for the
three years ended December 31, 2002
Consolidated Statements of Cash Flows for the
three years ended December 31, 2002
Consolidated Statements of Stockholders' Equity
for the three years ended December 31, 2002
Notes to Consolidated Financial Statements
Report of Independent Auditors
2) Financial Statement Schedule:
Schedule II - Valuation and Qualifying
Accounts and Reserves for the three years
ended December 31, 2002
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes
thereto.
The registrant has no 50%-or-less-owned companies.
3) Exhibits
Number Description
------ --------------------------------------------
3.1 Amended and Restated Certificate of
Incorporation of the Registrant, as
amended (1)
3.2 Amended and Restated Bylaws of the
Registrant, as amended (1)
4.1 Form of Certificate of Designation,
Preferences and Rights of Series A Junior
Participating Preferred Stock of the
Registrant (1)
4.2 Form of Rights Agreement between the
Registrant and The Bank of New York (2)
10.1 Amended and Restated Registration Rights
Agreement, dated as of September 29, 2000,
by and between the Registrant, J.H. Whitney
Mezzanine Fund, L.P., J.H. Whitney Market
Value Fund, L.P., GreenLeaf Capital, L.P.,
First Union Investors, Inc. and BNY Capital
Partners, L.P. (3)
10.2 Registration Rights Agreement between the
Registrant and IDT Holding, L.L.C. (1)
10.3 Lease Agreement, dated as of March 26, 2001,
between Research Park/GE Tenancy In Common
and PEI Electronics, Inc., as amended (3)
10.3a Second Lease Amendment to Lease Agreement,
dated as of November 8, 2002, between Research
Park/GE Tenancy In Common and PEI
Electronics, Inc.
10.4 Lease, dated as of January 4, 2001, between
Butterfield Technology Park L.L.C. and the
Registrant, as amended (3)
10.5 Lease Agreement, dated as of December 18, 1992,
between Niagara Frontier Transportation
Authority and Sierra Research Division,
Sierra Technologies, Inc., as amended (3)
10.6* Employment Agreement, dated as of January 1,
2001, between the Registrant and Thomas J.
Keenan (3)
10.7 Form of Director Indemnification Agreement (2)
10.8 Operating Agreement of IDT Holding, L.L.C.,
entered into December 10, 1999, as amended,
among The Veritas Capital Fund, L.P. and the
individuals listed on the signature page and
schedules thereto (2) and the amendment
thereto dated February 26, 2002 (4)
10.9 Integrated Defense Technologies, Inc. Amended
and Restated Credit Agreement dated as of
October 31, 2002, among Integrated Defense
Technologies, Inc. and Canadian Imperial
Bank of Commerce, as administrative agent
for itself and the lenders and other lenders
named therein (5)
10.10 Asset Purchase Agreement by and among BAE
SYSTEMS Aerospace Electronics Inc. as seller,
IDT Acquisition Co. as buyer, and Integrated
Defense Technologies, Inc. as guarantor dated
as of September 12, 2002 and amendment letter
dated November 1, 2002 (5)
10.11* Key Employee Retention Agreement between
Integrated Defense Technologies, Inc. and
Thomas J. Keenan dated February 27, 2003
10.12* Key Employee Retention Agreement between
Integrated Defense Technologies, Inc. and John
W. Wilhoite dated March 25, 2003
10.13* Key Employee Retention Agreement between
Integrated Defense Technologies, Inc. and Col.
James W. Davis, Jr. dated February 5, 2003
10.14* Key Employee Retention Agreement between
Integrated Defense Technologies, Inc. and
William E. Collins dated February 27, 2003
10.15* Key Employee Retention Agreement between
Integrated Defense Technologies, Inc. and Gary
A. Smith dated March 27, 2003
10.16* Key Employee Retention Agreement between
Integrated Defense Technologies, Inc. and John
J. Sciuto dated March 3, 2003
13 Portions of the Integrated Defense Technologies,
Inc. 2002 Annual Report to Stockholders
incorporated by reference in this Annual
Report on Form 10-K
21 List of Subsidiaries of Integrated Defense
Technologies, Inc.
23 Report of Deloitte and Touche LLP, Independent
Auditors on financial statement schedules
99.1 Certifications Pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
* Denotes management contract or compensatory plan, contract, or arrangement
required to be filed as an Exhibit to this Form 10-K
---------------
(1) Incorporated by reference to exhibits filed with Amendment No. 1
to the Company's Form S-1 Registration Statement, under the
Securities Act of 1933, File No. 333-75476.
(2) Incorporated by reference to exhibits filed with Amendment No. 2
to the Company's Form S-1 Registration Statement, under the
Securities Act of 1933, File No. 333-75476.
(3) Incorporated by reference to exhibits filed with the Company's
Form S-1 Registration Statement, under the Securities Act of 1933,
File No. 333-75476.
(4) Incorporated by reference to exhibits filed with the Company's
Current Report on Form 8-K filed March 7, 2002, under the
Securities Exchange Act of 1934, File No. 001-31235.
(5) Incorporated by reference to exhibits filed with the
Company's Quarterly Report on Form 10-Q for the period ended
September 27, 2002, under the Securities Exchange Act of 1934,
File No. 001-31235.
(b) Reports on Form 8-K
1. On November 14, 2002, the Company filed a report on Form 8-K
providing a certification of the Company's Chief Executive
Officer and Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, to accompany its quarterly report on Form 10-Q for
the quarter ended September 27, 2002, which was filed with the
Securities and Exchange Commission on November 7, 2002.
2. On January 14, 2003, the Company filed a report on Form 8-K
with respect to its November 1, 2002 acquisition of the BAE
SYSTEMS Aerospace Electronics Gaithersburg Operation, including
in Item 7 the financial statements of the acquired business
required pursuant to Article 3 Section 210.3-05 of Regulation S-X
and the pro forma information with respect to the business
combination required by Article 11 of Regulation S-X. This
information was not available on the November 7, 2002 filing date
of the Company's Form 10-Q for the quarterly period ended
September 27, 2002.
3. On February 28, 2003, the Company filed a report on Form 8-K
announcing its retention of Bear, Stearns & Co. Inc. to assist
the Board of Directors in evaluating strategic alternatives in
order to maximize stockholder value.
(c) Exhibits - the response to this portion of Item 14 is submitted as a
separate section of this report.
(d) Financial statement schedules - the response to this portion
of Item 14 is submitted as a separate section of this report.
---------------
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
INTEGRATED DEFENSE TECHNOLOGIES, INC.
By /s/ Thomas J. Keenan Date: March 26, 2003
-------------------------------
Thomas J. Keenan
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
Date
--------------
/s/ Thomas J. Keenan Chief Executive Officer and March 26, 2003
----------------------------- Director (Principal Executive
Thomas J. Keenan Officer)
/s/ John W. Wilhoite Vice President of Finance and March 25, 2003
----------------------------- Chief Financial Officer
John W. Wilhoite (Principal Financial and
Accounting Officer)
/s/ Robert B. McKeon Chairman and Director March 25, 2003
-----------------------------
Robert B. McKeon
/s/ Thomas J. Campbell Secretary and Director March 25, 2003
-----------------------------
Thomas J. Campbell
Director March __, 2003
-----------------------------
General Richard E. Hawley
Director March __, 2003
-----------------------------
General Barry R. McCaffrey
/s/ Edward N. Ney Director March 26, 2003
-----------------------------
Edward N. Ney
Director March __, 2003
-----------------------------
Admiral Joseph W. Prueher
/s/ Leighton W. Smith, Jr. Director March 26, 2003
-----------------------------
Admiral Leighton W. Smith, Jr.
/s/ William G. Tobin Director March 26, 2003
-----------------------------
William G. Tobin
Director March __, 2003
-----------------------------
General Anthony C. Zinni
CERTIFICATIONS
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
I, Thomas J. Keenan, certify that:
1. I have reviewed this Annual Report on Form 10-K of
Integrated Defense Technologies, Inc. (the "registrant");
2. Based on my knowledge, this Annual 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 Annual
Report;
3. Based on my knowledge, the financial statements, and other
financial information included in this Annual 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 Annual Report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and have:
a) designed such disclosure controls and procedures 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 Annual Report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this Annual Report (the "Evaluation Date"); and
c) presented in this Annual Report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this Annual Report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: March 26, 2003 /s/ Thomas J. Keenan
---------------------------
Thomas J. Keenan
Chief Executive Officer
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
I, John W. Wilhoite, certify that:
1. I have reviewed this Annual Report on Form 10-K of
Integrated Defense Technologies, Inc. (the "registrant");
2. Based on my knowledge, this Annual 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 Annual
Report;
3. Based on my knowledge, the financial statements, and other
financial information included in this Annual 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 Annual Report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and have:
a) designed such disclosure controls and procedures 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 Annual Report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this Annual Report (the "Evaluation Date"); and
c) presented in this Annual Report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this Annual Report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: March 26, 2003 /s/ John W. Wilhoite
---------------------------
John W. Wilhoite
Vice President of Finance
and Chief Financial Officer
Integrated Defense Technologies, Inc.
Schedule II - Valuation and Qualifying Accounts
For the three years ended December 31, 2002
(In thousands)
Column C
Column A Column B Additions Column D Column E
----------------------------------------------------------------------------------------------------------------
Charged to
Balance at Costs Charged Balance at
Beginning and to Other End
Description of Period Expenses Accounts Deductions of Period
----------------------------------------------------------------------------------------------------------------
Year ended December 31, 2000:
Allowance for doubtful accounts receivable 228 6 647 (1) 78 (2) 803
Allowance for excess and obsolete inventory 1,024 341 8,651 (1) 106 (3) 9,910
Reserve for environmental remediation --- --- 1,000 (1) --- 1,000
Year ended December 31, 2001:
Allowance for doubtful accounts receivable 803 120 --- 365 (2) 558
Allowance for excess and obsolete inventory 9,910 630 169 (1) 3,031 (3) 7,678
Reserve for environmental remediation 1,000 --- --- --- 1,000
Year ended December 31, 2002:
Allowance for doubtful accounts receivable 558 51 --- 387 (2) 222
Allowance for excess and obsolete inventory 7,678 268 2,097 (1) 1,414 (3) 8,629
Reserve for environmental remediation 1,000 --- --- --- 1,000
(1) Purchase accounting adjustments associated with the 2000 and
2002 Acquisitions.
(2) Uncollectible accounts written off, net of recoveries.
(3) Obsolete inventory reduced to net realizable value.