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UNOVA, INC. INDEX TO ANNUAL REPORT ON FORM 10-K
ITEM 8

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

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2002

or

Commission file number 001-13279

UNOVA, INC.

(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: (818) 992-3000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

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 Securities Exchange Act of 1934). Yes /x/    No / /

The aggregate market value of the registrant's common stock held by non-affiliates of the registrant as of June 28, 2002, the last business day of the registrant's most recently completed second fiscal quarter, was approximately $360.5 million. On such date, the closing price of the registrant's Common Stock, as quoted on the New York Stock Exchange, was $6.30.

On February 28, 2003, there were 58,687,296 shares of Common Stock outstanding, exclusive of treasury shares.

Documents Incorporated by Reference

Certain information required to be reported in Part III of this Annual report on From 10-K is herein incorporated by reference from the registrant's Definitive Proxy Statement to be filed with the Securities and Exchange Commission with respect to the registrant's Annual Meeting of Shareholders scheduled to be held on May 8, 2003.

UNOVA, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-K

PART I

ITEM 1. BUSINESS

General

UNOVA, Inc. and subsidiaries (the "Company" or "UNOVA") is an industrial technologies company providing global customers with solutions for improving their efficiency and productivity. UNOVA is a global supplier of mobile computing and wireless network products for non-office applications and for manufacturing systems technologies primarily for the automotive and aerospace industries. The Company has three reportable segments, Automated Data Systems ("ADS"), Integrated Production Systems ("IPS") and Advanced Manufacturing Equipment ("AME"). Segments are determined principally on the basis of their products and services. The ADS segment comprises the Company's wholly-owned subsidiary Intermec Technologies Corporation ("Intermec"). The IPS segment comprises the Lamb Machining Systems division, the Lamb Body & Assembly Systems division and the Landis Grinding Systems division. The AME segment comprises the Cincinnati Machine division. For evaluation purposes, the Company aggregates the IPS and AME reportable segments into the Industrial Automation Systems ("IAS") business. In the fourth quarter 2002, as a result of the continued economic downturn in the global automotive, aerospace and heavy equipment industries, the Company initiated a plan to consolidate its Cincinnati Machine, Lamb Machining Systems and Lamb Body & Assembly Systems divisions into the new operating entity UNOVA Manufacturing Technologies ("UMT"). For the years ended December 31, 2002, 2001 and 2000, UNOVA reported revenues of $1,313.2 million, $1,528.6 million and $1,837.8 million, respectively.

The Company is a Delaware corporation and its headquarters are located in Woodland Hills, California. UNOVA's corporate headquarters are moving to Everett, Washington, where it will be co-located with the Company's Intermec operations by July of 2003. The Company became an independent public company upon the distribution of its common stock to the shareholders of Western Atlas Inc. on October 31, 1997.

See Note N to the consolidated financial statements for financial information by reportable segment and by geographical area.

The Company's website address is www.unova.com. The Company makes available through its website, free of charge, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after such reports are electronically filed with the SEC.

Products and Services

Automated Data Systems Segment

Intermec products and services include rugged mobile computing solutions and automated data collection systems for field, on-premises and site-based workers as well as wireless network systems for untethered enablement of an enterprise, and barcode label and printing solutions. ADS's rugged and robust systems, solutions and services enable Intermec's customers to more efficiently and effectively manage their supply chains and fulfillment activities. ADS accounted for 57%, 43% and 40% of the Company's consolidated revenues in 2002, 2001 and 2000, respectively.

Major Intermec offices and manufacturing facilities are located in the states of Washington, Iowa, and Ohio; and internationally in the United Kingdom, the Netherlands, Sweden and France.

Scanners and Data Collection Systems:    Intermec develops bar code scanning and data collection products used primarily by non-office workers such as warehouse, delivery, manufacturing and other employees who operate outside the typical office environment. Product applications include work force automation; tracking of work in process and finished goods inventory through manufacturing, distribution and other commercial operations; and total asset visibility and real-time monitoring of inventory levels and order

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status to improve productivity, quality and responsiveness. The information collected, managed and exchanged by workers in these applications is often the most critical and the most susceptible to errors or omissions due to illegible handwriting, inaccurate keystrokes, or overlooked transactions. The ability to efficiently capture and wirelessly transmit information in real time means more streamlined business processes. Automating these business processes is key to consistent customer service and fulfillment execution. In addition, Intermec technologies are increasingly used for automating information exchange within supply chains and facilitating shipment and fulfillment of orders. Intermec's scanning and data collection products include rugged wireless handheld computers and terminals, wand scanners, imagers, linear and area imagers incorporating active pixel technology, and badge and laser scanners. These products are able to read or collect data and move that data directly into standard ERP (enterprise resource planning), WMS (warehouse management systems) and other business applications. Intermec also manufactures a large number of industrial handheld terminals for use in warehouses and industrial environments.

Intermec is a leader in the production of next generation item-tracking technology called RFID (radio frequency identification). Intermec markets a complete range of RFID tags, readers and related equipment, and services under the Intellitag trade name. RFID wirelessly communicates important product information between a tracking device, called an interrogator, and inexpensive "tags" comprising a computer chip and its antenna encased in a protective covering. RFID tags are programmed to contain identification, serial numbers, history and other attributes. Certain RFID tags, such as Intermec's Intellitag, contain read/write memory to allow updates and tag reuse. Unlike laser scanned bar codes, Intermec's RFID tags do not require "line of sight" to be read. As many as 40 Intellitag RFID tags can be read simultaneously at distances up to 10 feet. Companies have expressed interest in using RFID technology as a tool to track pallets and individual items through their entire supply chain or as an access security application. Intermec is working through alliances and with other companies to broaden customer access and create standards support.

Enterprise Wireless Networks Products & Services:    Intermec is a market leader in developing wireless Local Area Network ("LAN") software, systems and services. It was among the first companies to provide a network architecture that allows customers to use multiple radio technologies within one LAN system. Starting in the early 1980s, Intermec installed digital communication between mobile computers and host servers within industrial workspaces such as warehouses, distribution centers, factories and large outdoor facilities. In 1998, the Institute for Electronic and Electrical Engineering ("IEEE") promulgated a new standard for high-speed network communication via wireless radio signal. The 802.11b standard allows customers to purchase interoperable digital radios for client computing devices. In the years since the standard was established, several large network equipment vendors have begun selling 802.11b wireless LAN systems, increasing penetration for this technology among office workers and in public spaces such as hotels, restaurants and airports.

Intermec's core customers in the industrial and warehousing markets purchase the Company's wireless systems primarily because these systems are easier to implement and administer than competitive brands. Further, Intermec has a long history of success serving these markets. Finally, customers in these markets recognize that the Company's systems are rugged and reliable, and that reliability will prevent failures and downtime in the customer's operation. Intermec supports all major radio technologies, including synthesized UHF, 900 MHz, 802.11b, 802.11a and Bluetooth. Radio independence allows customers to choose the most efficient radio technology for their facilities. This freedom resolves data rate, transmission speed and range issues and creates a reliable communications environment. Intermec is a member of the Wireless Ethernet Compatibility Alliance ("WECA") initiative, which provides open standards for wireless networking. Intermec's new MobileLAN® system allows customers to migrate from today's 802.11b technology to tomorrow's 802.11a, while preserving much of the current wireless infrastructure. The MobileLAN

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access™ 2106 access point is the first to include the 802.11a high data rate standard—a five-fold increase over 802.11b data rate speeds—allowing deployment of multimedia and other high-bandwidth applications. Intermec also created wireless LAN products that specifically address the security needs of its customers. Based on IEEE 802.11i and 802.1x security standards, MobileLAN secure™ is an integrated security solution for wireless LANs that builds standards-based security capabilities into all components of the wireless LAN, including access points, authentication server software and network interface cards. Intermec's tiered wireless access point product line cost-effectively addresses diverse wireless applications found in an enterprise—both in and out of the office.

Mobile Computing Solutions:    Intermec is a leader in delivering automated solutions comprising ruggedized hand-held and truck-mounted mobile computing systems and local area and wide-area wireless and wired data communication systems. Intermec also develops and delivers handheld computer application software for designated markets and applications as well as communication and server systems to integrate the information into customers' enterprise management systems. Data capture devices and specialized peripherals and printer solutions are a part of the provided solution. To assist with the automation of business processes, Intermec provides extensive professional services, such as installation, maintenance, site security and systems integration. Intermec's comprehensive line of hand-held and vehicle-mounted computers combine Microsoft Windows®, Windows® CE and Pocket PC® capability with scanning and IP (Internet Protocol) based data communication abilities.

Intermec's family of products ranges from low-cost, hand-held batch and wireless data collection devices to sophisticated pen-based computers with extensive wired and wireless network capabilities. Intermec's "open systems" design philosophy delivers maximum product flexibility to customers with diverse application requirements. In combination with wireless communications, these mobile systems enable remote workers to have access to centralized computer applications and databases, to automate business processes to the point of transaction and to send and receive information on a real-time basis. This results in improved productivity, efficiency and accuracy of information.

Intermec offers mobile computing application software that provides work force automation, customer level sales ordering, pricing and forecasting and account settlement. Other software products manage workforce automation and order dispatching, total field asset visibility, real-time proof of delivery and other critical customer information. The Company has approximately 20 years of experience in developing both hardware and software for mobile computing in the direct store delivery, or DSD market. This experience gives the Company insights that it believes are essential in developing and producing successful product offerings in other mobile computing markets such as field service and logistics operators.

Bar Code Label and Printing Solutions:    The Company's line of flexible "on demand" bar code printers ranges from low-cost, light- to heavy-duty industrial models that accommodate a wide array of printing widths, materials and label configurations. These printers attach directly to enterprise networks. A variety of specialty printers provides custom capabilities including color printing, a global language enabler and high resolution (400 DPI) printing that ensures sharp fonts and precise graphics, even on extremely small labels such as those used by the electronics industry.

Intermec's media products include pressure-sensitive bar code labels and thermal transfer ribbons, which are sold to customers worldwide. Intermec's media products emphasize service and value-added technologies, such as the design and manufacture of specialized labels to meet customer requirements for extreme environments, including clean rooms, chemical baths and high humidity.

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Technologies/Trends: Intermec is consistently broadening the application of wireless networking, data capture and mobile computing by developing or integrating new technologies into its products. Recent examples include the following:

•

new high-speed wireless networking products such as 802.11a wireless LAN technology,



•

incorporation of GPRS wide-area wireless technologies into Pocket PC devices,



•

new high performance rugged Windows CE and Pocket PC based computers,



•

short-range radio systems such as "Bluetooth,"



•

low-cost, miniature linear image scan engines and new devices that use the Internet to simplify the management of wireless networks.

Intermec continues to invest in and develop standards-based, low-cost RFID products for supply chain applications such as source tagging, shipping labels and pallet tags with embedded electronic memory chips that can be reprogrammed via low-power radio signals. Intermec has also developed a complete range of products based on its RFID technology, comprising labels, printers and scanners. A prominent industry organization serving the automotive sector has approved a new standard for RFID that is based upon certain of the Company's communications protocols for RFID. These standards manage communications between a host computer and an RFID tag. This new global standard is expected to be used in systems that will allow tire manufacturers and auto companies to track individual tires as they are manufactured, distributed and installed on new cars and trucks manufactured in North America. Intermec plans to offer its new technology for integration with existing automatic identification and data capture solutions such as bar code, mobile computing and other enterprise-wide information systems.

Industrial Automation Systems

Industrial Automation Systems is a leading producer of value-added manufacturing technologies, products and services that span the production cycle from process engineering and design to systems integration, including comprehensive life cycle support. The Integrated Production Systems segment serves primarily the global automotive, off-road vehicle and diesel engine industries. The Advanced Manufacturing Equipment segment serves in the aerospace, industrial components, heavy equipment and general job shop markets.

The Company's IAS operations comprise the following divisions: Lamb Machining Systems, Lamb Body & Assembly Systems, Landis Grinding Systems and Cincinnati Machine. In October 2002, the Company announced plans to combine the business operations of Lamb Machining Systems, Lamb Body & Assembly Systems and Cincinnati Machine into the new operating entity Unova Manufacturing Technologies ("UMT"), to reduce costs, streamline decision-making and maximize efficiency. This new division will be headquartered in the greater Detroit area and will share engineering, administrative and manufacturing resources. Cincinnati Machine's high-tech aerospace machining and composites business and after-market Cincinnati Plus™ services operations will be moved to a UNOVA-owned facility in nearby Hebron, Kentucky, in order to maintain critical skills while reducing the high fixed costs associated with the current facility. Management believes this structure creates new opportunities that were unavailable to the separate organizations and offers customers more comprehensive products and services.

Major IAS offices and production facilities are located in Illinois, Michigan, Ohio and Pennsylvania; and internationally in Canada, the United Kingdom and Germany.

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Integrated Production Systems Segment

To create an integrated manufacturing solution, many of the segment's products and systems are sold in combination, including metal cutting solutions, precision grinding machines or assembly and testing systems. By working closely with customers, especially in the product design and engineering phase, IPS is able to design manufacturing processes that reduce capital requirements, lower lifecycle costs, eliminate costly shop floor programming and improve productivity by reducing downtime during operations.

Major industrial manufacturers use one or more of IPS's dedicated and flexible/modular systems to make the following products: powertrain components' such as engine blocks, heads, connecting rods, camshafts and crankshafts as well as transmission parts and chassis components (steering knuckles, rear-axle housings and brake calipers); and automotive and truck welding and assembly systems.

Metal Cutting:    Manufacturing solutions designed and integrated by Lamb Machining Systems range from stand-alone machines for light-duty, general-purpose metalworking, to complete, turnkey manufacturing solutions for high-variety or high-volume metal cutting operations. Product lines include machining centers, non-synchronous, ring- or dial-transfer systems for low-volume requirements; modular, flexible systems for medium-volume production requirements; and dedicated modular transfer lines for high-volume production. Through its Assembly and Test Systems operations, Lamb Machining Systems also designs and builds specialized assembly and/or testing equipment and systems for a variety of automotive manufacturing and other industries. Metal cutting products and services accounted for 17%, 23% and 27% of the Company's consolidated revenues in 2002, 2001 and 2000, respectively.

Precision Grinding and Abrasives:    Landis Grinding Systems is an innovator of cylindrical grinding products and processes that improve accuracy and reliability in critical mechanical parts. For example, precision-ground camshafts and cam lobes for internal combustion engines translate into improved engine durability and performance, with lower emissions and better fuel economies. Precision-ground air compressor pistons result in lower friction and energy consumption in air conditioning systems. Superabrasive grinding wheels, electronic controls, high-precision, maintenance-free hydrostatic bearings and other state-of-the-art grinding technologies enable today's car manufacturers to machine parts with precision measured in the sub-micron range. Research into the processing of new materials also has resulted in the development of ultra-high-precision grinding and finishing techniques. These advances are being applied to requirements of the microelectronics, computer, aerospace and optics industries for the manufacture of materials such as composites, silicon, glass and ceramics. Precision Grinding and Abrasives accounted for 12%, 14% and 12% of the Company's consolidated revenues in 2002, 2001 and 2000, respectively.

Auto Body Assembly Systems:    Lamb Body & Assembly Systems designs and integrates automated systems to form, assemble and weld high-quality auto and truck bodies as well as other industrial products. Robotic systems are integrated with high-precision holding and alignment fixtures and high-volume welding equipment to produce components and subassemblies. Proprietary processes have been developed specifically to assemble doors, hoods and trunk lids, which historically represent the most critical "fit and finish" manufacturing parts of car bodies. Using 3-D computer simulations, Lamb Body & Assembly Systems has established one of the broadest process and tool design capabilities in the industry. Tool design and advanced process/product development are now linked into the product engineering process, reducing costs and risks for automotive customers long before their programs move into the capital investment stage. Body and Assembly Systems accounted for 4%, 7% and 7% of the Company's consolidated revenues in 2002, 2001and 2000, respectively.

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Advanced Manufacturing Equipment Segment

The Company's AME segment offers CNC machine tools, such as turning centers, vertical and horizontal machining centers, 5-axis and 5-sided machining centers, flexible machining cells, multi-spindle profilers, routers, high-speed, linear motor machines and automated composites processing systems. The AME segment serves all key segments in industrial manufacturing, holding its largest market share in the aerospace sector which utilizes high-speed, extremely accurate equipment for the production of aluminum and composite components of all sizes and shapes for the production of commercial, defense and space aircraft. As part of the UMT merger, the AME segment will join production of horizontal machining centers and cells with that of Lamb's similar product lines and move its remaining operation to a smaller, more operationally-efficient facility in Hebron, Kentucky that will serve as its production headquarters for aerospace solutions. Cincinnati Plus™, AME's comprehensive life cycle support program, will be expanded to offer Lamb customers more products including service parts, unit repair and exchange, field service, training, machine certification, preventive maintenance programs and complete rebuild/retrofit packages. Acquired in October of 1998, Advanced Manufacturing Equipment accounted for 11%, 13% and 14% of the Company's consolidated revenues in 2002, 2001 and 2000, respectively.

Technologies/Trends:    The IAS businesses continue to develop manufacturing technologies to broaden product offerings and respond to manufacturers' needs for complete productivity solutions rather than simply equipment. New machining centers and systems have been introduced responding to the automotive and aerospace customers' needs to lower costs, improve productivity and reduce inventories. Management believes IAS will continue to lead in providing manufacturing solutions for emerging technologies, such as compact graphite iron (CGI) in the automotive industry and composites in the aerospace industry.

Business Strategy

The Company's strategy is to develop products, processes and services that help improve productivity and efficiency in a variety of manufacturing, distribution, retail, field service and logistics supply chain applications. All the Company's businesses offer single products as well as integrated solutions to their customers. Future growth in these businesses is expected to result from expansion of the Company's existing operations and customer base.

Automated Data Systems Segment

In the ADS market, potential customers seek to improve their control of labor, inventory and sales and distribution costs to become more efficient within their markets. The integration of Internet e-commerce and real-time information driven by the increasing demand for more efficient and effective fulfillment systems has created increased opportunities and demand for technologies that improve levels of service and responsiveness.

Warehouses and logistics operations already rely on wireless networks and handheld and mobile computers to transmit inventory data to central host computers. When information is updated in real time, companies have greater visibility to their current business operations, avoiding inventory shortages and improving customer service by providing more accurate shipping and delivery information. As competition places more pressure on companies for faster operational performance, they typically upgrade their supply chain "execution" technologies to improve financial measures, such as inventory and asset turnover, and customer satisfaction standards, such as delivery speed, in-stock availability and order accuracy.

The Company plans to emphasize its product development and market activities in the areas of wireless communications, mobile computers and technologies for supply-chain execution to capitalize on expected strong demand and long-term overall market growth.

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Industrial Automation Systems

Industrial Automation Systems, headquartered in the greater Detroit area, combines the engineering, manufacturing and business system infrastructure of two of the machine tool industry's most respected manufacturers—Cincinnati Machine and Lamb. In conjunction with the well-known Landis Grinding Systems operation, the Company offers technology-driven solutions that add value and productivity to the global manufacturing market.

For the IAS businesses, the Company plans to continue developing its existing customer base by seeking a greater role in customer projects by structuring itself to offer customers more comprehensive solutions to their manufacturing needs. The ongoing development of the Company's systems and solutions offerings will depend primarily on the application of new technologies and products to support its position in this technology-driven market. The Company believes it has the necessary technical expertise to achieve this goal.

In recent years, cost-cutting and low corporate profits in the automotive and aerospace industries have changed the Company's relationships with its customers. The customers have expressed a long-term strategy of consolidating their supplier base, favoring those companies that demonstrate superior engineering expertise, global integration, and the ability to manage and service large-scale projects. These market-driven changes also have forced many smaller competitors to withdraw from the market or to reduce their participation. The Company has made a number of organizational changes and believes those actions have positioned it to take advantage of these trends. Further, automakers and aircraft producers have announced plans to outsource the production of many major components to third-party suppliers. These third-party part suppliers, representing new customers to IAS, are interested in partnering with well-established suppliers offering cost-effective, value-added solutions.

Lamb recently established alliances with Asian and European machine tool partners to expand its customer base and access incremental sales opportunities among Asian and "transplant" automotive original equipment manufacturers ("OEMs") and their suppliers. To date, Lamb has entered into five such partnerships that have generated incremental revenue and favorable bidding activities. Management believes these alliance agreements will continue to be a useful strategy to access business previously unavailable to the Company.

Under terms of the alliance agreements, Lamb offers its value-added process and design knowledge while partners provide both lower cost sources of manufacturing systems and a style of machine tool preferred by primarily Asian and transplant automotive OEMs and their suppliers. Lamb also provides installation engineering and maintenance services within North America, skills and local-market capabilities that are valued by the target customers.

Markets and Customers

Automated Data Systems Segment

The automated data systems market is extensive because it represents technologies that can be utilized by a company of any size. Market growth is driven by the global need for technologies and solutions that improve quality, productivity and cost efficiency in business and government, particularly through logistics automation, supply chain execution, ERP and e-commerce solutions. Worldwide market coverage is accomplished through a dedicated sales and service organization in conjunction with value-added distributors, resellers and independent software vendors ("ISVs"). These partners extend Intermec coverage into broader applications and allow Intermec to cost-effectively penetrate and grow the small and mid-sized business in core markets.

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Through its application of technologies in the manufacturing, consumer goods, warehouse-distribution, transportation, retail (including direct store and destination delivery), health care, government, security and field services markets, ADS maintains a strong position in the global AIDC (Automated Information and Data Collection) market.

ADS sells and services its products through multiple sales and distribution channels: a direct field sales force that concentrates on large or complex systems sales, premier value-added resellers that offer applications-specific solutions, alliances with major systems integrators and enterprise computing companies and distributors who provide value-added services to the smaller ISV's and resellers. ADS's direct sales organization serves customers from offices throughout the Americas and Europe and in some selected countries outside these regions. Indirect sales channels include long-time preferred and non-exclusive relationships with value-added distributors and master resellers.

Although the majority of ADS sales are made through indirect sales channels, no individual value-added distributor or reseller is material to the Company's consolidated revenues. ADS also maintains contact with customers and prospective users by having established user forums for automated data systems applications and technologies.

The mobile computing systems market comprises several applications, such as route accounting for the distribution and package/parcel delivery industries, sales merchandising, remote delivery and field service. These applications are generally used in the consumer products, food, beverage, wholesale, parcel delivery, freight, field service and home service industries.

Manufacturing applications include the collection and communication of information related to receipt of materials, work in process, finished goods inventory and other functions throughout the manufacturing process. Warehousing and distribution center applications involve the collection and communication of information related to receiving materials to be stored, storage locations, materials retrieval and shipping.

Retail applications include the automation of shelf label maintenance and product shipping and receiving functions.

Additional international sales opportunities exist in countries where mobile computing practices and other applications are similar to those in the U.S. The extent of wireless systems opportunities in any particular country is based on the level of industrialization, the status of bar coding implementation, and the wireless regulatory environment for wireless communication technologies.

Industrial Automation Systems

The Company participates in the automotive, aerospace and general manufacturing markets. Investments by automotive customers are driven by model changes, competitive pressures, government regulations such as emission and fuel efficiency standards, and the customers' own internal spending cycles. Investments by aerospace customers are primarily driven by commercial and defense aircraft new product development programs. Investments in diesel engine manufacturing are influenced by the infrastructure needs of emerging industrial nations and by the efficiency benefits diesel engines offer for heavy and light trucks and utility vehicles. The automotive, aerospace and general machine tool markets tend to be cyclical and dependent on manufacturing capacity utilization rates or significant increases in productivity.

A substantial part of the IPS segment's total revenue is currently generated by worldwide automotive and diesel engine industry purchases of automated manufacturing systems, including integrated machining, body welding and assembly and precision grinding systems. U.S. and Canadian auto and auto-related manufacturers currently account for the majority of IPS sales. The passenger car and light truck industries continue to represent this division's largest market and business from diesel engine manufacturers has

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grown in recent years. The remainder of sales represents products manufactured and sold in Europe and those exported from the Company's production facilities, mostly for installation in Latin America and Asia.

The AME segment serves the worldwide general machining market, with a strong foundation in the aerospace industry through its relationships with the major OEMs involved with new aircraft programs. The aerospace industry has been in a deep decline in recent years, and the commercial sector has been most severely affected. Generally, new aircraft programs in the commercial, defense and space sectors of the global aerospace market are dependent upon superior manufacturing techniques. Weight and cost reduction continue to be key considerations for aerospace manufacturers. AME's new multi-axis, multi-spindle and multi-tasking equipment address these key considerations by significantly improving the production of large, high-precision, monolithic components.

The Company believes that future growth in IAS will be dependent on its ability to market its full range of products and services to its current customer base and to expand into other industrial manufacturing markets. This strategy is supported by the Company's global management structure that provides for unified marketing and product support of each primary business on a global basis.

Revenues for both segments within IAS are influenced by the capital investment plans of customers. These plans are typically strategic and long-range, driven by customers' competitive product issues as well as environmental issues related to compliance with emissions. Typically, short-term business cycles, such as monthly product sales, do not permanently interrupt capital investment decisions of major automotive customers. However, periods of economic uncertainty such as the current environment in North America can cause customer decision-makers to slow the pace of capital equipment orders as they assess their strategic direction.

Recent major customers include the following companies: U.S.-based Boeing Corporation, Briggs & Stratton, Caterpillar, Cummins, DaimlerChrysler, Department of the Navy, Ford, General Motors, Navistar, Northrop Grumman, Parker Hannifin, and Raytheon; and Western Europe-based Airbus España, Alenia Aerospasio, Bombardier Shorts Brothers, BMW, British Aerospace, DaimlerChrysler, Fiat, Ford/Jaguar, Peugeot, Renault, Volkswagen, Volvo and the European subsidiaries of the large U.S. manufacturers. The Company has also won major equipment contracts for the "transplant" manufacturing facilities of foreign automakers, including both European and Japanese, and also serves the automotive components manufacturing market.

Competition

Strong competition exists in both the domestic and international markets for the Company's products and services. Products are sold and projects are won in the marketplace based primarily on delivery, price, technology, capability, productivity, reliability and service.

Automated Data Systems Segment

The market for AIDC/mobile computing systems is largely fragmented. Based on independent market surveys, management believes that Intermec is one of the largest participants measured by revenues. The other major participant is Symbol Technologies, which acquired Telxon in 2000. Intermec also faces strong competition for single product lines from specialized suppliers, like Zebra, for printers.

The market for mobile computing and RF products is highly competitive and rapidly changing. Some firms, including Fujitsu and Casio, manufacture and market hand-held systems for route accounting applications. In addition, a number of firms manufacture and market radio-linked data communication

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products, including LXE, Symbol and Teklogix. Consumer personal digital assistants (PDAs) from suppliers such as Palm, Handspring, Hewlett Packard and Dell are potential competitors for certain non-mission-critical, light-duty enterprise computing applications. Companies such as Cisco and Entersys compete in the wireless network business. On the printer side, Intermec faces competition from Zebra, Datamax and many others, depending on the geographic area.

Intermec competes primarily on the basis of its technology: integrated solutions, open-systems architecture, networking and communications expertise, applications software and value-added service. Other attributes, such as level of sales and support services, and product functionality, performance, ruggedness and overall quality, are important for market success.

Industrial Automation Systems

While product quality and innovation are key competitive factors to win market share, pricing is a major decision point in the global market for Integrated Productions Systems and Advanced Manufacturing Equipment. IAS' strength is its ability to design reliable and efficient manufacturing processes and combine them with cost-effective machining solutions for customers in order to win orders amid strong competition.

The North American and European market for high-volume production systems for engines and transmissions is divided among several major competitors and numerous smaller participants. Major competitors are Ingersoll Milling (North America), Thyssen, Heller, Grob-Werke and Ex-Cello (each from Germany) and NTC (Japan).

In the body welding and assembly systems market, the Company is faced with competitors that are involved in a broad range of assembly equipment and other competitors that provide "niche" machines. Primary competitors include PICO (Comau), Valiant and Utica in North America; Thyssen, FFT, Kuka and Comau in Europe.

In the worldwide market for high-precision grinding of engine parts, the Company has achieved a strong market position through innovative products that improve customer efficiency while reducing their capital costs. Major competitors are the foreign companies Koyo and Toyoda in Japan; the Schleifring Group and Junker in Germany; and Giustina in Italy.

In each of its different product markets, Advanced Manufacturing Equipment faces separate competitors. Major competitors are as follows: Ingersoll Milling (North America), Henry Line (Canada) and Forrest Line (France) in aerospace systems; Makino and Mazak (both Japan) in horizontal systems; and Fadal/Thyssen (North America), Haas (North America), Okuma (Japan) and Mori Seiki (Japan) in the market for lower-end vertical machining and turning centers or "value" machines.

Research and Development

Company-wide expenditures on research and development activities amounted to $53.4 million, $66.3 million and $69.7 million, substantially all of which was sponsored by the Company, in the years ended December 31, 2002, 2001 and 2000, respectively.

Patents and Trademarks

Over a period of years, the Company has secured a large number of patents, trademarks and copyrights relating to its technology and manufactured products. These patents, trademarks and copyrights have been of value in the growth of the Company's business and may continue to be of value in the future. However, the Company's business generally is not dependent upon the protection of any patent, patent application

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or patent license agreement, or group thereof, and would not be materially affected by the expiration thereof. In December 2002, the Company assigned approximately 150 of the 800 patents in its portfolio to Broadcom, Inc. The contract of assignment contained a license grant back to UNOVA to continue using all assigned patents in the production and sale of the Company's products. The Company believes this assignment to Broadcom will not have a material effect on the Company's business.

Seasonality; Backlog

Sales backlog was $299 million, $386 million and $581 million at December 31, 2002, 2001 and 2000, respectively. The operations of the Company are not seasonal to any appreciable degree. The majority of the Company's backlog is concentrated in the IAS segments. The ADS market typically operates without a significant backlog of firm orders and does not consider backlog to be a relevant measure of future sales.

Employees

At December 31, 2002, the Company had 5,828 full-time employees, of which 2,643 are engaged in the ADS segment, 2,135 in the IPS segment, 1,005 in the AME segment and 45 in corporate and shared services.

Environmental and Regulatory Matters

During 2002, the amounts incurred to comply with federal, state and local legislation pertaining to environmental standards did not have a material effect upon the capital expenditures or earnings of the Company.

Radio emissions are the subject of governmental regulation in all countries in which the Company currently conducts business. In North America, both the Canadian and U.S. governments publish relevant regulations, and changes to these regulations are made only after public discussion. In some countries regulatory changes can be introduced with little or no grace period for implementing the specified changes. Furthermore, there is little consistency among the regulations of various countries outside North America, and future regulatory changes in North America are possible. These conditions introduce uncertainty into the product planning process and could have an adverse effect on the AIDC/Mobile Computing business.

Raw Materials

The Company uses a wide variety of raw materials in the manufacture of its products and obtains such raw materials from a variety of suppliers. In general, raw materials used are available from numerous alternative sources. As is customary for its industry, the Company's ADS segment at various times enters into certain single-source component part supply agreements. Management believes these agreements will be renewed or alternative sources are available in the ordinary course of business.

ITEM 2. PROPERTIES

The Company's executive offices, in leased premises, are presently at 21900 Burbank Boulevard, Woodland Hills, California. Its principal plants and offices have an aggregate floor area of approximately 5,063,841 square feet, of which 4,244,040 square feet (84%) are located in the United States, and 819,801 square feet (16%) are located outside of the United States, primarily in the United Kingdom, Germany and Canada.

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These properties are used by the business segments as follows (in square feet):

Approximately 3,888,607 square feet (77%) of the principal plant, office and commercial floor area is owned by the Company, and the balance is held under lease.

The Company's plants and offices in the United States are situated in 18 locations in the following states (in square feet):

The above-mentioned facilities are in satisfactory condition and suitable for the particular purposes for which they were acquired or constructed and are adequate for present operations.

The foregoing information excludes Company-held properties leased to others and also excludes plants or offices which, when added to all other of the Company's plants and offices in the same city, have a total floor area of less than 50,000 square feet.

ITEM 3. LEGAL PROCEEDINGS

The Company is currently, and is from time to time, subject to claims and suits arising in the ordinary course of its business. Although the results of litigation proceedings cannot be predicted with certainty, the Company believes that the ultimate resolution of these proceedings will not have a material adverse effect on the Company's financial statements.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters have been submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year ended December 31, 2002.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The high and low sales prices of the Company's common stock, by quarter, in the years ended December 31, 2002 and 2001 are as follows:

The Company's common stock is traded on the New York Stock Exchange under the ticker symbol "UNA," and as of February 7, 2003, there were approximately 14,137 holders of record. No cash dividends have been paid since the Company's inception. The Company's Revolving Facility places limits on the payment of dividends. See discussion of the Revolving Facility under the heading "Liquidity and Capital Resources" in Item 7 of this annual report.

See the information with respect to securities authorized for issuance under the Company's equity compensation plans under Item 12 of this annual report on Form 10-K.

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ITEM 6. SELECTED FINANCIAL DATA

UNOVA, INC.

^(A)

Reflects the acquisitions of Amtech (July 1998) and Cincinnati Machine (October 1998) and the disposition of Amtech (June 2000).

^(B)

Information related to goodwill impairment and special charges and other income is included in Notes G and H to the consolidated financial statements. Other income for the year ended December 31, 1998 represents a gain on the sale of real estate.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

The Company has three reportable segments, Automated Data Systems ("ADS"), Integrated Production Systems ("IPS") and Advanced Manufacturing Equipment ("AME"). Segments are determined principally on the basis of their products and services. The ADS segment comprises the Company's wholly owned subsidiary Intermec Technologies Corporation ("Intermec"). The IPS segment comprises the Lamb Machining Systems division, the Lamb Body & Assembly Systems division and the Landis Grinding Systems division. The AME segment comprises the Cincinnati Machine division. For evaluation purposes, the Company aggregates the IPS and AME reportable segments into the Industrial Automation Systems ("IAS") business. In the fourth quarter 2002, as a result of the continued economic downturn in the global automotive, aerospace and heavy equipment industries, the Company initiated a plan to consolidate its Cincinnati Machine, Lamb Machining Systems and Lamb Body & Assembly Systems divisions into the new operating entity UNOVA Manufacturing Technologies ("UMT"). Sales and service revenues and segment operating profit (loss) for the years ended December 31, 2002, 2001 and 2000 were as follows (millions of dollars):

^(A)

Includes Amtech through June 2000.

^(B)

Excludes goodwill impairment, special charges and other income.

Year Ended December 31, 2002 Compared to 2001

Sales and Service Revenues and Segment Operating Profit (Loss)

Total sales and service revenues for the year ended December 31, 2002 were $1,313.2 million, a decrease of $215.4 million, or 14.1%, compared with the prior year. The increase in ADS revenue, which included significant transactions involving the Company's intellectual property, was offset by significant decreases in IPS and AME revenue. Before goodwill impairment, special charges and other income, the Company reported total segment operating profit of $87.4 million for the year ended December 31, 2002 compared to total segment operating profit of $13.1 million for the prior year.

ADS Segment:    ADS segment revenues were $744.4 million for the year ended December 31, 2002 compared with $655.1 million for the prior year. During the second quarter 2001, the Company settled a

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dispute with Compaq Computer Corporation regarding the Company's battery power-management patents. In 2002, the Company settled disputes regarding the same patents with Dell Computer Corporation in the second quarter, International Business Machines Corporation and Matsushita in the third quarter and NEC Corporation in the fourth quarter. Accordingly, ADS revenues for the years ended December 31, 2002 and 2001 include significant royalty income. The specific terms of each of these settlements are confidential. In the fourth quarter 2002, the ADS segment sold a portfolio of wireless networking patents to Broadcom Corporation for $24 million. Excluding the revenue from intellectual property activity, ADS product and service revenues in 2002 increased 1% over 2001. By product line, Systems and Solutions increased by 6% while Printer/Media declined by 5% from 2001.

The ADS segment reported an operating profit of $110.1 million for the year ended December 31, 2002, compared to an operating loss of $14.8 million for the prior year, before goodwill impairment and special charges. The operating results include severance charges of $6.5 million and $8.0 million related to reductions in Intermec's global workforce in the fourth quarters of 2002 and 2001, respectively. Goodwill amortization was eliminated in 2002; however, fiscal 2001 operating results include goodwill amortization of $7.0 million. ADS pension expense was $0.3 million in 2002, compared to pension income of $2.2 million in 2001. The improvement in operating profit reflects significant reductions in selling, general and administrative ("SG&A") expenses and higher product and service gross margin percentages. Compared to 2001, product and service gross margins have improved by approximately four percentage points, largely as a result of efficiencies within the service organization and in the systems and solutions product line. Results for fiscal years 2002 and 2001 reflect significant gross margin contributed by royalties from intellectual property settlements and by the sale of intellectual property.

During 2001, the ADS segment recorded a third quarter charge for non-cash goodwill and other long-lived asset impairments of $230.6 million and a fourth quarter charge for the closure of a facility of $7.4 million. See discussion under the heading "Goodwill Impairment and Special Charges" below.

IPS Segment:    IPS segment revenues for the year ended December 31, 2002 were $424.0 million, a decrease of $244.1 million, or 36.5%, from $668.1 million in the prior year. The revenue decline reflects continued global deterioration in capital spending, primarily in the North American automotive industry. As a result of weakness in the IPS market, the segment reported an operating loss of $7.0 million for the year ended December 2002, compared to operating income of $49.9 million in 2001, excluding goodwill impairment and special charges. IPS operating profit for 2001 includes inventory and accounts receivable write-downs of $7.0 million relating to closed operations and fourth quarter severance charges of $6.5 million related to the reduction in its North American workforce. Goodwill amortization was eliminated in 2002. IPS goodwill amortization in 2001 was $3.4 million. IPS pension expense was $0.5 million in 2002 compared to pension income of $19.1 million in 2001.

Revenue declines necessitated cost reduction actions in 2001 and 2002. During 2001, the IPS segment closed three under-performing operations and one underutilized facility, resulting in aggregate charges of $44.8 million, including $31.0 million of impaired goodwill. During 2002, the IPS segment sold a non-core business resulting in a charge of $4.7 million. In the fourth quarter of 2002, the Company initiated a plan to merge IPS's Lamb Machining Systems and Lamb Body & Assembly Systems divisions with the AME segment's Cincinnati Machine operation, resulting in IPS charges for severance and impairment of long-lived assets of $12.7 million. These amounts are recorded as goodwill impairment and special charges. See discussion under the heading "Goodwill Impairment and Special Charges" below.

IPS's backlog decreased from $276.2 million at December 31, 2001 to $191.4 million at December 31, 2002. The backlog decline is primarily due to the North American machining systems and grinding systems operations, which have been impacted by significant canceled or delayed capital equipment investments by

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the U.S. automotive industry. The Company believes that a change in this trend will be necessary to enable its customers to introduce new vehicles and engines. However, the timing of renewed capital equipment investments is unclear. The Company does not expect this trend to improve in the near term, indicating projected lower revenue in 2003.

AME Segment:    AME revenues decreased $60.6 million, or 29%, to $144.8 million for the year ended December 31, 2002 from $205.4 million in the prior year. The decrease in revenues reflects continued weakness in the global aerospace-related and general machine tool markets. Before goodwill impairment and special charges, the segment reported an operating loss of $15.7 million for the year ended December 31, 2002 compared to an operating loss of $22.0 million for the prior year. The operating losses for 2001 include fourth quarter severance and early retirement charges of $10.1 million related to reductions in the segment's U.S. workforce. AME revenues continue a trend of decline. Weak domestic machine tool markets, and particularly the aerospace related component, were further impacted by the declining national economy. Revenue declines and the related reduction in contributed gross margin were more than offset by reductions in SG&A expenses, resulting in lower operating losses in 2002 compared to 2001. The 2001 SG&A expense includes $10.1 million related to workforce reductions. Backlog decreased to $43.6 million at December 31, 2002 from $66.9 million at December 31, 2001.

During the third quarter of 2001, the AME segment recorded non-cash goodwill and other long-lived asset impairments of $25.4 million. During the fourth quarter 2001, the segment recorded charges of $8.7 million to exit certain of its vertically integrated manufacturing activities and consolidate facilities. During the fourth quarter 2002, the AME segment recorded a $10.8 million charge as a result of the Company's plan to merge the Lamb Machining Systems, Lamb Body & Assembly Systems and Cincinnati Machine operations. These amounts are reported as goodwill impairment and special charges. See the discussion under the heading "Goodwill Impairment and Special Charges" below.

The Company initiated the integration of the UMT merger during the fourth quarter and reported related severance, early retirement, asset impairment, plant closure and other restructuring charges of $23.5 million in 2002. Of these charges, $18.9 million relates to the planned incremental reduction of 725 employees. This reduction in headcount is in addition to 75 employees affected by the fourth quarter 2001 restructuring plan. The Company may terminate additional employees related to the UMT merger during 2003. Of these employees, 209 had been terminated as of December 31, 2002, with the remainder expected to be terminated relatively ratably through 2003.

Costs and Expenses

Cost of sales and service decreased $219.3 million to $898.7 million for the year ended December 31, 2002 from $1,118.0 million for the year ended December 31, 2002. Cost of sales and service as a percentage of sales improved to 68.4% for the year ended December 31, 2001 compared to 73.1% for the prior year. The decrease in cost of sales reflects the lower sales volume in 2002 and improved gross margins from ADS products and services, partially offset by the cost of sales recorded for intellectual property transactions, decreased margins in the IPS and AME segments and by the effect on pension income (expense) from the pension reversion in 2001. Operating segment pension expense was $1.5 million in 2002, versus pension income of $21.3 million in 2001.

Selling, general and administrative ("SG&A") expense decreased $56.7 million to $317.1 million for the year ended December 31, 2002 from $373.8 million in 2001. The reduction in SG&A during 2002 is primarily due to the reduction in IAS business base.

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The decrease in depreciation and amortization expense of $22.6 million from $57.2 million for the year ended December 31, 2001 to $34.2 million for 2002 reflects the impact of lower capital expenditures and the write-off and sale of assets in 2001, as well as the elimination of goodwill amortization in 2002.

Net interest expense was $20.6 million and $29.9 million for the years ended December 31, 2002 and 2001, respectively. The decrease was attributable to lower outstanding debt during the year.

Goodwill Impairment and Special Charges

Throughout 2002 and 2001, the Company undertook a series of actions to close underutilized or underperforming operations and facilities. These actions resulted in charges for severance, early retirement, plant closure costs and impairment of long-lived assets as follows:

IPS Segment:    The UMT integration plan, initiated during the fourth quarter 2002, includes the relocation of certain Cincinnati Machine operations, outsourcing of certain manufacturing activities, termination of employees and the sale of certain plant and equipment. This action, which is expected to be substantially complete by December 31, 2003, resulted in a severance charge of $6.0 million for 319 employees and an early retirement charge of $4.2 million for 42 employees by the IPS segment. The related analysis of long-lived assets to be disposed of resulted in the non-cash impairment of property, plant and equipment of $2.5 million in the IPS segment. The fair value of long-lived assets to be disposed of was estimated based on the current market value of similar assets. As of December 31, 2002, the IPS segment had reduced its headcount by 154 employees and paid $1.4 million in severance.

In March 2002, the IPS segment sold its plastics extrusion equipment business ("Plastics") resulting in a loss of $4.7 million, including $2.8 million of allocated goodwill. The net assets and results of operations for Plastics are not material for all periods presented.

During the second quarter 2001, the IPS segment initiated closure of substantially all of its R&B Machine Tool Company and MM&E, Inc. facilities. Certain remaining manufacturing activities were consolidated into other IPS units. This action, which was substantially complete at December 31, 2001, resulted in a severance charge for 217 employees totaling $3.0 million and a charge for other plant closure costs of $1.6 million. The related review of goodwill and long-lived assets for impairment resulted in a non-cash goodwill impairment charge of $31.0 million. The