UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

þ      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005

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: 001-16821

UNITED DEFENSE INDUSTRIES, INC.

(Exact Name of Registrant as Specified in its charter)

(703) 312-6100

(Registrant’s telephone number, including area code)

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 þ          No o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes þ          No o

      At April 15, 2005 there were 50,848,293 shares outstanding of the Registrant’s common stock, par value $.01 per share.

UNITED DEFENSE INDUSTRIES, INC.

INDEX

UNITED DEFENSE INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

See accompanying notes.

UNITED DEFENSE INDUSTRIES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

See accompanying notes.

UNITED DEFENSE INDUSTRIES, INC.

UNAUDITED CONSOLIDATED STATEMENTS

OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

See accompanying notes.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

See accompanying notes.

UNITED DEFENSE INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2005

      The financial information presented as of any date other than December 31 has been prepared from the books and records without audit. Financial information as of December 31, 2004 presented in this quarterly report has been derived from the audited financial statements of United Defense Industries, Inc., but does not include all the associated annual disclosures required by generally accepted accounting principles. Certain amounts in prior period financial statements have been reclassified to conform to the current period presentation. In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments (consisting of normal, recurring adjustments) necessary to present fairly our financial position as of March 31, 2005 and the results of operations for the three months ended March 31, 2004 and 2005 and cash flows for the three months ended March 31, 2004 and 2005. The results of operations are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. These unaudited consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2004.

      We use different techniques for estimating and recording revenues depending on the type and characteristics of the contract. Sales are recognized on most fixed-price production contracts when the risks and rewards of ownership have been transferred to the customer. For our DoD production contracts, those criteria are typically met when the manufacture of the product is completed and the customer has certified it as meeting the contract specifications and as having passed quality control tests. However, under recent Bradley and M113 production contracts, sales are not recognized until the vehicles are fielded to individual U.S. Army (“Army”) units, because it is at that point that the risks and rewards of ownership are stipulated to be transferred. Fielding a vehicle refers to the final deprocessing activity such as verifying proper running condition, installing on-board equipment, and obtaining certified customer acceptance at their site of operation. This contractual provision extends the period of time during which these vehicles are carried as inventory and may result in an uneven distribution of revenue from these contracts between periods.

      For production contracts with foreign customers, sales are generally recorded upon shipment of products to the customer, which corresponds to when the risks and rewards of ownership transfer. Gross margin on each unit delivered or accepted is recognized, based on an estimate of the margin that will be realized over the life of the related contract. We evaluate estimates of gross margin on production contracts quarterly and recognize changes in estimates of gross margins during the period in which those changes are determined. Sales under fixed-price ship repair and maintenance contracts are recognized as work is performed. Under this method, contract costs are expensed as incurred and sales are recognized simultaneously based on the ratio of direct labor inputs and other costs incurred to date compared with estimated total direct labor inputs and total costs. Sales under cost reimbursement contracts for research, engineering, prototypes, ship repair and maintenance and certain other contracts are recorded as costs are incurred and include estimated base fees in the proportion that costs incurred to date bear to total estimated costs. Award fees are recorded as revenue when contracts are modified to incorporate the earned award fees. We charge any anticipated losses on a contract to operations as soon as those losses are determined.

      At March 31, 2005, we had a stock-based employee compensation plan, which is described more fully in our Form 10-K for the year ended December 31, 2004. We account for the plan under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. Accordingly, we record compensation expense over the vesting period in our consolidated

UNITED DEFENSE INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

statements of operations if the option price is less than fair value of the common stock at the date an option is granted. Upon closing of our merger agreement with BAE Systems (See Note 13), all of the outstanding stock options and restricted shares will vest.

      The following table illustrates the effect on net income and earnings per share if we had elected to apply the fair value recognition provisions of FASB Statement No. 123 (as amended by SFAS 148), “Accounting for Stock-Based Compensation,” to stock-based employee compensation.

      On March 2, 2005, the Board of Directors authorized the issuance of up to 266,700 shares of restricted stock. A portion of the awards (133,350 shares) vest on the passage of time and become fully vested on December 31, 2007. Compensation expense for those awards was measured on the fair value of $56.68 per share at the date of grant and is being amortized over the vesting period. During the quarter ended March 31, 2005, compensation expense related to these restricted stock grants was approximately $0.7 million. The remaining 133,350 shares are performance based shares and vest if certain financial targets are achieved by December 31, 2007. Compensation expense for the performance based awards will be recorded only if it becomes probable that the performance targets will be met and the shares will vest. The expense will be measured periodically based on the fair value of shares at each reporting period until the number of shares to be issued becomes known. As of March 31, 2005 we have not recorded any compensation expense related to the performance based awards. The restricted shares require no payment from the recipient employee or director.

      In March 2004, the Board of Directors authorized the repurchase of up to $100 million of our common stock. The total number of shares repurchased under the plan as of December 31, 2004 was 2,491,800 at an aggregate cost of $92.7 million, before expenses. In January 2005, the Board of Directors authorized the repurchase of up to an additional $100 million shares of our common stock. During the first quarter of 2005, no additional UDI shares were repurchased.

UNITED DEFENSE INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      In January, 2005, the Board of Directors authorized a quarterly dividend payment of $0.125 per share, which commenced on March 1, 2005 to shareholders of record as of February 15, 2005. We paid a dividend of $6.4 million on March 1, 2005.

      On October 13, 2004, the FASB reached a consensus on the effective date for SFAS No. 123R (“SFAS 123R”), “Share-Based Payment.” SFAS 123R requires us to measure compensation cost for all share-based payments at fair value for annual periods beginning after June 15, 2005. We are currently evaluating the requirements and impact of SFAS 123R on the Company’s consolidated financial statements.

      On October 22, 2004, the FASB issued two FASB Staff Positions (FSPs) regarding the accounting implications of the American Jobs Creation Act of 2004. We are currently evaluating the requirements and impact of FSP No. 109-1, “Application of FASB Statement No. 109 ‘Accounting for Income Taxes’ to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004”. However, it is not expected to have a material effect on our effective tax rate. FSP No. 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” will not affect our consolidated financial statements.

      Our investment in our 51% owned foreign joint venture in Turkey, FNSS Savunma Sistemleri A.S. is accounted for using the equity method because we do not control it due to our partner’s veto rights over most operating decisions, although we do have the ability to exercise influence over its operating and financial policies. Our share of the earnings from our investment in Turkey was $5.8 million and $0.0 for the three months ended March 31, 2004 and 2005, respectively. A dividend payment from FNSS in 2005 is unlikely. Since FNSS has completed its production contracts, its ability to pay dividends in future years is unclear. Consequently this deterioration in the outlook is viewed as other than temporary. We discontinued recognizing our share of the equity in earnings and wrote off our investment balance as of June 30, 2004.

      The following table reports financial results from the joint venture in Turkey:

      Comprehensive income was $41.5 million and $30.7 million for the three-month periods ended March 31, 2004 and 2005, respectively. Comprehensive income consists primarily of net income, net foreign currency translation adjustments, and fair value adjustments of foreign currency and interest rate hedges, net of taxes.

      We have a credit facility with various banks that includes $900 million of term loan facilities and a $200 million revolving credit facility. Outstanding borrowings on the term loan facilities were $511.9 million at March 31, 2005. The facilities bear interest at variable rates with a weighted average rate of 4.77% at

UNITED DEFENSE INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

March 31, 2005. These loans are due through 2009 and provide for quarterly principal and interest payments. Principal payments of $13.0 million were made during the first three months of 2005.

      Outstanding borrowings under the credit facility are guaranteed by certain of our subsidiaries and are secured by a lien on our present and future tangible and intangible assets.

      At December 31, 2004, we revised the discount rate assumption used in the determination of net pension and post retirement costs and benefit obligations from 6.0% to 5.75%. On January 1, 2005 the rate of return assumption used for the actuarial estimates of these benefit programs was unchanged at 8.5%. Components of Net Periodic Benefit Cost for the three months ended March 31, 2004 and 2005 include: