##### Table of Contents









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549




---

FORM 10-K

|   |  |                                                                                                                                         
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
    FISCAL YEAR ENDED OCTOBER 30, 2004
|OR
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
    1934                                       

Commission file no. 333-38223



---

ARGO-TECH CORPORATION

(Exact name of registrant as specified in its
charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 31-1521125                              
|(State or other jurisdiction
    of incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

23555 Euclid Avenue, Cleveland, Ohio 44117

(Address of principal executive
offices  zip code)


(216) 692-6000

(Registrants telephone number, including
area code)




---

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

None


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 þ     No o

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 Annual Report on
Form 10-K or any amendment to this
Form 10-K.     Yes þ     No o

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

No established published trading market exists
for the registrants common stock, par value $0.01 per
share. As of January 15, 2005, 1 share of the
registrants common stock was outstanding, and is held by
AT Holdings Corporation.



---




DOCUMENTS INCORPORATED BY REFERENCE

None




---



##### Table of Contents



INDEX TO ANNUAL REPORT

ON FORM 10-K


Table of Contents

|          |  |                                                                                                                          |  |      |    | 
|--------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|          |  |                                                                                                                          |  | Page |   
|          |  |                                                                                                                          |  |      |   
|PART I:  
|Item 1.   |  | Business                                                                                                                 |  |      | 2  | 
|Item 2.   |  | Properties                                                                                                               |  |      | 8  | 
|Item 3.   |  | Legal Proceedings                                                                                                        |  |      | 8  | 
|Item 4.   |  | Submission of Matters to a
    Vote of Security Holders                                                                  |  |      | 8  | 
|         
|PART II: 
|Item 5.   |  | Market for the
    Registrants Common Equity; Related Stockholder Matters and
    Issuer Purchases of Equity Securities |  |      | 9  | 
|Item 6.   |  | Selected Financial Data                                                                                                  |  |      | 9  | 
|Item 7.   |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations                                |  |      | 12 | 
|Item 7A.  |  | Quantitative and Qualitative
    Disclosures about Market Risk                                                           |  |      | 27 | 
|Item 8.   |  | Financial Statements and
    Supplementary Data                                                                          |  |      | 28 | 
|Item 9.   |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure                                 |  |      | 28 | 
|Item 9A.  |  | Controls and Procedures                                                                                                  |  |      | 28 | 
|         
|PART III:
|Item 10.  |  | Directors and Executive
    Officers of the Registrant                                                                   |  |      | 29 | 
|Item 11.  |  | Executive Compensation                                                                                                   |  |      | 30 | 
|Item 12.  |  | Security Ownership of
    Certain Beneficial Owners and Management                                                       |  |      | 36 | 
|Item 13.  |  | Certain Relationships and
    Related Transactions                                                                       |  |      | 37 | 
|         
|PART IV: 
|Item 15.  |  | Exhibits; Financial
    Statement Schedules                                                                              |  |      | 40 | 

1



---

TABLE OF CONTENTS



|                                                                                                                          |                                       |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------------------------------------------- | ------------------------------------- |  |  |  |  |  |  | 
|ARGO-TECH CORPORATION                                                                                                    
|PART I                                                                                                                   
|Item 1. Business.                                                                                                        
|Item 2. Properties.                                                                                                      
|Item 3. Legal Proceedings.                                                                                               
|Item 4. Submission of Matters to a Vote of Security Holders.                                                             
|PART II                                                                                                                  
|Item 5. Market for the Registrants Common Equity; Related Stockholder Matters and Issuer Purchases of Equity Securities.
|Item 6. Selected Financial Data.                                                                                         
|Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.                           
|Item 7A. Quantitative and Qualitative Disclosures About Market Risk.                                                     
|Item 8. Financial Statements and Supplementary Data.                                                                     
|Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.                            
|Item 9A. Controls and Procedures.                                                                                        
|PART III                                                                                                                 
|Item 10. Directors and Executive Officers of the Registrant.                                                             
|Item 11. Executive Compensation.                                                                                         
|Item 12. Security Ownership of Certain Beneficial Owners and Management.                                                 
|Item 13. Certain Relationships and Related Transactions.                                                                 
|PART IV                                                                                                                  
|Item 15. Exhibits; Financial Statements Schedules.                                                                       
|SIGNATURES                                                                                                               
|                                                                                                                          | CONSOLIDATED STATEMENTS OF CASH FLOWS
|EXHIBIT INDEX                                                                                                            
|Exhibit 12.1 Statement Re Computation of Ratios                                                                          
|Exhibit 31.1 302 Certification                                                                                           
|Exhibit 31.2 302 Certification                                                                                           
|Exhibit 32 906 Certification                                                                                             



---



##### Table of Contents






ARGO-TECH CORPORATION






PART I








|        |          
|------- | ---------
|Item 1. | Business.

Argo-Tech Corporation, a Delaware corporation
(we, us or Argo-Tech), was
formed in 1986 to acquire the Power Accessories Division of TRW.
Today, we are a global designer, manufacturer and servicer of
high performance fuel flow devices and systems. We operate in
two business segments, Aerospace and Industrial. The Aerospace
segment consists of aircraft engine fuel pumps and other engine
products, commercial and military products and systems found on
a planes airframe, and aerial refueling pumps and related
equipment. The Industrial segment includes ground fueling
nozzles, hoses and other ground fueling components, an automated
fuel management system, cryogenic pumps and nozzles and the
operation of a business park in Cleveland, Ohio. Financial
information by business segment can be found in Note 13 to
the audited consolidated financial statements included elsewhere
in this report.

Our principal executive offices are located at
23555 Euclid Avenue, Cleveland, Ohio 44117, and our
telephone number is (216) 692-6000. We also maintain a
website at www.argo-tech.com. However, information on our
website is not a part of this report.

Aerospace segment

We are the worlds leading supplier of main
engine fuel pumps to the commercial aircraft industry and a
leading supplier of main engine fuel pumps to the military. We
are also a leading supplier of commercial and military airframe
products and systems, which are used to transfer fuel to an
engine and control fuel between tanks. In addition, we are a
leading global supplier of military aerial refueling pumps and
related equipment.

During the long life cycle of aircraft containing
our products, we earn significant aftermarket revenue from
repair and overhaul sales. On average, a commercial aircraft
will experience five to six main engine fuel pump overhauls over
its 30-year life span.

Industrial segment

We are the leading supplier of ground fueling
components and automated fuel management systems, which are used
at airports throughout the world. In addition, we design and
supply in-tank pumps and nozzles for liquid natural gas
(LNG), liquid propane gas and other cryogenic
fluids, as well as specialty military and industrial hose for
aerospace, chemical transfer and marine applications. We also
supply products to the industrial gas turbine industry.

We operate an aerospace certified materials
laboratory and a business park in Cleveland, Ohio, where we
maintain our headquarters and primary production facilities.

Products

Aerospace

Main engine fuel
pumps.Main engine fuel pumps are
precision mechanical pumps, mounted to the aircrafts
engines, that maintain the flow of fuel to the engine at a
precise rate and pressure. These pumps consist of an aluminum
body which is cast by certified subcontractors. We then machine
the casting, manufacture a variety of other components, assemble
the final product and perform rigorous testing at our Cleveland
facility.

Our main engine fuel pumps are used across the
full spectrum of commercial engine designs. We are the sole
source supplier of main engine fuel pumps for all CFM56 series
engines, the most popular series of large commercial aircraft
engines used today and for the Boeing 777 aircraft. Our
products also include large regional and business jet
applications, including the main engine fuel pumps used on all
regional jets manufactured by Bombardier and Embraer having
seating capacity for at least 70 passengers. These jets
include the high-end Bombardier Global Express, the Gulfstream
Aerospace Corp. V aircraft and the Boeing 717. We supply
main

2



---



##### Table of Contents



engine fuel pumps for the GE CF34-8 engine,
which is used on the Bombardier CRJ700 and CRJ900 regional and
business aircraft and the Embraer ERJ-170, a 70 passenger
regional jet. We also supply main engine fuel pumps for the GE
CF34-10 engine which is used on the Embraer ERJ-190 and the new
ARJ 21 regional jet to be manufactured by AVIC I
Commercial Aircraft Co. Ltd. in China.


Airframe products.Fuel pumps and other airframe fuel transfer control systems in
the airframe are necessary to transfer fuel to the engine
systems and to maintain aircraft balance by shifting fuel
between tanks. We design and manufacture complete fuel systems
and fuel subsystems such as refuel/ defuel, engine feed and fuel
level control. We also design and manufacture a wide variety of
fuel components consisting of boost and transfer fuel pumps,
fuel flow proportioners and airframe valves, adapters, nozzles
and caps. These systems and components are used for fueling,
storing, transferring and engine feed functions during ground
and flight operations. Argo-Tech is the fuel system supplier for
the Eclipse 500, a new generation of business jet manufactured
by Eclipse Aviation Corporation, as well as for the
Adam A700, the Javelin and the Northrop-Grumman X47 Joint
Unmanned Combat Aircraft System.

Aerial refueling
systems.Aerial refueling systems
permit military aerial tankers to refuel fighter, bomber and
other military aircraft while in flight. We are a major supplier
of components for aerial refueling systems, which are produced
only for military applications. Aerial refueling components we
manufacture, including pumps, hose and couplers, are installed
in the refueling systems of 100% of U.S. designed military
aircraft equipped with aerial refueling capability.

Aftermarket sales.Aftermarket sales comprise the largest component of our
aerospace business, and consist primarily of spare parts sales
and overhaul, retrofit, repair and technical support to
commercial and military customers worldwide.



| |           
| | ----------
| | Industrial

Ground fueling
products.Ground fueling systems are
used to transfer fuel from underground fuel tanks and ground
fueling trucks to the fuel receptacle of the aircraft. We
manufacture various ground fueling hydrants, couplers and
nozzles for commercial and military airports around the world,
as well as specialty industrial hose. We also manufacture
digital pressure control valves. These valves incorporate a
microprocessor to enhance fuel flow control and allow for
accurate measurement of pressure at the delivery receptacle
thereby optimizing the fuel flow and pressure.

We also sell fuel management systems, including
the Argo-Tech-developed AVR2000 Aviation Refueling Management
System, which is used at nearly 200 sites worldwide. It is the
leading hardware and software system for customized fuel
utilization management, data collection and billing in the
industry.

Cryogenic products.We design and supply high performance submerged motor pumps for
cryogenic gases and fluids. We have also introduced LNG nozzles
and receptacles for use on alternative fuel vehicles. We believe
these products position us favorably in this emerging market.

Industrial gas turbine
products.As a result of our
established record of performance with our Aerospace engine
products, we have gained entry into the Industrial &
Marine Gas Turbine, or IMGT, market. Our current
IMGT products include designed to specification lubrication and
scavenge pumps, liquid fuel delivery pumps and precision liquid
fuel flow dividers. We offer complete aftermarket support for
these products, including technical support, supply of spare
parts, product repair and overhaul and on-site service.

Customers



| |          
| | ---------
| | Aerospace

Original Equipment Manufacturer (referred to as
OEM in this report) customers for our aerospace
products include the worlds major aircraft engine
manufacturers: General Electric, Honeywell, Pratt &
Whitney (including Pratt & Whitney Canada), Rolls-Royce
(including Rolls-Royce Allison and Rolls-Royce Deutschland),
SNECMA and Williams International Corp. Customers for our
airframe pumps and valves include Airbus, Boeing, Cessna,
Gulfstream, Lockheed Martin, Northrop Grumman, Raytheon and
various U.S. government

3



---



##### Table of Contents



agencies. Orders for military components can be
directly received from government entities and through customers
such as Boeing, General Electric, Lockheed Martin and
Pratt & Whitney. Our aftermarket customers include all
major aircraft and engine repair facilities and all major
airlines. Currently, the total number of airline and third party
customers for our spare parts, overhaul and repair exceeds 200.
Upsilon International Corporation and two other related
entities, as distributors of certain of our products to foreign
customers, accounted for approximately 12% of our net revenues
for the fiscal year ended October 30, 2004. See
Item 13. Certain Relationships and Related
Transactions  Distribution agreements. No other
customer accounted for more than 10% of our net revenues during
this period.




| |           
| | ----------
| | Industrial

Most commercial ground fueling products are sold
to customers through independent distributors, while military
ground fueling products are usually sold directly to the
government. Customers in the domestic markets include a variety
of airlines, airports and various fixed base operators. In
international markets, our ground fueling products are purchased
by several oil companies, including ExxonMobil, Royal Dutch
Shell and several state-run oil companies and airport
authorities.

Our cryogenic pump customer base includes
shipping vessels operated by domestic and foreign carriers,
liquefied gas ship loading terminal owners, liquefied gas
receiving terminals, petrochemical plants, Samsung and other
large architectural and engineering companies worldwide,
electric power generation companies and alternate fuel vehicle
fleet operators.

Our industrial gas turbine products are utilized
in three market sectors: power generation, mechanical drive and
marine. Major customers for these products include Rolls Royce
Energy Systems, Rolls Royce Power Engineering, Siemens
Westinghouse and Statoil.

Sales and marketing

OEM customers in both the Aerospace and
Industrial segments select suppliers primarily on the basis of
custom design capabilities, product quality and performance,
prompt delivery, price and aftermarket support. We believe that
we meet these requirements in a timely, responsive manner which
has resulted in an extensive installed base of components and
substantial aftermarket revenues.

We market and sell our OEM and aftermarket
products through a combination of direct marketing, internal
sales personnel, independent manufacturing representatives and
U.S. and international distributors. We supply main engine fuel
pump spare parts directly to domestic airlines and third-party
overhaul shops, while foreign customers that purchase main
engine fuel pump products receive their spare parts through
Upsilon International Corporation, which operates a distribution
facility in Torrance, California.

For the fiscal years ended October 30, 2004,
October 25, 2003 and October 26, 2002, customer
revenues from the United States were $107.1 million,
$94.0 million and $86.7 million, respectively, and
foreign customer revenues were $80.2 million,
$66.7 million and $68.6 million, respectively.

Suppliers and raw materials

We use a certified supplier program that demands
a commitment to 100% quality and on-time deliveries. Supplier
performance is measured by our comprehensive supplier rating
system. Currently, our supplier base includes approximately
800 companies.

Our largest supplier expenditure relates to
outsourcing of component machining. We have derived significant
savings by taking advantage of advances in machining
technologies and by coordinating engineering with our suppliers.
Agreements are in place with our key long term suppliers that
provide most of the outside supplier component machining.

Aluminum castings used in the manufacture of main
engine fuel pumps are the highest volume raw material supplied
to us. Key long term certified suppliers provide the majority of
these castings. We also buy quantities of steel bar stock to
produce gears and shafts from multiple producers. However,
CPM-10V, a powdered metal

4



---



##### Table of Contents



essential for the manufacture of certain of our
main engine fuel pumps, is a proprietary product available only
from Crucible Specialty Metals. We do not have a contractual
arrangement with Crucible Specialty Metals; we purchase CPM-10V
pursuant to standard purchase orders. Another material has been
identified as an alternative to CPM-10V, but that material has
not yet been certified by our customers.


Manufacturing, repair and overhaul

Argo-Tech has a total of five manufacturing,
repair and overhaul facilities:



| |   |                                                               
| | - | --------------------------------------------------------------
| |  | a 150-acre business park in Cleveland, Ohio;                  
|
| |  | a 9.2-acre facility in Costa Mesa, California;                
|
| |  | an 85,000 square-foot facility in Tucson,
    Arizona;        
|
| |  | a 6,000 square-foot facility in Inglewood,
    California; and
|
| |  | a 3,500 square-foot facility in
    Henley-on-Thames, England.

In the Aerospace segment, main engine fuel pumps
and some models of our airframe fuel pumps are manufactured,
repaired and overhauled at our Cleveland facility. The remaining
Aerospace segment products are manufactured, repaired and
overhauled in our Costa Mesa facility. The Inglewood facility is
exclusively an overhaul and repair shop for our main engine fuel
pump products.

In the Industrial segment, all products are
manufactured in the Costa Mesa facility with three exceptions:
(i) industrial hose products which are manufactured in our
Tucson facility; (ii) the AVR 2000 airport fuel management
system, which is produced at our Henley-on-Thames facility; and
(iii) industrial and marine gas turbine products, which are
manufactured at our Cleveland facility. Repair and overhaul of
Industrial segment products is conducted in our Cleveland and
Costa Mesa facilities.

Most of the products at our Cleveland facility
are manufactured internally. This facility houses our senior
management and the majority of our Aerospace engineering and
design staff, sales team and production and main distribution
facilities. This facility is organized around manufacturing
cells that produce bearings, gears, housings and
shafts for assembly. By creating cells, the necessary people,
machinery, materials and methods are focused on distinct
products and processes. Each manufacturing cell includes members
from each of the Manufacturing, Quality, Production Control,
Statistical Process Control and Manufacturing Engineering
disciplines. Our design engineering staff is also organized into
cells which correspond to and complement the manufacturing
cells. The manufacturing and engineering cells work together to
achieve the timely design and production of our products.

In contrast to our substantial reliance on
internal manufacturing of products in our Cleveland facility, we
outsource most of the machining and pre-assembly production of
products in our Costa Mesa facility to external providers.
However, we do maintain internal equipment capacity at our Costa
Mesa facility, which enables us to produce small quantity, quick
turn components to reduce setup/breakdown times on smaller jobs
and for the manufacturing control of key parts. We have lowered
the cost of products manufactured in Costa Mesa by outsourcing
capital intensive tasks such as casting and machining, while
completing final assembly and testing on the premises.

All of the industrial hose products manufactured
at our Tucson facility are processed internally. The software
relating to the AVR 2000 airport fuel management system is
written internally at our Henley-on-Thames facility, while the
hardware relating to the system is sourced from two third
parties.

In addition to our manufacturing facilities, we
maintain sophisticated testing facilities at our Cleveland and
Costa Mesa locations. These testing facilities allow for
simulation of typical conditions and stresses that will be
experienced by our products during use. Our products are also
thoroughly tested for design compliance, performance and
durability. To facilitate quality control and product
development, we maintain a sophisticated chemistry and
metallurgy laboratory at our Cleveland facility.

5



---



##### Table of Contents



We have obtained and preserved our quality
management system certifications. ISO-9001:2000 and AS 9100
Revision A certifications are recognized by most of our
customers, as well as by the Federal Aviation Administration and
U.S. government supply organizations.

Intellectual property

We rely on intellectual property, including a
number of trade secrets, trademarks and patented and unpatented
technology, to operate our business. We will continue to
dedicate technical resources toward the further development of
proprietary products and processes to maintain our competitive
position in the markets we serve. Although we consider our
intellectual property rights to be valuable, we do not believe
that the loss of any such rights would have a material adverse
effect on us.

Government regulations

The commercial aerospace industry is highly
regulated by the Federal Aviation Administration in the United
States, the Joint Aviation Authorities in Europe and the Civil
Aviation Authority in England, while the military aerospace
industry is governed by military quality (MIL or ISO-9000)
specifications. We are required to be certified by one or more
of these entities and, in some cases, by individual OEMs, in
order to engineer and service parts and components used in
specific aircraft models. We must also satisfy the requirements
of our customers, including OEMs and airlines, that are subject
to Federal Aviation Administration regulations, and provide
these customers with products that comply with the government
regulations applicable to commercial flight operations. In
addition, the Federal Aviation Administration requires that
various maintenance routines be performed on aircraft
components. We currently satisfy or exceed these maintenance
standards in our repair and overhaul activities. We maintain
repair stations approved by the Federal Aviation Administration
at our Cleveland, Costa Mesa and Inglewood facilities.

Our aviation and metals operations are also
subject to a variety of worker and community safety laws. The
Occupational Safety and Health Act of 1970, known as
OSHA, mandates general requirements for safe
workplaces for all employees. In addition, OSHA provides special
procedures and measures for the handling of certain hazardous
and toxic substances. We believe that our operations are in
material compliance with OSHAs health and safety
requirements.

Competition

Competition among aerospace component
manufacturers is based on engineered solutions, product quality,
customer support, pricing and on-time delivery. Competitors in
the Aerospace segment are primarily divisions of large
corporations. Virtually all of Argo-Techs competitors have
significantly greater financial resources than does Argo-Tech.
Our primary competitors in the aerospace segment include Cobham,
Goodrich, Hamilton Sundstrand, Intertechnique and
Parker-Hannifin.

In the Industrial segment, competition varies by
product, but is typically based on engineered solutions, price,
product quality and on-time delivery. Our primary competitors in
the industrial segment include Ebara, Nikkiso and Meggitt.

Backlog

We believe that unfilled orders are not
necessarily an indicator of future shipment levels of our
products. As customers demand shorter lead times and flexibility
in delivery schedules, they have also revised their purchasing
practices. As a result, notification of firm orders may occur
only within 30 to 60 days of delivery. In addition, due to
the government funding process, backlog can vary on a
period-to-period basis depending on the stage of completion of
the contracts represented by such backlog. Therefore, we believe
that the backlog of unfilled orders at fiscal year end cannot be
relied upon as a valid indication of our sales or profitability
in a subsequent year.

6



---



##### Table of Contents



Development expense trends

In connection with new aerospace product
development programs, we incur significant research and
development expenditures to design, test and qualify main engine
fuel pumps and accessories for engine and airframe OEMs.
Research and development expenditures are expensed as incurred,
and such expenses are expected to continue at historical levels.
Research and development expenses were $11.9 million,
$9.5 million and $11.7 million for the fiscal years
ended October 30, 2004, October 25, 2003 and
October 26, 2002, respectively.

Employees

As of October 30, 2004, we had
690 full-time employees of which 409 are salaried and 281
are hourly. The 173 hourly employees located at our
Cleveland facility are represented by the UAW under a collective
bargaining agreement that will expire on March 31, 2008.

Environmental matters

Our operations are subject to a number of
national, state and local environmental laws in the United
States and other countries, and to regulation by government
agencies, including the U.S. Environmental Protection
Agency. Among other matters, these regulatory authorities impose
requirements that regulate the emission, discharge, generation,
management, transportation and disposal of pollutants and
hazardous substances. These authorities may require response
actions to hazardous substances which may be or have been
released to the environment, and require us to obtain and
maintain permits in connection with our operations. This
extensive regulatory framework imposes significant compliance
burdens and risks.

Although we seek to maintain our operations and
facilities in compliance with applicable environmental laws,
there can be no assurance that we have no violations, or that
changes in such laws, regulations or interpretations of such
laws or in the nature of our operations will not require us to
make significant additional expenditures to ensure compliance in
the future. We have not made or incurred in fiscal year 2004,
and do not believe that we will have to make or incur in fiscal
year 2005, material capital expenditures for our operations to
comply with environmental laws or regulations of which we are
aware or material costs for environmental remediation.

Our Cleveland facility is currently the subject
of environmental remediation activities. The cost of these
activities is the responsibility of TRW, now a subsidiary of
Northrop Grumman, under the terms of the purchase agreement by
which we acquired TRWs Power Accessories Division in 1986.
Remediation has been underway since 1989 and is expected to
continue for the foreseeable future. TRW has funded all
necessary remediation costs and we expect that TRW will continue
to do so in the future. We estimate that TRW has spent in excess
of $15 million for environmental remediation at our
Cleveland facility.

The 1986 TRW purchase agreement also requires
TRW, for a period of 20 years from the date of the
agreement, to indemnify us for:



| |   |                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | costs associated with third party environmental
    claims relating to environmental conditions arising from
    activities conducted by TRW during its operation of its Power
    Accessories Division that have not been conducted by us after
    our purchase of the assets of the division in 1986; and
|
| |  | a portion of the costs associated with third
    party environmental claims arising from activities conducted by
    TRW and us, the portion of the costs to be paid by each party
    being determined based on the length of time each party
    conducted the activity giving rise to the claim.         

We have received no third party environmental
claims relating to the Cleveland facility.

In March 1986, a two thousand gallon underground
storage tank was removed from our Costa Mesa facility. Petroleum
hydrocarbon soil contamination was discovered during the removal
of the tank, prompting the Orange County Health Care Agency to
require a site assessment. Subsequent site investigations
revealed that groundwater underlying the site is impacted by
trichloroethene and perchloroethylene. In 1990, the Regional
Water Quality Control Board issued a Cleanup and Abatement Order
to J.C. Carter Company, Inc., or Carter(which we

7



---



##### Table of Contents



acquired in 1997 and now operate as a
wholly-owned subsidiary named Argo-Tech Corporation Costa Mesa),
relating to the investigation and remediation of groundwater
contamination. To date, the full extent of the groundwater
contamination has not been ascertained. By virtue of our
acquisition of Carter, Carters responsibility for
satisfying the cleanup order could affect us. However, we have
obtained indemnification from Carters selling stockholders
for, among other things, all costs and expenses related to
satisfaction of the order. As a result, since our acquisition of
Carter, we have not paid any material portion of these costs and
expenses. This indemnification does not expire. However, there
can be no assurance that such indemnification obligations with
respect to the cleanup order will continue to be satisfied by
the selling stockholders. See Item 7.
Managements Discussion and Analysis of Financial Condition
and Results of Operations  Risk factors 
We have potential exposure resulting from environmental
matters.










|        |            
|------- | -----------
|Item 2. | Properties.

We own and operate a 150-acre business park in
Cleveland, Ohio, which includes 1.8 million square feet of
engineering, manufacturing and office space. We occupy
approximately 475,000 square feet for our main engine fuel
pump, airframe fuel pump and industrial gas turbine businesses
and lease almost one million square feet of the facility to
third parties. We believe that this facilitys machinery,
plants and offices are in satisfactory operating condition. We
also believe that it has sufficient capacity to meet our
foreseeable future needs without significant additional capital
expenditures. The Cleveland facility is utilized by both of our
segments, Aerospace and Industrial.

We also own a 9.2-acre facility in Costa Mesa,
California, which encompasses 165,000 covered square feet. We
manufacture certain of our Aerospace segments airframe and
aerial refueling products and accessories, as well as our
Industrial segments ground fueling and cryogenic products
equipment at this facility. We believe that our Costa Mesa
facility has sufficient capacity to permit further growth in
those product lines without significant additional capital
expenditures.

Our leased facility in Tucson, Arizona
encompasses 85,000 square feet and includes available space
for expansion. We manufacture specialty industrial hose for our
Aerospace and Industrial segments, including hoses for chemical
transfer, marine applications, ground fueling and aerial
refueling at this facility. We believe the Tucson facility has
sufficient capital and capacity to permit further growth in
those product lines without significant additional capital
expenditures.

Our Inglewood, California leased facility
occupies approximately 6,000 square feet. Its primary
purpose is to repair and overhaul main engine fuel pumps owned
by airline customers. Inglewoods assets include test
stands for testing fuel pumps after overhaul and a small machine
shop for simple rework of pump components. The Inglewood
facility is utilized by our Aerospace segment.

A leased facility at Henley-on-Thames, England
occupies approximately 3,500 square feet. Its primary
activities are the design, development and support of aviation
refueling management systems for our Industrial segment.









|        |                   
|------- | ------------------
|Item 3. | Legal Proceedings.

We are not presently involved in any material
legal proceedings. However, during the ordinary course of
business, we are, from time to time, threatened with, or may
become a party to, legal actions and other proceedings.









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

No matter was submitted to a vote of our sole
stockholder, AT Holdings Corporation, during the fourth quarter
of fiscal year 2004.

8



---



##### Table of Contents









PART II









|        |                                                                                                                          
|------- | -------------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for the Registrants Common
    Equity; Related Stockholder Matters and Issuer Purchases of
    Equity Securities.

We are a wholly owned subsidiary of AT Holdings
Corporation, which we refer to as AT Holdings.
Neither AT Holdings nor Argo-Tech have any equity securities
that trade in an established public trading market or otherwise.

We paid cash dividends totaling
$57.6 million to AT Holdings in fiscal year 2004. Our
ability to pay any dividends to AT Holdings in the future is
limited by the terms of the indenture pursuant to which our 9
1/4% Senior Notes due 2011 were issued and our existing credit
facility. The indenture and credit facility contain certain
optional and mandatory redemption features and other financial
covenants, including restrictions on our ability to incur
additional indebtedness, pay dividends or make other restricted
payments to AT Holdings. However, the indenture permits certain
payments to AT Holdings for, among other things, corporate
administrative expenses not to exceed $500,000 per fiscal
year and specified tax obligations.

We have no equity compensation plans under which
our securities are authorized for issuance.









|        |                         
|------- | ------------------------
|Item 6. | Selected Financial Data.

Selected Consolidated Financial Data

The following table sets forth Argo-Techs
selected historical consolidated financial data for the fiscal
years 2000 through 2004, which have been derived from
Argo-Techs audited consolidated financial statements for
those periods. Argo-Techs fiscal year ends on the last
Saturday in October and is identified according to the calendar
year in which it ends. For example, the fiscal year ended
October 30, 2004 is referred to as fiscal 2004.
The 2004 fiscal year consisted of a 53-week period. All of the
other fiscal years presented consisted of 52-week periods. The
information presented below should be read in conjunction with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and the consolidated
financial statements and notes thereto included elsewhere in
this report.

|                  |                                     |                        |   |         |             |  |   |             |   |  |             |         |   |             |   |         |   |  |   |         |  
|----------------- | ----------------------------------- | ---------------------- | - | ------- | ----------- |  | - | ----------- | - |  | ----------- | ------- | - | ----------- | - | ------- | - |  | - | ------- | -
|                  |                                     |                       
|                  |                                     | Fiscal Year Ended      |  
|                  |                                     |                        |  
|                  |                                     | October 30,            |   |         | October 25, |  |   | October 26, |   |  | October 27, |         |   | October 28, |  
|                  |                                     | 2004                   |   |         | 2003        |  |   | 2002        |   |  | 2001        |         |   | 2000        |  
|                  |                                     |                        |   |         |             |  |   |             |   |  |             |         |   |             |  
|                  |                                     |                       
|                  |                                     | (Dollars in thousands) |  
|Operating results |                                     |                        |   |         |             |  |   |             |   |  |             |         |   |             |   |         |   |  |   |        
|                  | Net revenues                        |                        | $ | 187,328 |             |  | $ | 160,726     |   |  | $           | 155,303 |   |             | $ | 173,208 |   |  | $ | 159,353 |  
|                  |                                     |                        |   |         |             |  |   |             |   |  |             |         |   |             |  
|                  | Gross profit                        |                        |   | 78,125  |             |  |   | 66,191      |   |  |             | 66,634  |   |             |   | 79,033  |   |  |   | 66,870  |  
|                  | Selling, general and administrative |                        |   | 31,166  |             |  |   | 26,417      |   |  |             | 23,359  |   |             |   | 23,094  |   |  |   | 24,404  |  
|                  | Research and development            |                        |   | 11,934  |             |  |   | 9,525       |   |  |             | 11,722  |   |             |   | 10,265  |   |  |   | 9,597   |  
|                  | Amortization of intangibles         |                        |   | 3,414   |             |  |   | 3,414       |   |  |             | 3,721   |   |             |   | 7,515   |   |  |   | 7,517   |  
|                  |                                     |                        |   |         |             |  |   |             |   |  |             |         |   |             |  
|                  | Income from operations              |                        |   | 31,611  |             |  |   | 26,835      |   |  |             | 27,832  |   |             |   | 38,159  |   |  |   | 25,352  |  
|                  | Interest expense                    |                        |   | 22,705  |             |  |   | 21,257      |   |  |             | 21,434  |   |             |   | 24,534  |   |  |   | 25,644  |  
|                  | Debt extinguishment expense         |                        |   | 12,961  |             |  |   |            |   |  |             |        |   |             |   |        |   |  |   |        |  
|                  | Other, net                          |                        |   | (95     | )           |  |   | (529        | ) |  |             | (97     | ) |             |   | (51     | ) |  |   | (402    | )
|                  | Income tax provision (benefit)      |                        |   | (3,499  | )           |  |   | 1,579       |   |  |             | 569     |   |             |   | 2,876   |   |  |   | (642    | )
|                  |                                     |                        |   |         |             |  |   |             |   |  |             |         |   |             |  
|                  | Net income (loss)                   |                        | $ | (461    | )           |  | $ | 4,528       |   |  | $           | 5,926   |   |             | $ | 10,800  |   |  | $ | 752     |  
|                  |                                     |                        |   |         |             |  |   |             |   |  |             |         |   |             |  

9



---



##### Table of Contents



|                                           |                                                                              |                        |   |          |             |  |   |             |   |  |             |         |   |             |   |         |   |  |   |         |  
|------------------------------------------ | ---------------------------------------------------------------------------- | ---------------------- | - | -------- | ----------- |  | - | ----------- | - |  | ----------- | ------- | - | ----------- | - | ------- | - |  | - | ------- | -
|                                           |                                                                              |                       
|                                           |                                                                              | Fiscal Year Ended      |  
|                                           |                                                                              |                        |  
|                                           |                                                                              | October 30,            |   |          | October 25, |  |   | October 26, |   |  | October 27, |         |   | October 28, |  
|                                           |                                                                              | 2004                   |   |          | 2003        |  |   | 2002        |   |  | 2001        |         |   | 2000        |  
|                                           |                                                                              |                        |   |          |             |  |   |             |   |  |             |         |   |             |  
|                                           |                                                                              |                       
|                                           |                                                                              | (Dollars in thousands) |  
|Balance sheet data
    (at end of period): |                                                                              |                        |   |          |             |  |   |             |   |  |             |         |   |             |   |         |   |  |   |        
|                                           | Cash and cash equivalents                                                    |                        | $ | 15,857   |             |  | $ | 14,057      |   |  | $           | 17,769  |   |             | $ | 8,057   |   |  | $ | 5,174   |  
|                                           | Total assets                                                                 |                        |   | 254,262  |             |  |   | 255,797     |   |  |             | 260,333 |   |             |   | 273,574 |   |  |   | 277,334 |  
|                                           | Working capital                                                              |                        |   | 41,963   |             |  |   | 34,934      |   |  |             | 33,352  |   |             |   | 35,904  |   |  |   | 33,277  |  
|                                           | Total debt                                                                   |                        |   | 264,813  |             |  |   | 219,349     |   |  |             | 235,045 |   |             |   | 253,380 |   |  |   | 264,762 |  
|                                           | Redeemable ESOP stock, net(1)                                                |                        |   | 40,957   |             |  |   | 14,612      |   |  |             | 8,835   |   |             |   | 13,994  |   |  |   | 20,983  |  
|                                           | Stockholders equity/ (deficiency)(2)                                        |                        |   | (110,976 | )           |  |   | (29,928     | ) |  |             | (31,633 | ) |             |   | (42,119 | ) |  |   | (58,842 | )
|Other data:                                |                                                                              |                        |   |          |             |  |   |             |   |  |             |         |   |             |   |         |   |  |   |        
|                                           | Adjusted EBITDA(3)                                                           |                        | $ | 44,893   |             |  | $ | 36,867      |   |  | $           | 38,447  |   |             | $ | 54,066  |   |  | $ | 42,671  |  
|                                           | Adjusted EBITDA margin(4)                                                    |                        |   | 24.0     | %           |  |   | 22.9        | % |  |             | 24.8    | % |             |   | 31.2    | % |  |   | 26.8    | %
|                                           | Net cash flows provided by operating activities                              |                        | $ | 33,230   |             |  | $ | 15,673      |   |  | $           | 30,724  |   |             | $ | 18,063  |   |  | $ | 22,427  |  
|                                           | Net cash flows used in investing activities                                  |                        |   | (3,056   | )           |  |   | (1,939      | ) |  |             | (1,785  | ) |             |   | (1,885  | ) |  |   | (3,025  | )
|                                           | Net cash flows used in financing activities                                  |                        |   | (28,374  | )           |  |   | (17,446     | ) |  |             | (19,227 | ) |             |   | (13,295 | ) |  |   | (18,101 | )
|                                           | Depreciation and amortization of intangibles and
    deferred financing fees |                        |   | 9,175    |             |  |   | 10,053      |   |  |             | 10,387  |   |             |   | 15,214  |   |  |   | 15,635  |  
|                                           | Capital expenditures                                                         |                        |   | 3,056    |             |  |   | 1,939       |   |  |             | 1,785   |   |             |   | 1,885   |   |  |   | 3,025   |  
|                                           | Ratio of earnings to fixed charges(5)                                        |                        |   |         |             |  |   | 1.3         | x |  |             | 1.3     | x |             |   | 1.6     | x |  |   | 1.0     | x



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Redeemable ESOP Stock has been excluded from
    stockholders equity/(deficiency) due to the ability of
    holders of the ESOP Stock to put, subject to certain
    restrictions, the shares of ESOP Stock to Argo-Tech at the most
    recent valuation of our independent consulting firm.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(2) | Includes a dividend of $57.6 million to AT
    Holdings made in the third quarter of fiscal 2004 from the
    proceeds of the $250.0 million of senior notes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(3) | EBITDA is net income plus interest,
    taxes, depreciation and amortization. Adjusted
    EBITDA is defined as EBITDA further adjusted to exclude
    ESOP compensation expense, amortization of purchase accounting,
    non-cash compensation costs, write-off of inventory acquisition
    step-up, debt extinguishment expenses and a fixed asset
    write-off. EBITDA and Adjusted EBITDA do not represent, and
    should not be considered as alternatives to, net income or cash
    flows provided by operating activities, as determined by
    Generally Accepted Accounting Principles (GAAP), and
    our calculations thereof may not be comparable to that reported
    by other companies. EBITDA and Adjusted EBITDA are included in
    this report because they are a basis upon which we assess our
    liquidity position and because certain covenants in our
    borrowing arrangements are tied to similar measures. We also
    believe that it is widely accepted that EBITDA and Adjusted
    EBITDA provide useful information regarding a companys
    ability to service and/or incur indebtedness. This belief is
    based on our negotiations with our lenders who have indicated
    that the amount of indebtedness we will be permitted to incur
    will be based, in part, on our EBITDA and our Adjusted EBITDA.
    EBITDA and Adjusted EBITDA do not take into account our working
    capital requirements, debt service requirements, tax payments,
    capital expenditures and other commitments and, accordingly, are
    not necessarily indicative of amounts that may be available for
    discretionary use. We believe that inclusion of supplementary
    adjustments to EBITDA applied in presenting Adjusted EBITDA are
    appropriate to provide additional information to investors.

10



---



##### Table of Contents



The following table reconciles Adjusted EBITDA to
EBITDA and net income:

|                      |                                            |                        |        |        |             |   |        |             |  |   |             |        |  |             |        |        |  |   |        |        |  
|--------------------- | ------------------------------------------ | ---------------------- | ------ | ------ | ----------- | - | ------ | ----------- |  | - | ----------- | ------ |  | ----------- | ------ | ------ |  | - | ------ | ------ | -
|                      |                                            |                       
|                      |                                            | Fiscal Year Ended      |       
|                      |                                            |                        |       
|                      |                                            | October 30,            |        |        | October 25, |   |        | October 26, |  |   | October 27, |        |  | October 28, |       
|                      |                                            | 2004                   |        |        | 2003        |   |        | 2002        |  |   | 2001        |        |  | 2000        |       
|                      |                                            |                        |        |        |             |   |        |             |  |   |             |        |  |             |       
|                      |                                            |                       
|                      |                                            | (Dollars in thousands) |       
|Net income (loss)     |                                            | $                      | (461   | )      |             | $ | 4,528  |             |  | $ | 5,926       |        |  | $           | 10,800 |        |  | $ | 752    |       
|Add:                  |                                            |                        |        |        |             |   |        |             |  |   |             |        |  |             |        |        |  |   |        |       
|                      | Depreciation and amortization              |                        |        | 7,213  |             |   |        | 7,601       |  |   |             | 8,329  |  |             |        | 13,074 |  |   |        | 13,494 |  
|                      | Interest expense(a)                        |                        |        | 22,705 |             |   |        | 21,257      |  |   |             | 21,434 |  |             |        | 24,534 |  |   |        | 25,644 |  
|                      | Income tax provision (benefit)             |                        |        | (3,499 | )           |   |        | 1,579       |  |   |             | 569    |  |             |        | 2,876  |  |   |        | (642   | )
|                      |                                            |                        |        |        |             |   |        |             |  |   |             |        |  |             |       
|EBITDA                |                                            | $                      | 25,958 |        |             | $ | 34,965 |             |  | $ | 36,258      |        |  | $           | 51,284 |        |  | $ | 39,248 |       
|Add:                  |                                            |                        |        |        |             |   |        |             |  |   |             |        |  |             |        |        |  |   |        |       
|                      | ESOP compensation expense(b)               |                        |        | 4,851  |             |   |        | 1,874       |  |   |             | 1,344  |  |             |        | 2,091  |  |   |        | 2,972  |  
|                      | Amortization of purchase accounting(c)     |                        |        |       |             |   |        | 28          |  |   |             | 259    |  |             |        | 4      |  |   |        | 296    |  
|                      | Non-cash compensation/benefit cost(d)      |                        |        | 1,123  |             |   |        |            |  |   |             | 586    |  |             |        | 526    |  |   |        |       |  
|                      | Debt extinguishment expense(e)             |                        |        | 12,961 |             |   |        |            |  |   |             |       |  |             |        |       |  |   |        |       |  
|                      | Write-off of inventory acquisition step-up |                        |        |       |             |   |        |            |  |   |             |       |  |             |        |       |  |   |        | 155    |  
|Fixed asset write-off |                                            |                        |       |        |             |   |       |             |  |   |            |        |  |             | 161    |        |  |   |       |       
|                      |                                            |                        |        |        |             |   |        |             |  |   |             |        |  |             |       
|Adjusted EBITDA       |                                            | $                      | 44,893 |        |             | $ | 36,867 |             |  | $ | 38,447      |        |  | $           | 54,066 |        |  | $ | 42,671 |       



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Interest expense includes the amortization of
    deferred financing fees.                                                                                                                                                                                                                                                                                                                                                                   
|   
|(b) |  | Represents the value of the shares committed to
    be released by the ESOP trustee under the ESOPs provisions
    for allocation to participants and recognized as a non-cash
    compensation expense.                                                                                                                                                                                                                                    
|   
|(c) |  | Represents the incremental depreciation relating
    to plant and equipment written up to its fair market value under
    purchase accounting applied to the acquisition of Argo-Tech
    Corporation Costa Mesa (formerly J.C. Carter Company,
    Inc.). Such amortization is included in cost of sales.                                                                                                                                   
|   
|(d) |  | In fiscal year 2001, this represents the non-cash
    expense related to the remeasurement of the stock option plans
    whose expiration date was extended. In fiscal year 2002, this
    represents the non-cash expense related to a salary early
    retirement program. In fiscal year 2004, this represents the
    non-cash compensation expense related to our ESOP Excess Benefit
    Plan.                                         
|   
|(e) |  | Represents the write-off of deferred financing
    fees associated with the refinancing of our 8 5/8% senior
    subordinated notes and the amendment and restatement of our
    credit agreement in June 2004, amounts paid for the tender,
    consent and redemption of our senior subordinated notes and the
    recognition of the remaining accretion on a portion of our
    senior subordinated notes that were issued at a discount.

The following table reconciles Adjusted EBITDA to
net cash flow from operating activities:

|                                           |  |                        |         |   |             |   |         |             |  |   |             |   |  |             |         |   |  |   |         |  
|------------------------------------------ |  | ---------------------- | ------- | - | ----------- | - | ------- | ----------- |  | - | ----------- | - |  | ----------- | ------- | - |  | - | ------- | -
|                                           |  | October 30,            |         |   | October 25, |   |         | October 26, |  |   | October 27, |   |  | October 28, |        
|                                           |  | 2004                   |         |   | 2003        |   |         | 2002        |  |   | 2001        |   |  | 2000        |        
|                                           |  |                        |         |   |             |   |         |             |  |   |             |   |  |             |        
|                                           |  |                       
|                                           |  | (Dollars in thousands) |        
|Adjusted EBITDA                            |  | $                      | 44,893  |   |             | $ | 36,867  |             |  | $ | 38,447      |   |  | $           | 54,066  |   |  | $ | 42,671  |  
|Change in operating assets and liabilities |  |                        | 8,424   |   |             |   | (590    | )           |  |   | 14,973      |   |  |             | (6,559  | ) |  |   | 5,342   |  
|Interest expense                           |  |                        | (22,705 | ) |             |   | (21,257 | )           |  |   | (21,434     | ) |  |             | (24,534 | ) |  |   | (25,644 | )
|Income tax benefit (provision)             |  |                        | 3,499   |   |             |   | (1,579  | )           |  |   | (569        | ) |  |             | (2,876  | ) |  |   | 642     |  
|All other adjustments                      |  |                        | (881    | ) |             |   | 2,232   |             |  |   | (693        | ) |  |             | (2,034  | ) |  |   | (584    | )
|                                           |  |                        |         |   |             |   |         |             |  |   |             |   |  |             |        
|Net cash provided by operating activities  |  | $                      | 33,230  |   |             | $ | 15,673  |             |  | $ | 30,724      |   |  | $           | 18,063  |   |  | $ | 22,427  |  
|                                           |  |                        |         |   |             |   |         |             |  |   |             |   |  |             |        



---



|    |                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | Adjusted EBITDA margin is computed as Adjusted
    EBITDA as a percentage of net revenues.                                                                                                                                             
|   
|(5) | For purposes of determining the ratio of earnings
    available to cover fixed charges, earnings consist of income
    before taxes plus fixed charges. Fixed charges consist of
    interest on indebtedness including amortization of

11



---



##### Table of Contents



| |                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | deferred financing fees and fixed loan guarantee
    fees. No ratio is presented for the fiscal year ended
    October 30, 2004 as the earnings for that period were
    $3,960,000 less than the fixed charges.









|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of
    Financial Condition and Results of Operations.

The following discussion should be read in
conjunction with our financial statements and the notes to those
statements and other financial information included elsewhere in
this report. This report contains forward-looking statements
that involve risks and uncertainties. Our actual results may
differ materially from those indicated in the forward-looking
statements. See  Risk factors below for
more information regarding forward-looking statements.

Overview

We are a global designer, manufacturer and
servicer of high performance fuel flow devices and systems. We
operate in two business segments, Aerospace and Industrial. The
Aerospace segment consists of aircraft engine fuel pumps and
other engine products, commercial and military products and
systems found on a planes airframe, and aerial refueling
pumps and related equipment. The Industrial segment includes
ground fueling nozzles, hoses and other ground fueling
components, an automated fuel management system, cryogenic pumps
and nozzles and the operation of a business park in Cleveland,
Ohio. Financial information by business segment can be found in
Note 13 to the audited consolidated financial statements
included elsewhere in this report.

In fiscal 2004, the Aerospace segment generated
approximately 74% of our net revenues and the Industrial segment
generated approximately 26% of our net revenues. Approximately
63% of the aerospace revenues were derived from sales to
commercial OEMs and commercial aftermarket customers, while
military revenues represented approximately 37% of our aerospace
revenues. Approximately 58% of the industrial revenues were
derived from sales to commercial customers, while military
customers represented approximately 42% of our industrial
revenues.

In fiscal 2004, sales to commercial OEMs
represented approximately 26% of our commercial aerospace
revenues. As is customary in the commercial aerospace industry,
we incur substantial costs, for which we are generally not
reimbursed, to design, test and qualify original equipment for
OEMs. Once qualified, OEM products generally are sold at or
below cost of production in anticipation of receiving orders for
commercial spare parts and overhaul activities at significantly
higher margins. Most of our OEM sales are on a sole source
basis; therefore, in most cases, we are the only OEM certified
provider of these parts in the aftermarket. Over the
approximately 30 year life cycle of an aircraft program,
commercial spare parts and overhaul activities for products we
manufacture often generate six or more times the aggregate net
revenues of the OEM program. We have over 50 years of
experience in most of our product lines which allows us to
benefit from a large and growing installed base.

In contrast to the practice in the commercial
aerospace industry, we are generally reimbursed for the design,
test and qualification costs of equipment used on military
aircraft. Military original equipment shipments generally are
sold at cost plus a reasonable profit. Due to lower aircraft
utilization, military aftermarket sales are less significant
than commercial aftermarket sales. Aftermarket margins for
military products are at a level higher than original equipment
shipments.

The following is managements discussion and
analysis of certain significant factors which have affected
Argo-Techs financial position and operating results during
the periods presented in the accompanying audited consolidated
financial statements. Argo-Techs fiscal year ends on the
last Saturday of October and is identified according to the
calendar year in which it ends.

ESOP

We established our Employee Stock Ownership Plan
(ESOP) in 1994 by purchasing 420,000 shares of common
stock of our parent company, AT Holdings, with the proceeds of a
$16.8 million ten-year loan funded through a credit
facility that was refinanced on July 18, 1997. The term of
the loan ended on April 28, 2004, at which time the
remaining amount of the loan was repaid in full, releasing the
final 21,000 shares of stock which

12



---



##### Table of Contents



represented a half-year allocation from the
suspense account. We decided to continue this employee benefit
by contributing 21,000 shares of AT Holdings common stock
to the plan in October 2004. We plan to contribute
42,000 shares in October 2005. All of these
63,000 shares have been repurchased by Argo-Tech from plan
participants who exercised their put option rights under the
plan. The ESOP, which includes approximately 225 of our salaried
employees, represents an ownership interest in AT Holdings of
approximately 54%. GAAP requires that non-cash ESOP compensation
expense and a corresponding increase in stockholders
equity be recorded annually as shares held by the ESOP are
allocated to participants and the loan made to the ESOP is
repaid. GAAP also requires that this non-cash ESOP compensation
expense be added back to net income in the determination of cash
flow from operations. The aggregate amount of such non-cash ESOP
compensation expense was $4.9 million, $1.9 million
and $1.3 million for the fiscal years ended
October 30, 2004, October 25, 2003 and
October 26, 2002, respectively. In addition, participants
may require us, in certain circumstances, to repurchase shares
of AT Holdings common stock that they receive from the ESOP at
the most recent valuation of our independent consulting firm. In
fiscal 2002, 2003 and 2004, we were required to repurchase an
aggregate of approximately $0.5 million, $0.3 million
and $0.6 million, respectively, of redeemable ESOP stock,
which we purchased using available cash. In fiscal 2005, we
estimate our repurchase obligations could be between
$3.5 million and $4.5 million. See Risk
factors  Risks associated with our business and
operations  Our cash flows and capital resources may
be adversely affected by exercises of rights to require us to
repurchase or redeem securities of AT Holdings.


Refinancing

On June 23, 2004, we completed a refinancing
of substantially all of our outstanding indebtedness, including
the capital structure of our parent, AT Holdings, by:



| |   |                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | purchasing through a tender offer our outstanding
    $195.0 million aggregate principal amount of senior
    subordinated notes due 2007, together with a premium of
    approximately $5.5 million and accrued and unpaid interest
    of approximately $4.0 million, and redeeming any of these
    notes that were not tendered;
|
| |  | redeeming all of AT Holdings outstanding
    Series A Cumulative Exchangeable Redeemable Preferred Stock
    (referred to in this report as the Holdings Preferred
    Stock) at 100% of the $30.0 million liquidation
    preference, together with accrued and unpaid dividends of
    $27.6 million; and                      
|
| |  | restating $19.8 million of term loans
    outstanding under our then-existing senior credit facility,
    together with accrued and unpaid interest of $0.1 million.                                                                                                                                                                

The above transactions and the payment of
associated fees and expenses are collectively referred to in
this report as the Refinancing.

Recent developments

Following the September 11, 2001 terrorist
attacks, the commercial aerospace industry experienced a
significant downturn in both the OEM and aftermarket sectors.
The major commercial airlines reduced their flying capacity by
retiring older aircraft, parking underutilized aircraft and
canceling or delaying the delivery of new aircraft.
Additionally, many airlines deferred maintenance which reduced
the need for aftermarket services. During 2004, commercial OEM
and aftermarket revenues increased 11.4% and 15.3%,
respectively. It is anticipated that commercial OEM and
aftermarket revenues will increase modestly in 2005. Military
revenues increased 13.4% in 2004 due to demand for aftermarket
products and services as a result of military activity in the
Middle East and due to increased production on several OEM
programs. We anticipate military revenues will remain steady in
2005. We anticipate increased Industrial revenues in 2005
primarily due to increased demand for our ground fueling and
cryogenic products.

Our fiscal year 2005 revenues and cash flows are
forecasted to be higher than fiscal year 2004 due to continued
improvement in the commercial aerospace industry and improved
performance in our cryogenic products business, partially offset
by increased development expenses related to new programs.
Management believes that we will be able to maintain our
liquidity and remain in compliance with our debt covenants.

13



---



##### Table of Contents



Our parent, AT Holdings, owns an asset tracking
technology that is currently in development. Argo-Tech provides
the funding for the development of this technology through
dividends to AT Holdings. During fiscal year 2004, we dividended
$0.9 million to AT Holdings for development expenses. We
estimate that the dividend to fund this technology in fiscal
year 2005 will be approximately $3.0 million. This dividend
is within the restrictions contained in both our indenture and
credit facility governing our ability to pay dividends or make
other restricted payments to our parent.

This section includes forward-looking statements
within the meaning of Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act of 1934, as
amended. There can be no assurances that our current outlook
will prove to be correct.

Critical accounting policies

Our consolidated financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of
these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets,
liabilities, revenue and expenses, and related disclosure of
contingent assets and liabilities. Management bases its
estimates on historical experience and on various other
assumptions that are believed to be reasonable under the
circumstances, the results of which enable the fair presentation
of our financial position and results of operations. Actual
results may differ from these estimates under different
assumptions or conditions. Management believes the following
critical accounting policies reflect its more significant
estimates and assumptions used in the preparation of its
consolidated financial statements.

Revenue Recognition.Revenues are generally recognized when goods are shipped or
services provided, at which time title and risk of loss passes
to the customer. Substantially all sales are made pursuant to
firm, fixed-price purchase orders received from customers. We
have executed long-term supply agreements with certain of our
OEM customers. These agreements require Argo-Tech to supply all
the amounts ordered by the customers during the term of the
agreements (generally three to five years) at specified prices.
Under certain of these agreements, we expect to incur losses.
Provisions for estimating losses on these contracts are made in
the period in which such losses are identified based on cost and
pricing information and estimated future shipment quantities
provided by the customer. The cumulative effect of revisions to
estimated losses on contracts is recorded in the accounting
period in which the amounts become known and can be reasonably
estimated. Such revisions could occur at any time there are
changes to estimated future revenues or costs. Revenue from
certain fixed price engineering contracts for which costs can be
reliably estimated are recognized based on milestone billings.
Variations in actual labor performance, changes to estimated
profitability and final contract settlements may result in
revisions to the cost estimates. Revisions in cost estimates as
contracts progress have the effect of increasing or decreasing
profits in the period of revision. We record estimated
reductions to revenue for volume-based incentives based on
expected customer activity for the applicable period. Revisions
for volume-based incentives are recorded in the accounting
period in which such estimates can be reasonably determined.

Valuation of Accounts Receivable and Allowance
for Doubtful Accounts.We evaluate the
collectibility of our trade receivables based on a combination
of factors. We regularly analyze our customer accounts, and when
we become aware of a specific customers inability to meet
its financial obligation to us, such as in the case of
bankruptcy filings, we immediately record a bad debt expense and
reduce the related receivable to the amount we reasonably
believe is collectible. We estimate the allowance for doubtful
accounts based on the aging of the accounts receivable, customer
creditworthiness and historical experience. Our estimate of the
allowance amounts includes amounts for specifically identified
losses and a general amount for estimated losses. If
circumstances change or economic conditions deteriorate, our
estimates of the recoverability of receivables could be further
adjusted.

Valuation of
Inventories.Our inventory purchases
and commitments are made in order to build inventory to meet
future shipment schedules based on forecasted demand for our
products. Inventories are stated at the lower of cost or market,
with cost being determined on the first-in, first-out, or FIFO,
method. Periodically, we perform a detailed assessment of
inventory, which includes a review of, among other factors,
historical sales activity, future demand requirements, product
life cycle and development plans and quality issues. Based on
this

14



---



##### Table of Contents



analysis, we record provisions for potentially
obsolete or slow-moving inventory to reflect inventory at net
realizable value. These provisions could vary significantly,
either favorably or unfavorably, from actual requirements based
upon future economic conditions, customer inventory levels or
competitive factors that were not foreseen, or did not exist,
when the valuation allowances were established.


Valuation of Goodwill and Intangible
Assets.Goodwill and identified
intangible assets are recorded at fair value on the date of
acquisition. Intangible assets other than goodwill are
recognized if the benefit of the intangible asset is obtained
through contractual or other legal rights, or if the intangible
asset can be sold, transferred, licensed or exchanged,
regardless of our intent to do so. Intangible assets, such as
goodwill, that have an indefinite useful life are not amortized.
All other intangible assets are amortized over their estimated
useful lives. We review goodwill and purchased intangible assets
for impairment annually, or whenever events or changes in
circumstances indicate the carrying value of an asset may not be
recoverable. Our asset impairment review assesses the fair value
of the assets based on the future cash flows the assets are
expected to generate. This approach uses our estimates of future
market growth, forecasted revenue and costs and appropriate
discount rates. When impairment is identified, the carrying
amount of the asset is reduced to its estimated fair value.

Pensions and post-retirement plan
assumptions.We have two
noncontributory defined benefit pension plans for qualifying
hourly and salary employees and a postretirement health care
benefit plan for qualifying hourly retirees and their
dependents. We account for our defined benefit plans in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 87, No. 106 and No. 132,
which requires amounts recognized in the financial statements to
be determined on an actuarial basis. We are required to make
assumptions regarding such variables as the expected long-term
rate of return on assets and the discount rate, which are used
to determine service cost and interest cost to arrive at pension
income or expense for the year. We are also required to make
assumptions for the long-term health care cost trend rates for
our post-retirement benefit plan. The estimated cost and
benefits of the noncontributory defined benefit pension plans
and the postretirement health care plan are determined by an
independent actuary using various actuarial assumptions,
including, but not limited to, assumptions on demographic
factors such as retirement, mortality and turnover. We have
analyzed the rate of return on assets used and determined that
this rate is reasonable based on the plans historical
performance relative to the overall markets. The discount rate
assumption is consistent with prior years and is based on
changes in the prevailing market long-term interest rates at the
measurement date. If any of our assumptions were to change, our
benefit plan expenses would also change. An increase/decrease in
the discount rate, assuming no other changes in the estimates,
reduces/increases the amount of the accumulated benefit
obligation and the related required expense. A detailed
discussion of Argo-Techs pensions and post-retirement
plans can be found in Note 10 to the audited consolidated
financial statements included elsewhere in this report.

Results of operations

The following table presents, for the periods
indicated, selected items in our consolidated statements of
income as a percentage of net revenues.

|                                  |  |                   |       |    |                  |  |       |                  |  |  |       |  
|--------------------------------- |  | ----------------- | ----- | -- | ---------------- |  | ----- | ---------------- |  |  | ----- | -
|                                  |  |                  
|                                  |  | Fiscal Year Ended |      
|                                  |  |                   |      
|                                  |  | October 30, 2004  |       |    | October 25, 2003 |  |       | October 26, 2002 | 
|                                  |  |                   |       |    |                  |  |       |                  | 
|Net revenues                      |  |                   | 100.0 | %  |                  |  | 100.0 | %                |  |  | 100.0 | %
|Gross profit                      |  |                   | 41.7  | %  |                  |  | 41.2  | %                |  |  | 42.9  | %
|Operating expenses                |  |                   | 24.8  | %  |                  |  | 24.5  | %                |  |  | 25.0  | %
|Income from operations            |  |                   | 16.9  | %  |                  |  | 16.7  | %                |  |  | 17.9  | %
|Interest expense                  |  |                   | 12.1  | %  |                  |  | 13.2  | %                |  |  | 13.7  | %
|Debt extinguishment expense       |  |                   | 6.9   | %  |                  |  |      |                  |  |  |      |  
|Other, net                        |  |                   |      |    |                  |  | (0.3  | )%               |  |  |      |  
|Income (loss) before income taxes |  |                   | (2.1  | )% |                  |  | 3.8   | %                |  |  | 4.2   | %
|Income tax provision (benefit)    |  |                   | (1.9  | )% |                  |  | 1.0   | %                |  |  | 0.4   | %
|Net income (loss)                 |  |                   | (0.2  | )% |                  |  | 2.8   | %                |  |  | 3.8   | %

15



---



##### Table of Contents



Export sales

Substantially all of our export sales are
denominated in U.S. dollars. Export sales for fiscal years
2004, 2003, and 2002 were $80.2 million, $66.7 million
and $68.6 million, respectively. Sales to Europe for fiscal
years 2004, 2003 and 2002 were $32.8 million,
$30.4 million and $28.0 million, respectively. Export
sales to all other regions, individually less than 10%, were
$47.4 million, $36.3 million and $40.6 million
for fiscal years 2004, 2003 and 2002, respectively.

Fiscal 2004 compared with fiscal
2003

Net revenues for fiscal 2004 increased
$26.6 million, or 16.6%, to $187.3 million from
$160.7 million for fiscal 2003. This change was due to an
increase in aerospace revenues of $16.9 million and a
$9.7 million increase in industrial revenues. The increase
in aerospace revenues was attributable to an increase of
$10.9 million in commercial revenues and an increase of
$6.0 million in military revenues. Commercial OEM revenues
increased $2.3 million, or 11.4% to $22.5 million and
commercial aftermarket revenues increased $8.6 million, or
15.3% to $64.9 million. Commercial OEM revenues increased
primarily as a result of an increase in pump requirements from
our customers. Commercial aftermarket revenues increased
primarily due to increases in repair and overhaul services and
demand for spare parts. Military revenues increased primarily
due to revenue related to increased sales on a variety of OEM
and aftermarket main engine fuel pumps and components as well as
an increase in revenues related to airframe components on
various OEM and OEM development programs, partially offset by a
decrease in aftermarket revenues related to airframe components.
Industrial revenues increased $9.7 million, primarily
attributable to an increase of $8.0 million in ground
fueling revenues, of which $6.2 million was attributable to
military sales, and $1.9 million in cryogenic pump
revenues, offset by a slight decrease in business park revenues.
Approximately 42.8% of fiscal 2004 net revenues were
attributable to export sales to foreign customers compared to
41.5% in fiscal 2003. Substantially all such sales were
denominated in U.S. dollars.

Aerospace gross profit for fiscal 2004 increased
$9.8 million, or 18.3%, to $63.3 million from
$53.5 million for fiscal 2003. Gross margin increased to
45.8% for fiscal 2004 from 44.2% for fiscal 2003. The increase
in gross profit and gross margin is primarily attributable to an
increase in higher margin commercial aerospace aftermarket
revenues, an increase in military revenues and an increase in
operating efficiencies at both our Cleveland and Costa Mesa
facilities, partially offset by an increase in non-cash costs
associated with ESOP compensation. Industrial gross profit for
fiscal 2004 increased $2.2 million or 16.9% to
$15.2 million from $13.0 million in fiscal 2003. The
increase in gross profit was attributable to an increase in
ground fueling revenues partially offset by a decrease in
cryogenic gross profit, attributable to an increase in
manufacturing costs. Gross margin decreased to 30.9% in fiscal
2004 from 33.0% in fiscal 2003 primarily attributable to an
increase in manufacturing costs for our cryogenic pump products
partially offset by a favorable sales mix of ground fueling
products.

Operating expenses for fiscal 2004 increased
$7.1 million, or 18.0%, to $46.5 million from
$39.4 million in fiscal 2003. The increase is primarily due
to an increase in selling, general and administrative expenses
of $4.7 million and research and development expenses of
$2.4 million. The increase in selling, general and
administrative expenses of $4.7 million was related to
increased non-cash costs associated with ESOP compensation,
increased incentive compensation and increased marketing costs,
including commissions and royalties. The increase in research
and development expenses is primarily due to a decrease in
customer paid development expenses. Operating expenses as a
percentage of revenues increased to 24.8% for fiscal 2004 from
24.5% in fiscal 2003.

Income from operations for fiscal 2004 increased
$4.8 million, or 17.9%, to $31.6 million from
$26.8 million in fiscal 2003. As a percent of revenues,
income from operations for fiscal 2004 increased to 16.9% from
16.7% in fiscal 2003. These increases were primarily due to
increased sales of higher margin commercial aerospace
aftermarket revenues, an increase in military revenues and an
increase in ground fueling revenues, partially offset by an
increase in cryogenic pump manufacturing costs and higher
operating expenses.

16



---



##### Table of Contents



Interest expense for fiscal 2004 increased
$1.5 million, or 7.1%, to $22.7 million from
$21.2 million in fiscal 2003 due to a higher outstanding
borrowing and interest rate on our $250.0 million 9
1/4% senior notes issued in June 2004 which was partially
offset by lower outstanding borrowing and interest rates on our
credit facility.

Debt extinguishment expense of $12.9 million
was incurred in fiscal 2004. The expense is for the write-off of
$6.1 million of deferred financing fees associated with the
refinancing of our 8 5/8% senior subordinated notes and the
amendment and restatement of our credit agreement,
$5.5 million for the tender, consent and redemption fees
associated with the refinancing of the 8 5/8% senior
subordinated notes and recognition of the remaining accretion of
$1.3 million on a portion of the 8 5/8% senior
subordinated notes that were issued at a discount.

The income tax benefit was $3.5 million for
fiscal 2004 as compared to a provision of $1.6 million in
fiscal 2003. This decrease in income tax is primarily due to a
decrease in pre-tax income and a lower estimated effective tax
rate in the current year due to the debt extinguishment
expenses. A reconciliation of the income tax provision can be
found in Note 11 to the audited consolidated financial
statements included elsewhere in this report.

Net income for fiscal 2004 decreased
$5.0 million to a loss of $0.5 million from income of
$4.5 million in fiscal 2003, primarily due to the revenue
and expense factors discussed above.

Fiscal 2003 compared with fiscal
2002

Net revenues for fiscal 2003 increased
$5.4 million, or 3.5%, to $160.7 million from
$155.3 million for fiscal 2002. This change was due to an
increase in aerospace revenues of $0.3 million and a
$5.1 million increase in industrial revenues. The increase
in aerospace revenues was attributable to an increase of
$9.8 million in military revenues offset by a decrease of
$9.5 million in commercial revenues. Commercial OEM
revenues decreased $0.6 million, or 2.9%, to
$20.2 million and commercial aftermarket revenues decreased
$8.9 million, or 13.7%, to $56.3 million. Commercial
OEM revenues declined as a result of lower overall engine
requirements from our customers in response to decreasing
aircraft build rates. Commercial aftermarket revenues were lower
primarily due to a decrease in the demand for spare part sales
and repair and overhaul activities. The lower demand for
aftermarket sales and activities is a result of the reduced
flying by commercial airlines, the availability of spare parts
taken from parked aircraft and deferral of maintenance. Military
revenues increased primarily due to revenue related to increased
sales on a variety of OEM and aftermarket aerial refueling
components, main engine fuel pump and airframe components, as
well as an increase in revenues related to airframe components
on various OEM development programs. Industrial revenues
increased $5.1 million, primarily due to an increase in
ground fueling and cryogenic pump revenues offset by a decrease
in industrial gas turbine revenues. Approximately 41.5% of
fiscal 2003 net revenues were attributable to export sales
to foreign customers compared to 44.2% in fiscal 2002.
Substantially all such sales were denominated in
U.S. dollars.

Aerospace gross profit for fiscal 2003 decreased
$1.4 million, or 2.6%, to $53.5 million from
$54.9 million for fiscal 2002. Gross margin decreased to
44.2% for fiscal 2003 from 45.4% for fiscal 2002. The decrease
in gross profit and gross margin is primarily attributable to a
decrease in higher margin commercial aerospace aftermarket
revenues and an increase in non-cash ESOP compensation expense
partially offset by an increase in military revenues and a
change in classification and allocation of $2.1 million of
certain costs to selling, general and administrative expenses.
Industrial gross profit for fiscal 2003 increased
$0.6 million, or 4.8%, to $13.0 million from
$12.4 million in fiscal 2002. The increase in gross profit
was attributable to an increase in ground fueling revenues
partially offset by an increase in utility costs associated with
the operation of our business park and a decrease in industrial
gas turbine revenues. Gross margin, which decreased to 33.0% in
fiscal 2003 from 36.1% in fiscal 2002, was lower primarily due
to the increase in utility costs, an unfavorable sales mix of
ground fueling products and an increase in cryogenic pump
manufacturing costs.

Operating expenses for fiscal 2003 increased
$0.6 million, or 1.5%, to $39.4 million from
$38.8 million in fiscal 2002. Selling, general and
administrative expenses increased $3.0 million due to a
$2.1 million change in classification and allocation of
certain costs from cost of sales, an increase in marketing
costs, bid and proposal costs, legal costs, severance costs
associated with a reduction in the salaried workforce and an
increase in non-cash ESOP compensation expense offset by the
non-recurrence of a non-cash expense of $0.6 million
related to a salaried employee early retirement program in
fiscal 2002. Research and development expenses decreased
$2.2 million due to an increase in customer paid
development expenses, which are included in cost of revenues,

17



---



##### Table of Contents



and a decrease in spending related to programs
nearing completion. Operating expenses as a percent of revenues
decreased to 24.5% for fiscal 2003 from 25.0% in fiscal 2002.


Income from operations for fiscal 2003 decreased
$1.0 million, or 3.6%, to $26.8 million from
$27.8 million in fiscal 2002. As a percent of revenues,
income from operations for fiscal 2003 decreased to 16.7% from
17.9% in fiscal 2002. These decreases were primarily due to the
decrease in higher margin commercial aerospace aftermarket
revenues partially offset by an increase in military and
industrial revenues, an increase in utility costs associated
with the operation of our business park and an increase in
selling, general and administrative expenses offset by a
decrease in research and development expenses discussed above.

Interest expense for fiscal 2003 decreased
$0.2 million, or 0.9%, to $21.2 million from
$21.4 million for fiscal 2002 due to lower outstanding
borrowings which were partially offset by an increase in
interest rates on the term loans under our credit facility and
increased amortization of deferred financing fees resulting from
the amendment of that credit facility in January 2003.

The income tax provision for fiscal 2003
increased $1.0 million to $1.6 million from
$0.6 million in fiscal 2002. A reconciliation of the income
tax provision can be found in Note 11 to the audited
consolidated financial statements included elsewhere in this
report.

Net income for fiscal 2003 decreased
$1.4 million to $4.5 million from $5.9 million
for fiscal 2002 primarily due to the revenue and expense factors
discussed above.

Liquidity and capital resources

We are a holding company that receives all of our
operating income from our subsidiaries. As a result, our primary
source of liquidity for conducting business activities and
servicing our indebtedness has been cash flows from our
subsidiaries operating activities.

Argo-Tech has a $15.0 million five-year Term
Loan Facility and has available a five-year
$30.0 million Revolving Credit Facility. The unused balance
of the Revolving Credit Facility ($24.2 million at
October 30, 2004 after reduction of $5.8 million for
letters of credit) is subject to a .50% commitment fee. The
Credit Facility and Term Loan mature on June 23, 2009. The
Credit Facility is collateralized by substantially all of the
tangible assets of Argo-Tech (including the capital stock of AT
Holdings). The Credit Facility contains a number of covenants
that, among other things, limit Argo-Techs ability to
incur additional indebtedness, pay dividends, prepay
subordinated indebtedness, dispose of certain assets, create
liens, make capital expenditures, make certain investments or
acquisitions and otherwise restrict corporate activities. The
Credit Facility contains no restrictions on the ability of
Argo-Techs subsidiaries to make distributions to
Argo-Tech. The Credit Facility also requires Argo-Tech to comply
with certain financial ratios and tests, under which Argo-Tech
is required to achieve certain financial and operating results.
Argo-Tech was in compliance with the covenants at
October 30, 2004. Interest was calculated, at
Argo-Techs choice, using an alternate base rate
(ABR) or LIBOR, plus a supplemental percentage determined
by the ratio of debt to adjusted EBITDA. The interest rate for
fiscal year 2004 ranged from 1.00% to 2.50% plus ABR or 2.50% to
3.50% plus LIBOR.

At October 25, 2003, Argo-Tech had a
$115.0 million principal amount of Term Loans
($25.9 million remaining balance) and a seven-year
$20.0 million Revolving Credit Facility. The Credit
Facility and Term Loans were to mature on October 28, 2005.
On June 23, 2004, Argo-Tech amended and restated the Credit
Facility and Term Loans into a $15.0 million five-year Term
Loan Facility and a five-year $30.0 million Revolving
Credit Facility.

At October 30, 2004, Argo-Tech had
outstanding $250.0 million 9 1/4% Senior Notes due
2011. Interest on the Notes is payable semiannually on
June 1 and December 1 of each year. The Senior Notes
will mature on June 1, 2011. The Senior Notes are unsecured
and rank equally with all our existing and future senior debt
and rank senior to all our existing and future subordinated
debt. The Senior Notes will be effectively subordinated to all
our existing and future secured debt to the extent of the value
of the assets securing such debt. The Senior Notes are subject
to certain limitations and restrictions which Argo-Tech has not
exceeded at October 30, 2004.

18



---



##### Table of Contents



At October 25, 2003, Argo-Tech had
outstanding $195.0 million 8 5/8% Senior Subordinated
Notes due 2007 (the Notes). The accreted value of
the Notes was $193.5 million. Interest on the Notes is
payable semiannually on April 1 and October 1 of each
year. In June 2004, Argo-Tech purchased, through a tender offer
and redemption, its outstanding $195.0 million 8
5/8% Notes due 2007, together with a premium of
$5.5 million and accrued and unpaid interest of
$4.0 million.

As a result of the Refinancing, long-term debt at
October 30, 2004 consisted of $14.8 million principal
amount of term loans and $250.0 million principal amount of
senior notes. Scheduled payments of $6.2 million were made
on the term loans in fiscal 2004. At October 30, 2004,
there were no outstanding borrowings on the revolving credit
facility, and we had available, after $5.8 million in
letters of credit, $24.2 million under our revolving credit
facility. In January 2005, we amended our Credit Facility to
increase the available letters of credit from $7.5 million
to $12.0 million and to allow additional banks within the
lending group to issue letters of credit.

Cash and cash equivalents for fiscal year 2004
increased $1.8 million to $15.9 million. The increase
was primarily due to cash provided by operating activities,
partially offset by our issuance of $250.0 million of 9
1/4% senior notes due 2011, amendment and restatement of
our senior credit facility and related transactions and capital
expenditures. The proceeds from the offering of the senior
notes, together with cash on hand and borrowings of
$15.0 million under our amended and restated senior credit
facility, were used to: purchase, through a tender offer and a
redemption, all of our outstanding $195.0 million 8
5/8% senior subordinated notes due 2007; dividend to AT
Holdings $57.6 million for the redemption of all of AT
Holdings outstanding Series A Cumulative Exchangeable
Redeemable Preferred Stock at 100% of its $30.0 million
liquidation preference, together with accrued and unpaid
dividends of $27.6 million; repay $19.8 million of
term loans outstanding under our existing senior credit
facility; and pay transaction fees and expenses of approximately
$7.5 million. Prior to the amendment and restatement of our
senior credit facility, $6.0 million of scheduled payments
had been made.

Cash Flows from Operating
Activities.Cash provided by operating
activities for fiscal 2004 increased $17.5 million, to
$33.2 million, from $15.7 million in fiscal 2003
primarily as a result of an increase in income from operations
and a net favorable change in operating assets and liabilities.
Cash provided by operating activities for fiscal 2003 decreased
$15.0 million to $15.7 million primarily as a result
of an increase in receivables and inventory. Cash provided by
operating activities for fiscal 2002 increased
$12.6 million to $30.7 million primarily as a result
of a decrease in receivables and inventory.

Cash Used In Investing
Activities.Net cash used in investing
activities was $3.1 million, $1.9 million and
$1.8 million for fiscal years 2004, 2003 and 2002,
respectively, for expenditures for the purchase of property,
plant and equipment. These expenditures reflect a normal amount
of capital investments necessary to maintain our efficiency and
manufacturing capabilities.

Cash Flows from Financing
Activities.Cash used in financing
activities for fiscal 2004 was $28.4 million, primarily as
a result of the issuance of $250.0 million of senior notes,
offset by our Refinancing transactions. These transactions
included (i) the purchase of $195 million of our 8
5/8% senior subordinated notes, (ii) a dividend to AT
Holdings, our parent company, for the redemption of all of AT
Holdings outstanding Series A Cumulative Exchangeable
Redeemable Preferred Stock, (iii) scheduled repayments and
the restatement of our credit facility and (iv) payment of
transaction fees and expenses. Cash used in financing activities
for fiscal 2003 was $17.4 million, which was primarily used
to make scheduled repayments of long-term debt and payment of
financing related fees associated with amending our credit
agreement. Cash used in financing activities for fiscal 2002 was
$19.2 million, which was primarily used to make scheduled
repayments of long-term debt and for AT Holdings
repurchase of common stock from various former employees.

Capital
Expenditures.Our capital expenditures
for fiscal years 2004, 2003 and 2002 totaled $3.1 million,
$1.9 million and $1.8 million, respectively, which
were related in each year to maintaining existing facilities and
equipment and systems to support current operating activities.
For fiscal 2005, we estimate that capital expenditures will
total $4.2 million. The majority of these projects will be
for continued maintenance of facilities and equipment in support
of our current operating activities. Capital expenditures are
financed with cash generated from operations. We currently have
no material commitments for capital expenditures.

19



---



##### Table of Contents



Our expected future contractual cash obligations
and other commercial commitments for the next several fiscal
years, as of October 30, 2004, are as follows (in millions):

|                                   |  |      |      |  |      |   |      |      |  |   |      |          |  |      |      |  |            |   |      |       |  |   |       |  |  |   |       | 
|---------------------------------- |  | ---- | ---- |  | ---- | - | ---- | ---- |  | - | ---- | -------- |  | ---- | ---- |  | ---------- | - | ---- | ----- |  | - | ----- |  |  | - | ----- | 
|                                   |  |      |      |  |      |   |      |      |  |   |      | 2010 and |  |      |     
|                                   |  | 2005 |      |  | 2006 |   |      | 2007 |  |   | 2008 |          |  | 2009 |      |  | Thereafter |   |      | Total | 
|                                   |  |      |      |  |      |   |      |      |  |   |      |          |  |      |      |  |            |   |      |       | 
|Term loan facility                 |  | $    | 0.7  |  |      | $ | 0.7  |      |  | $ | 0.7  |          |  | $    | 6.7  |  |            | $ | 6.0  |       |  | $ |      |  |  | $ | 14.8  | 
|9 1/4% senior notes                |  |      |     |  |      |   |     |      |  |   |     |          |  |      |     |  |            |   |     |       |  |   | 250.0 |  |  |   | 250.0 | 
|Operating leases                   |  |      | 0.6  |  |      |   | 0.3  |      |  |   | 0.2  |          |  |      | 0.1  |  |            |   |     |       |  |   |      |  |  |   | 1.2   | 
|Other long-term obligations(1)     |  |      | 22.0 |  |      |   | 23.7 |      |  |   | 24.4 |          |  |      | 23.5 |  |            |   | 23.2 |       |  |   | 46.2  |  |  |   | 163.0 | 
|                                   |  |      |      |  |      |   |      |      |  |   |      |          |  |      |      |  |            |   |      |       | 
|Total contractual cash obligations |  | $    | 23.3 |  |      | $ | 24.7 |      |  | $ | 25.3 |          |  | $    | 30.3 |  |            | $ | 29.2 |       |  | $ | 296.2 |  |  | $ | 429.0 | 
|                                   |  |      |      |  |      |   |      |      |  |   |      |          |  |      |      |  |            |   |      |       | 



---



|    |                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents interest payments on the senior notes
    and estimated funding for retirement and other post-employment
    benefits. Interest on the term loan facility is excluded as it
    is not fixed and determinable.

We believe that cash flows from operations will
provide adequate funds for our working capital needs, planned
capital expenditures, ESOP repurchase obligations and near term
debt service requirements. Our ability to fund our operations,
make planned capital expenditures, repurchase ESOP shares and
make scheduled payments on our indebtedness depends on our
future operating performance and cash flows. We may need to
refinance all or a portion of our indebtedness on or before
maturity. There can be no assurance that we will be able to
refinance any of our indebtedness on commercially reasonable
terms or at all. These items are subject to prevailing
conditions and to financial, business, and other factors, some
of which are beyond our control.

New accounting standards

In December 2003, the Financial Accounting
Standards Board (FASB) issued a revised FASB
Interpretation No. (FIN) 46, Consolidation of
Variable Interest Entities. FIN 46 requires existing,
unconsolidated variable interest entities to be consolidated by
their primary beneficiaries if the entities do not effectively
disperse risks among the parties involved. Argo-Tech is not
associated with variable interest entities; therefore, the
adoption of this statement did not have any effect on
Argo-Techs consolidated financial position or results of
operations.

In December 2003, the Medicare Prescription Drug,
Improvement and Modernization Act was enacted, which introduced
a Medicare prescription drug benefit and a federal subsidy to
sponsors of retiree health-care plans that provide a benefit at
least actuarially equivalent to the Medicare benefit. In
accordance with FASB Staff Position (FSP) Statement
of Financial Accounting Standards (SFAS)
No. 106-2, Argo-Tech adopted the provisions of this
statement effective with the period beginning August 1,
2004. The accumulated postretirement benefit obligation and net
periodic postretirement benefit cost reflect the provisions of
the Act. The adoption of this statement did not have a material
effect on Argo-Techs consolidated financial position or
results of operations.

In December 2003, the FASB issued a revision to
SFAS No. 132, Employers Disclosures about
Pensions and Other Postretirement Benefits, which expands
the disclosure requirements regarding plan assets and benefit
obligations for Argo-Techs two noncontributory defined
benefit pension plans and its postretirement benefit plan.
Argo-Tech adopted the provisions of this statement effective
with the period beginning February 1, 2004 (see
Note 10 in the audited consolidated financial statements
included elsewhere in this report).

In November 2004, the FASB issued
SFAS No. 151, Inventory Costs, which is an
amendment of Accounting Research Bulletin (ARB)
No. 43, Chapter 4, Inventory Pricing. This
statement clarifies that abnormal amounts of idle facility
expense, freight, handling costs, and wasted materials
(spoilage) should be recognized as current-period charges.
The provisions of this statement become effective for
Argo-Techs fiscal year beginning October 30, 2005.
Management has not determined the impact, if any, that this
statement will have on Argo-Techs consolidated financial
statements.

In December 2004, the FASB issued
SFAS No. 123(R), Share Based Payment,
which requires all share-based payments to employees, including
grants of employee stock options, to be recognized in the
financial

20



---



##### Table of Contents



statements based on their fair values. The
provisions of this statement become effective for
Argo-Techs fiscal quarter beginning July 31, 2005.
Management has not determined the impact, if any, that this
statement will have on Argo-Techs consolidated financial
statements.


Risk Factors

From time to time, information we provide,
statements by our employees or information included in our
filings with the Securities and Exchange Commission (including
those portions of the Managements Discussion and Analysis
that refer to the future) may contain forward-looking statements
that are not historical facts. Those statements are
forward-looking within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements, and our future performance, operating results,
financial position and liquidity, are subject to a variety of
factors that could materially affect results, including those
described below. Any forward-looking statements made in this
report or otherwise, speak only as of the date of such
statement, and we undertake no obligation to update such
statements. Comparisons of results for current and any prior
periods are not intended to express any future trends or
indications of future performance, unless expressed as such, and
should only be viewed as historical data.

You should carefully consider each of the risks
and uncertainties we describe below and all of the other
information in this report. The risks and uncertainties we
describe below are not the only ones we face. Additional risks
and uncertainties of which we are currently unaware or that we
currently believe to be immaterial may also adversely affect our
business.

Risks associated with our business and
operations



| |                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our sales and earnings are dependent on
    conditions in the airline industry, and a significant or
    prolonged downturn in the airline industry or a future terrorist
    attack could decrease the airline industrys demand for our
    products and reduce our sales.

The majority of our fiscal 2004 gross profit and
operating income was derived from sales of products to engine
and aircraft manufacturers, airlines and other customers in the
aerospace industry. Any downturn in the airline industry could
decrease demand for our products and negatively impact our
financial condition. The commercial aerospace industry is
cyclical and has historically been subject to fluctuations due
to general economic conditions. On September 11, 2001,
terrorists attacked the United States with four hijacked
U.S. commercial aircraft. In the aftermath of the terrorist
attacks, passenger traffic on commercial flights was
significantly lower than prior to the attacks. Most commercial
airlines reduced their operating schedules, lowered fares and
implemented cost reduction initiatives. These factors, combined
with the impact of the war in Iraq, the outbreak of the Severe
Acute Respiratory Syndrome (SARS) virus in 2003, as well as
increases in fuel costs and a weak U.S. economy, have
resulted in large and continuing financial losses in the airline
industry. Major carriers around the world have filed for
bankruptcy and others are considering bankruptcy protection.
Financial losses and reduced schedules in the airline industry
have resulted, and will continue to result, in reduced orders
and delivery delays of new commercial aircraft, parking and
retirement of older aircraft (eliminating those aircraft from
maintenance needs and making spare parts from those aircraft
available) and delays in airlines purchases of aftermarket
parts and service as maintenance is deferred. Any recovery in
the aerospace industry will be dependent on continuing
improvement in the U.S. economy and the occurrence of any
event similar to those described above could delay these
recoveries. We refer you to our Managements
Discussion and Analysis of Financial Condition and Results of
Operations for a discussion of the impact that these
factors have had on our results of operations.



| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The aerospace industry is subject to
    significant government regulation and oversight and failure to
    comply with these regulations could increase the cost of
    operating our business.

The aerospace industry is highly regulated in the
United States and in other countries. We must be certified or
accepted by the Federal Aviation Administration, the United
States Department of Defense and similar agencies in foreign
countries and by individual OEMs in order to sell and service
parts and components used in specific aircraft models. If
material certifications, authorizations or approvals are revoked
or suspended, our

21



---



##### Table of Contents



operations will be curtailed. In the future, new
and more demanding government regulations may be adopted or
industry oversight may be increased. We may have to incur
significant additional costs to achieve compliance with new
regulations or to reacquire a revoked or suspended approval,
which could reduce our profitability.




| |                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We compete with a number of established
    companies, virtually all of which have significantly greater
    financial, technological and marketing resources than we do. We
    may not be able to compete effectively with these companies,
    which could adversely affect our business and financial
    condition.

The aerospace industry is a highly competitive
global industry which has experienced significant consolidation
in recent years. This consolidation has caused, and its
continuation will amplify, the pricing pressures discussed in
the risk factor below regarding the concentration of customers
for our products. We may not achieve the cost savings and
operational improvements expected from our business strategy or
if those savings and improvements are not sufficient to allow us
to compete favorably in the future with other larger,
consolidated competitors. Competition among aerospace component
manufacturers is based on engineered solutions, product quality,
customer support, pricing and on-time delivery. In the
industrial segment, competition varies by product, but is
typically based on engineered solutions, price, product quality
and on-time delivery. We may not be able to compete with our
competitors, which are typically divisions of large corporations
that have significantly greater financial resources than we do.
In addition, some suppliers have obtained, and continue to
obtain, Parts Manufacturing Authority or PMA, from
the Federal Aviation Administration to manufacture and sell
various Argo-Tech components in the aerospace aftermarket, which
has increased the level of competition in this significant
portion of our business. While we have attempted to respond to
this competition, a significant increase in PMA certifications
for our products would further increase this competitive effect.



| |                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to meet future capital
    requirements or to continue our research and development
    activities, or recoup some of our capital and research and
    development expenditures, our competitive position may
    suffer.

In securing new business, we are typically
required to expend significant amounts of capital for
engineering, research and development, tooling and other costs.
Generally, we seek to recoup these costs through pricing and
aftermarket revenues over time, but we may be unsuccessful due
to competitive pressures and other market constraints, or due to
the terms of our contracts. Although we believe that we will be
able to fund these expenditures through cash flow from
operations and borrowings under our amended senior credit
facility, we cannot assure you that we will have adequate funds
to make all the necessary capital and research and development
expenditures or that the amount of future expenditures will not
be materially in excess of our anticipated expenditures. If we
are unable to make necessary capital and research and
development expenditures or to continue our research and
development activities, our business and our competitive
position will suffer.

In addition, there are a limited number of
commercial main engine fuel pump platforms launched each year.
Because these programs result in long-term supply contracts and
generate significant aftermarket revenues during the long
lifetime of the program, it is very important to our business
and future profitability that we are named the main engine fuel
pump supplier on some of these programs. If the programs we are
selected on are not successful, or if actual orders are less
than our estimates, our business and competitive position could
suffer.



| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | There are a limited number of customers for
    certain products and the loss of a significant customer would
    reduce demand for our products and reduce our
    sales.

Because of the importance of a few large
customers and the high degree of concentration of OEMs in the
aerospace industry, our business is exposed to a high degree of
risk related to customer concentration. In fiscal 2004, our ten
largest customers accounted for approximately 51.2% of our net
revenues. A loss of significant business from any of these
customers would be harmful to our cash flows, thereby making it
more difficult for us to make payments on the notes.

Due to the relatively small number of customers
in the aerospace industry, customers, particularly OEM
customers, are often able to influence prices and other terms of
sale for certain of our products. There is substantial and
continuing pressure from OEMs in the aerospace industry to
reduce costs, including costs

22



---



##### Table of Contents



associated with outside suppliers like us. We
attempt to resist downward pricing pressure, while trying to
preserve our business relationships with these customers, but we
are not always successful. At the same time, it is difficult for
us to offset these downward pricing pressures through
alternative, less costly sources of raw materials.




| |                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------
| | We have fixed-price contracts with some of
    our customers and we bear the risk of costs in excess of our
    estimates.

We have entered into multi-year, fixed-price
contracts with some of our OEM customers, where we have agreed
to supply our products for a fixed price and, accordingly,
realize all the benefit or detriment resulting from any
decreases or increases in the costs of making these products.
Sometimes we accept a fixed-price contract for a product that we
have not yet produced, which increases the risks of delays or
costs in excess of our estimates. The costs that we incur in
fulfilling these contracts may vary substantially from our
original estimates.

Most of our contracts do not permit us to recover
for increases in input prices, taxes or labor costs, although
some contracts provide for renegotiation to address certain
material adverse changes. Any increase in those costs could
increase the cost of operating our business.



| |                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A significant portion of our sales is, and
    is expected to continue to be, from government contracts that
    are subject to reductions in defense spending, government
    regulation and risks particular to government contracts. The
    termination of any of our government contracts would reduce
    demand for our products and reduce our sales.

Approximately 38% of our sales in fiscal 2004
were related to U.S. designed military products. In
addition, foreign military sales are affected by
U.S. government regulations, regulations by the purchasing
foreign government and political uncertainties in the U.S. and
abroad. The U.S. defense budget has fluctuated in recent
years. Although we have experienced increased military sales as
a result of military actions in Afghanistan and Iraq, there can
be no assurance that the U.S. defense budget will not
decline or that sales of defense-related items to foreign
governments will continue at present levels. A significant
disruption or decline in U.S. military expenditures in the
future would materially decrease our military sales. In
addition, we are subject to risks particular to contracts with
the U.S. government. These risks include the ability of the
U.S. government to unilaterally:



| |   |                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------
| |  | suspend us from receiving new contracts pending
    resolution of alleged violations of procurement laws or
    regulations;
|
| |  | terminate existing contracts, with or without
    cause, at any time;                                                       
|
| |  | reduce the value of existing contracts;                                                                                     
|
| |  | audit our contract-related costs and fees,
    including allocated indirect costs; and                                      
|
| |  | control or potentially prohibit the export of our
    products, technology or other data.                                   

Any unexpected termination of a significant
government contract would reduce our sales and profitability.



| |                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------
| | A portion of our revenue is derived from
    international sources, which exposes us to additional
    uncertainty.

Approximately 42.8% of our fiscal 2004 net
revenue was derived from shipments to destinations outside of
the United States and Canada. Sales outside of the United States
and Canada are subject to other various risks, including:



| |   |                                                                                
| | - | -------------------------------------------------------------------------------
| |  | governmental embargoes or foreign trade
    restrictions on antidumping duties;
|
| |  | changes in U.S. and foreign governmental
    regulations;                      
|
| |  | tariffs;                                                                       
|
| |  | other trade barriers;                                                          

23



---



##### Table of Contents





| |   |                                                                                                   
| | - | --------------------------------------------------------------------------------------------------
| |  | the potential for nationalization of enterprises;                                                 
|
| |  | economic downturns;                                                                               
|
| |  | inflation;                                                                                        
|
| |  | environmental laws and regulations;                                                               
|
| |  | political, economic and social
    instability; and                                               
|
| |  | difficulties in receivable collections and
    dependence on foreign personnel and foreign unions.



| |                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our level of indebtedness could impede our
    ability to raise additional capital to fund our operations,
    limit our ability to react to changes in the economy or our
    industry and prevent us from meeting our obligations under the
    notes.

We are significantly leveraged. As of
October 30, 2004, our total indebtedness was
$264.8 million. Our substantial degree of leverage could
have important consequences for you, including the following:



| |   |                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | it may limit our ability to obtain additional
    debt or equity financing for working capital, capital
    expenditures, product development, debt service requirements,
    acquisitions and general corporate or other purposes;                      
|
| |  | a substantial portion of our cash flows from
    operations will be dedicated to payments on our indebtedness and
    will not be available for other purposes, including our
    operations, capital expenditures and future business
    opportunities;
|
| |  | the debt service requirements of our other
    indebtedness could make it more difficult for us to satisfy our
    financial obligations, including those related to the notes;                                                                          
|
| |  | certain of our borrowings, including borrowings
    under our credit facility, are, and are expected to continue to
    be, at variable rates of interest, exposing us to the risk of
    increased interest rates;                                      
|
| |  | it may limit our ability to adjust to changing
    market conditions and place us at a competitive disadvantage
    compared to our competitors that have less debt; and                                                                                 
|
| |  | it may increase our vulnerability to a downturn
    in general economic conditions or in our business, and may make
    us unable to carry out capital spending and research and
    development activities that are important to our growth.            



| |                                                                    
| | -------------------------------------------------------------------
| | We depend on the skill and experience of
    our senior executives.

Our success depends upon the efforts, abilities,
experience and expertise of the executive officers of our senior
management team. Our senior executives have extensive experience
in our industry and with our business products and customers.
There is competition for these kinds of personnel in the
aerospace industry. The failure to retain and/or recruit
additional or substitute senior executives and/or other key
employees could have a material adverse effect on us.



| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our operations depend on maintaining a
    skilled workforce and any interruption in the work force at our
    facilities or those of OEMs and their suppliers could curtail
    our operations.

Because we maintain a relatively small inventory
of finished goods, and because the aerospace industry operates
on relatively long production lead times, an interruption of our
work force due to strikes, work stoppages, shortages of
appropriately skilled production and professional workers or
other interruption materially could impact our operations.

Our operations are highly dependent on an
educated and trained workforce. All of our hourly employees at
our Cleveland facility are represented by the United Auto
Workers, or UAW, union under a collective bargaining agreement
that will expire on March 31, 2008.

24



---



##### Table of Contents



Many OEMs and their suppliers also have unionized
work forces. Work stoppages or slowdowns experienced by OEMs or
their suppliers could result in slowdowns or closures of
assembly plants where our products are included in assembled
aircraft. Any interruption experienced by OEMs or their
suppliers could result in cancellations, reductions or delays in
orders by our customers, which could reduce demand for our
products and reduce our sales.



| |                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------
| | Our business and profitability is affected
    by the price and continuity of supply of certain necessary raw
    materials and component parts.

We rely on one supplier for CPM-10V, a powdered
metal used in the manufacture of certain pump components. If we
were unable to obtain adequate supplies of CPM-10V at
commercially reasonable prices, our operations could be
interrupted. Increased costs associated with supplied materials
or components could increase our costs of production and could
reduce our profitability if we are unable to make corresponding
increases in the prices of our products. We maintain a
relatively small inventory of raw materials and component parts,
and our business would suffer if supply is reduced or terminated
by our suppliers. Although we believe that alternative
suppliers, or alternate materials or components, could be
identified, the lengthy and expensive Federal Aviation
Administration and OEM certification process associated with
aerospace products could prevent efficient replacement of a
material or supplier.



| |                                                                            
| | ---------------------------------------------------------------------------
| | We depend on our Cleveland, Ohio and Costa
    Mesa, California facilities.

We believe that our success to date has been, and
future results of operations will be, dependent in large part
upon our ability to manufacture and deliver products promptly
upon receipt of orders and to provide prompt and efficient
service to our customers. As a result, any disruption of our
day-to-day operations could have a material adverse effect on
our business, customer relations and profitability. Our
Cleveland, Ohio and Costa Mesa, California facilities are the
primary production, research and marketing facilities for our
products, and the Cleveland facility also serves as our
corporate headquarters. A fire, flood, earthquake or other
disaster or condition that damaged or destroyed either of those
facilities could disable these functions which are critical to
our business.



| |                                                                     
| | --------------------------------------------------------------------
| | We have potential exposure resulting from
    environmental matters.

Our business operations and facilities are
subject to a number of federal, state, local and foreign laws
and regulations that govern the discharge of pollutants and
hazardous substances into the air and water as well as the
handling, storage and disposal of such materials and other
environmental matters. Compliance with such laws is a
significant obligation for us at each of our facilities. We
would be subject to serious consequences, including fines and
other sanctions, and limitations on our operations due to
changes to, or revocations of, the environmental permits
applicable to our facilities if we fail to comply. Environmental
laws and regulations where we operate have become increasingly
strict, and may become more strict in the future. This could
result in increased compliance costs and increased risk of fines
and sanctions for violations.

Under certain environmental laws, liability
associated with investigation or remediation of hazardous
substances can arise at a broad range of properties, including
properties currently or formerly operated by an entity, as well
as properties to which an entity sent hazardous substances or
wastes for treatment, storage, or disposal. Costs and other
obligations can arise from claims for toxic torts, natural
resource and other damages, as well as the investigation and
clean up of contamination at such properties. Under certain
environmental laws, such liability may be imposed jointly and
severally, so a party may be responsible for more than its
proportionate share and may even be responsible for the entire
liability at issue. The extent of any such liability can be
difficult to predict.

Our operations at some of our properties involve
hazardous materials. Our Cleveland and Costa Mesa facilities are
currently the subject of environmental remediation regarding
contamination resulting from the operations of our predecessors.
Those predecessors have indemnified us for substantially all
remediation costs at each site. We cannot assure you, however,
that those parties will continue to satisfy their
indemnification obligations or that we would not be ultimately
responsible at either or both of these sites for potentially

25



---



##### Table of Contents



significant environmental liabilities. In
addition, we cannot assure you that additional contamination,
either at one or both of these sites or at other locations, will
not be identified in the future that could result in significant
liabilities and obligations to us.




| |                                                                       
| | ----------------------------------------------------------------------
| | We have a potential risk of product
    liability and warranty claims.

Our operations expose us to potential liabilities
for personal injury or death as a result of the failure of an
aircraft component that has been designed, manufactured or
serviced by us, or the irregularity or failure of metal products
we have processed or distributed. In an effort to improve
operating margins, some customers have delayed the replacement
of parts beyond our recommended lifetime, which may undermine
aircraft safety and increase our risk of liability.

We believe that our liability insurance is
adequate to protect us from future product liability claims.
However, we cannot assure you that we will not experience any
material product liability losses in the future, that we will
not incur significant costs to defend such claims, that our
insurance coverage will be adequate if claims were to arise or
that we would be able to maintain insurance coverage in the
future at an acceptable cost. A successful claim brought against
us in excess of our available insurance coverage may have a
material adverse effect on our business.

In the ordinary course of our business,
contractual disputes over warranties can arise. In most cases,
financial responsibility for warranty costs is contractually
retained by our customer so long as the customers
specifications are met, but we may nonetheless be subjected to
requests for cost sharing or pricing adjustments as a part of
our commercial relationship with the customer.



| |                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our cash flows and capital resources may be
    adversely affected by exercises of rights to require us to
    repurchase or redeem securities of AT Holdings.

Certain holders of common stock and warrants to
purchase common stock of AT Holdings have put
rights, or rights to require us or AT Holdings to repurchase
their securities. Depending on the number of puts and the
determined value of AT Holdings common stock at the time of the
put, such obligations could from time to time have a material
adverse effect on our cash flow and capital resources. There can
be no assurance that we will have sufficient cash in the future
to meet these obligations.

Under the terms governing our Employee Stock
Ownership Plan (ESOP), participants in the ESOP may
put to us, subject to certain restrictions, shares of AT
Holdings common stock received from the ESOP at their current
value, as determined annually by an independent financial
consulting firm (the ESOP valuation). Participants
may put shares to us after their termination of employment and
in specified instances after attaining age 55 with 10 or
more years of participation in the ESOP (the
diversification option). If we do not satisfy the
repurchase obligation in cash, we are required to pay the
balance of the repurchase price in the form of a promissory note
that would be repayable in equal installments over 5 years.
In fiscal 2002, 2003 and 2004, we were required to repurchase an
aggregate of approximately $0.5 million, $0.3 million
and $0.6 million, respectively, of redeemable ESOP stock,
which we purchased using available cash. Beginning in 2004, the
diversification option became available to eligible ESOP
participants, and as a result, our repurchase obligations may
increase. In addition, the valuation of AT Holdings common stock
by the independent financial consulting firm generally
corresponds to our financial performance. If our performance
continues to improve and the value of AT Holdings common stock
increases, the cost of our repurchase obligations will also
increase. In fiscal 2005, we estimate our repurchase obligations
could be between $3.5 million and $4.5 million. See
Item 11. Executive Compensation 
Compensation pursuant to employee benefit plans 
Employee Stock Ownership Plan.

Certain management and director stockholders of
AT Holdings, including the executives named in the executive
compensation table included elsewhere in this report and other
AT Holdings stockholders, are party to the AT Holdings
Stockholders Agreement dated December 17, 1998.
Pursuant to the stockholders agreement and subject to
certain limitations, such management and director stockholders
have the right, upon termination of their employment or
directorship, as the case may be, to put to AT Holdings all but
not part of their shares of AT Holdings common stock for a
purchase price equal to the greater of (i) the most recent
ESOP valuation (as determined by an independent financial
consulting firm) or (ii) the sale price of AT Holdings
common stock in

26



---



##### Table of Contents



any transaction within the last year in which 10%
or more of AT Holdings common stock was sold. If AT Holdings
cannot satisfy its repurchase obligations in cash (which would
be provided by a dividend from Argo-Tech), or is prevented from
doing so by the terms of the agreements governing the
indebtedness of AT Holdings or its affiliates, including the
notes, AT Holdings is required to pay the balance of the
repurchase price in the form of a subordinated promissory note.
These management and director stockholders currently own
approximately 136,230 shares and options to purchase
shares, or 20.9%, of AT Holdings common stock.


J.P. Morgan Partners (SBIC), LLC holds
immediately exercisable warrants to
purchase 46,025 shares, or 7.0% of AT Holdings common
stock. At any time on or after December 31, 2005,
J.P. Morgan Partners (SBIC), LLC can require AT Holdings to
redeem any or all of the warrants, in which case AT Holdings
must make a cash payment for the value of each warrant redeemed.
At October 30, 2004, the value of these warrants was
approximately $5.3 million based on the most recent ESOP
valuation of AT Holdings common stock by the independent
financial consulting firm. The purchase price of the warrants
could be higher, as J.P. Morgan Partners (SBIC), LLC is not
required to accept the price determined in connection with the
ESOP valuation by the independent financial consulting firm.



| |                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may be unable to identify attractive
    acquisition candidates, successfully integrate our acquired
    operations or realize the intended benefits of our
    acquisitions.

One of our business strategies is to pursue
targeted complementary product line or business acquisition
opportunities. We intend to evaluate potential acquisitions and
engage in discussions with acquisition candidates. We cannot
assure you that suitable acquisition candidates will be
identified and acquired in the future or that we will be able to
accomplish our strategic objectives as a result of any
acquisition. Our ability to finance acquisitions may be
constrained by our high degree of leverage. Our amended credit
facility and the terms of our senior notes issued in June 2004
may significantly limit our ability to make acquisitions and
incur indebtedness in connection with the acquisitions. We
cannot assure you that our acquisition strategies will be
successfully received by customers or achieve their intended
benefits. We will encounter various risks in acquiring other
product lines or businesses, including the possible inability to
integrate an acquired product line or business into our
operations, diversion of managements attention and
unanticipated problems or liabilities, some or all of which
could adversely affect us.



| |                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------
| | We have only a limited ability to protect
    our intellectual property rights, which are important to our
    success.

Our success depends, in part, upon our ability to
protect our proprietary technology and other intellectual
property. We rely upon a combination of trade secrets,
confidentiality policies, nondisclosure and other contractual
arrangements and patent, copyright and trademark laws to protect
our intellectual property rights. The steps we take in this
regard may not be adequate to prevent or deter reverse
engineering or infringement or other violation of our
intellectual property, and we may not be able to detect
unauthorized use or take appropriate and timely steps to enforce
our intellectual property rights. In addition, the laws of some
countries may not protect and enforce our intellectual property
rights to the same extent as the laws of the United States.









|         |                                                                
|-------- | ---------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About
    Market Risk.

In the ordinary course of operations,
Argo-Techs major market risk exposure is to changing
interest rates. Argo-Techs exposure to changes in interest
rates relates primarily to its long term debt obligations. At
October 30, 2004, Argo-Tech had fixed rate debt of
$250.0 million at 9.25% and variable rate debt under our
credit facility of $14.8 million, calculated at
Argo-Techs choice using an alternate base rate
(ABR) or LIBOR, plus a supplemental percentage determined
by the ratio of debt to adjusted EBITDA. The variable rate is
not to exceed ABR plus 2.50% or LIBOR plus 3.50%. Argo-Tech does
not enter into derivative contracts for trading or speculative
purposes. A 10% fluctuation in interest rates would not
materially affect Argo-Techs financial condition, results
of operations or cash flows.

27



---



##### Table of Contents











|        |                                                 
|------- | ------------------------------------------------
|Item 8. | Financial Statements and Supplementary
    Data.

The response to this item is submitted in a
separate section of this report following the signature page.









|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants
    on Accounting and Financial Disclosure.

There were no changes in, or disagreements with,
accountants on accounting and financial disclosure.









|         |                         
|-------- | ------------------------
|Item 9A. | Controls and Procedures.

(a) Disclosure controls and
procedures.

The term disclosure controls and
procedures is defined in Rules 13a-14(c) and
15d-14(c) of the Securities Exchange Act of 1934 (Exchange
Act). These rules refer to the controls and other
procedures of a company that are designed to ensure that
information required to be disclosed by the company in the
reports that it files under the Exchange Act is recorded,
processed, summarized and reported within the required time
periods. Argo-Techs Chief Executive Officer and Chief
Financial Officer have evaluated the effectiveness of
Argo-Techs disclosure controls and procedures as of a date
within 90 days before the filing of this annual report (the
Evaluation Date), and have concluded that, as of the
Evaluation Date, such controls and procedures were effective at
ensuring that required information will be disclosed in
Argo-Techs reports filed under the Exchange Act.

(b) Changes in internal controls.

There were no significant changes in
Argo-Techs internal controls or in other factors that
could significantly affect these controls subsequent to the
Evaluation Date.

(c) Sarbanes-Oxley Act 
Section 404 compliance.

Section 404 of the Sarbanes-Oxley Act
requires management to report on, and its independent auditors
to attest to, Argo-Techs internal control over financial
reporting beginning with the fiscal year ending October 29,
2005. Argo-Tech is actively continuing its ongoing internal
process of documenting, testing and evaluating the effectiveness
of its internal control over financial reporting utilizing
outside assistance.

28



---



##### Table of Contents









PART III








|         |                                                        
|-------- | -------------------------------------------------------
|Item 10. | Directors and Executive Officers of the
    Registrant.

The following table sets forth certain
information concerning our directors and executive officers.
Directors serve until their successors are elected at each
annual meeting. Officers hold office until their successors are
elected and qualified.

|                     |  |     |    |  |          |                                                                      
|-------------------- |  | --- | -- |  | -------- | ---------------------------------------------------------------------
|Name                 |  | Age |    |  | Position
|                     |  |     |    |  |         
|Michael S. Lipscomb  |  |     | 58 |  |          | Chairman, President and Chief Executive Officer,
    Director        
|Paul R. Keen         |  |     | 55 |  |          | Executive Vice President, General Counsel and
    Secretary, Director
|Frances S. St. Clair |  |     | 49 |  |          | Executive Vice President and Chief Financial
    Officer, Director   

Michael S. Lipscombhas been Chairman,
President & Chief Executive Officer since 1994.
Mr. Lipscomb joined TRWs corporate staff in February
1981 and was made Director of Operations for the Power
Accessories Division in 1985. Mr. Lipscomb was named Vice
President of Operations when Argo-Tech was formed in 1986,
becoming President in 1990 and Chairman and Chief Executive
Officer in 1994. Mr. Lipscomb has also served as a director
of Argo-Tech and AT Holdings since 1990.

Paul R. Keenis
Executive Vice President, General Counsel and Secretary.
Mr. Keen was named Vice President and General Counsel in
1987, became Secretary in December 1990 and was promoted to
Executive Vice President in December 2003. Prior to 1987, he
spent the majority of his career with TRW as Senior Counsel,
Securities and Finance and as primary legal counsel to two
operating groups. Mr. Keen joined the Board of Directors of
Argo-Tech in April 1999. Mr. Keen served as a member of the
Board of Directors of AT Holdings from September 2003 to
September 2004.

Frances S. St. Clairis Executive Vice President and Chief
Financial Officer. Ms. St. Clair joined Argo-Tech in 1991
as Controller and was promoted to Vice President and Controller
in November 1991. Ms. St. Clair was promoted to Chief
Financial Officer in November 1992 and to Executive Vice
President in December 2003. Ms. St. Clair received her
C.P.A. certification in 1984. Ms. St. Clair joined the
Board of Directors of Argo-Tech in April 1999. Ms. St.
Clair served as a director of AT Holdings from September 2001 to
September 2003 and rejoined in the Board in September 2004.



| |                      
| | ---------------------
| | Director compensation

Since 1999, Argo-Tech has not compensated its
directors. AT Holdings pays its directors a quarterly fee of
$3,000 plus $4,000 and reasonable out-of-pocket expenses for
each board meeting attended. Fees paid to Mr. Lipscomb,
Mr. Keen and Ms. St. Clair for service on the board of
AT Holdings are included in the Annual compensation
table below.



| |                 
| | ----------------
| | Board Committees

Argo-Tech does not maintain committees of its
board of directors. The board of directors of AT Holdings
maintains an audit committee and a compensation committee.



| |                                                                                                              
| | -------------------------------------------------------------------------------------------------------------
| | Code of Ethics for the Chief Executive
    Officer, Chief Financial Officer and Senior Financial
    Officers

We have adopted a code of ethics for our senior
financial officers that include the Chief Executive Officer, the
Chief Financial Officer, and other members of Argo-Techs
financial leadership team. A copy of the code of ethics is
available without charge, by request to: General Counsel,
Argo-Tech Corporation, 23555 Euclid Avenue, Cleveland
OH 44117. We intend to satisfy the disclosure requirement
regarding any amendment to, or a waiver of, a provision of our
code of ethics through filing a current report on Form 8-K
for such events.

29



---



##### Table of Contents











|         |                        
|-------- | -----------------------
|Item 11. | Executive Compensation.

The following table sets forth, for the fiscal
years 2004, 2003 and 2002, certain information about the
compensation paid to or accrued by us for the Chief Executive
Officer and each of our other executive officers (the
Named Executives).

|                            |                               |                     |      |      |           |   |         |         |  |   |                    |         |  |   |        |        | 
|--------------------------- | ----------------------------- | ------------------- | ---- | ---- | --------- | - | ------- | ------- |  | - | ------------------ | ------- |  | - | ------ | ------ | 
|                            |                               |                     |      |     
|                            |                               | Annual compensation |      |      |          
|                            |                               |                     |      |      | All other |  
|Name and principal position |                               | Fiscal Year         |      |      | Salary    |   |         | Bonus   |  |   | compensation(1)(2) |        
|                            |                               |                     |      |      |           |   |         |         |  |   |                    |        
|Michael S. Lipscomb         |                               |                     | 2004 |      |           | $ | 484,170 |         |  | $ | 346,181            |         |  | $ | 38,426 |       
|                            | Chairman, President and       |                     |      | 2003 |           |   | $       | 461,112 |  |   | $                  | 225,023 |  |   | $      | 50,475 | 
|                            | Chief Executive Officer       |                     |      | 2002 |           |   | $       | 419,193 |  |   | $                  | 222,172 |  |   | $      | 46,458 | 
|Paul R. Keen                |                               |                     | 2004 |      |           | $ | 258,804 |         |  | $ | 142,342            |         |  | $ | 29,074 |       
|                            | Executive Vice President,     |                     |      | 2003 |           |   | $       | 246,480 |  |   | $                  | 83,310  |  |   | $      | 12,806 | 
|                            | General Counsel and Secretary |                     |      | 2002 |           |   | $       | 232,530 |  |   | $                  | 85,339  |  |   | $      | 5,759  | 
|Frances S. St. Clair        |                               |                     | 2004 |      |           | $ | 236,250 |         |  | $ | 129,938            |         |  | $ | 10,503 |       
|                            | Executive Vice President and  |                     |      | 2003 |           |   | $       | 225,000 |  |   | $                  | 76,050  |  |   | $      | 23,582 | 
|                            | Chief Financial Officer       |                     |      | 2002 |           |   | $       | 200,016 |  |   | $                  | 73,504  |  |   | $      | 25,630 | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Other annual compensation did not exceed the
    lesser of $50,000 or 10% of salary plus bonus of any of the
    Named Executives in 2002, 2003 or 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(2) | The amounts listed consist of the value of life
    insurance provided by us for the benefit of the Named Executives
    in excess of the value of life insurance provided by us for the
    benefit of all other salaried employees. For Mr. Lipscomb,
    the amounts listed also include $32,000 for fiscal year 2004,
    $27,000 for fiscal year 2003 and $22,000 for fiscal year 2002,
    paid as AT Holdings directors fees. For Mr. Keen, the
    amounts listed also include $25,000 for fiscal year 2004 and
    $7,000 for fiscal year 2003 paid as AT Holdings directors
    fees. For Ms. St. Clair, the amounts listed also include
    $7,000, $20,000 and $22,000 for fiscal years 2004, 2003 and
    2002, respectively, paid as AT Holdings directors fees.

Management retention agreements

Stay pay and severance
agreements.We have entered into a
stay pay and severance agreement with each of the Named
Executives. Our Board of Directors believes that these
agreements benefit us by securing the continued services of key
management personnel and by enabling management to perform their
duties and responsibilities without the distracting uncertainty
generally associated with a change in control.

The agreements provide that, if a change in
control (as defined in the agreements) occurs and the executive
remains employed by us on a full-time basis through the
effective date of the change in control, the executive will
receive a single lump sum stay payment equal to 25%
of the sum of the highest annual base salary and the highest
bonus amount received by the executive in the preceding five
years.

The agreements also provide that if an
executives full-time employment is terminated without
cause (as defined in the agreements), either before or after a
change in control has occurred, or upon a voluntary termination
of employment by an executive upon the reduction of his or her
base salary by 5% or more, if the reduction is not a result of a
company policy to reduce the salaries of a substantial number of
officers or employees, or if the executive ceases to be employed
in a position involving substantially the same level of
responsibility or duties as performed by the executive on the
date the agreement was executed (a Qualifying Voluntary
Termination), the executive will receive a basic severance
payment. The payment will consist of a single lump sum equal to
the sum of the highest annual base salary and the highest bonus
amount received by the executive in the preceding five years.

Additional payments will be made to the executive
in the event that a change in control has occurred and the
executives employment is terminated without cause within
the six-month period following the effective date of such change
in control, or upon a Qualifying Voluntary Termination within
that period. The executive will receive additional severance
payments equal to the amount he or she would have received had
employment continued, at the same intervals and at the same rate
of base salary the executive was receiving during the month
preceding termination, until the six-month anniversary of the
effective date of the change in control. These additional

30



---



##### Table of Contents



severance payments, if paid, would be in addition
to the basic severance payment and the stay payment described
above.


Each executive is entitled to several other
benefits contained in the agreements, including:



| |   |                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | life, health, medical/hospital, dental, and
    vision insurance benefits for a period of 12 months in the
    event that an executives full-time employment is
    terminated without cause or upon a Qualifying Voluntary
    Termination, either before or after a change in control has
    occurred; and
|
| |  | gross-up payments to cover any excise tax imposed
    by Section 4999 of the Internal Revenue Code of 1986, as
    amended (the Code) upon any payment made to the
    executive under the agreements, subject to certain limitations.                                                                      

We have agreed to be solely responsible for any
and all attorneys fees and related expenses incurred by
the executive in the event that we fail to comply with our
obligations under the agreements.

Trust agreement.In
connection with an additional stay pay agreement with
Mr. Lipscomb, we entered into a trust agreement, which
established an irrevocable grantor trust for the benefit of
Mr. Lipscomb as the beneficiary. The stay pay agreement
provides for payment of $315,600 on January 1, 2007, or
earlier, upon Mr. Lipscombs voluntary or involuntary
termination of full-time employment with us, with or without
cause (as defined in the stay pay agreement).

The assets to be held by the trust include the
original deposit of principal and any other contributions made
by us, at our option. These trust assets are to be disposed of
by the trustee when certain conditions in
Mr. Lipscombs stay pay agreement occur or when the
trustee is directed by two officers of Argo-Tech, other than
Mr. Lipscomb, to dispose of the assets.

If the amount disbursed by the trustee exceeds
the amount to which Mr. Lipscomb or his qualifying
successor is entitled under the stay pay agreement,
Mr. Lipscomb or his qualifying successor is entitled to
retain such excess. The trust assets and any income earned on
those assets remain at all times subject to the claims of our
general creditors under state and federal law.

The stay pay agreement also provides for the
payment of attorneys fees if enforcement of the stay pay
agreement becomes necessary, and contains certain restrictions
on certain types of competitive activity by Mr. Lipscomb.
The benefits provided by the trust and the stay pay agreement
and the trust agreement are in addition to the benefits provided
under Mr. Lipscombs Stay Pay and severance agreement
described above and Mr. Lipscombs employment
agreement described below.

Employment
agreements.We have also entered into
employment agreements with Mr. Lipscomb and Mr. Keen,
which also provide for the payments of severance benefits upon
termination of employment without cause (as defined in the
employment agreements). In the event of such a termination,
Mr. Lipscomb will receive all salary and bonuses for a
period of twelve months from the date of termination, in an
amount equal to all salary and bonuses received during the
twelve month period immediately preceding termination and a
continuation of benefits during such period. Mr. Keen will
receive, in the event of such a termination, a single lump sum
payment equal to twenty-four months of his base salary, in an
amount calculated from the base salary in effect for the full
month immediately preceding the date of termination.
Mr. Keen will receive life, health, medical/hospital,
dental and vision insurance benefits for a period of twelve
months following termination. Mr. Keens agreement
also provides for the payment of attorneys fees if
enforcement of the agreement becomes necessary, and contains
restrictions on certain competitive activities by Mr. Keen.

The benefits provided by these additional
agreements are provided in addition to the benefits and payments
provided under the severance stay pay and severance agreements
and Mr. Lipscombs trust agreement.

Compensation pursuant to employee benefit
plans



| |                      
| | ---------------------
| | Salaried Pension Plan

Our Salaried Pension Plan was established
effective November 1, 1986. Prior to July 1, 1994, our
regular, permanent salaried employees were eligible to
participate in this plan. Participation in the plan was closed
to any

31



---



##### Table of Contents



person who was not a participant on June 30,
1994, and all benefit accruals ceased as of the close of
business on June 30, 1994. The benefits of participants in
the Salaried Pension Plan who were employees on June 30,
1994 became vested (to the extent otherwise non-vested) as of
the close of business on June 30, 1994. Employee
contributions were neither required nor permitted.


The normal monthly retirement benefit under the
Salaried Pension Plan is 1.25% of a participants final
average monthly compensation multiplied by the
participants years of benefit service. Compensation earned
after June 30, 1994, and service performed after
June 30, 1994, are not taken into account in determining a
participants benefit under the Salaried Pension Plan.
Final average monthly compensation means the average monthly
compensation (computed before withholdings, deductions for taxes
or other purposes and salary reduction amounts under the
Salaried Savings Plan (as defined and discussed below)) paid or
payable to the participant for the five calendar years which
produce the highest such average, determined as if the
participants employment terminated on June 30, 1994
(or, if earlier, the date the participants employment
actually terminated or the participant ceased to be within the
class of employees eligible to participate in the Salaried
Pension Plan). If a participant ceased to be within the class of
employees eligible to participate or a participants
employment terminated (or is deemed to have terminated) prior to
July 1 of a calendar year, that calendar year is not taken
into account for purposes of determining final average monthly
compensation. A participants vested benefit cannot be less
than the participants vested benefit under the Salaried
Pension Plan, if any, as of October 31, 1989.

The Code limits the maximum annual retirement
benefit payable under the Salaried Pension Plan and the maximum
amount of annual compensation that can be taken into account in
calculating benefits under the Salaried Pension Plan.

At retirement, based on benefits accrued as of
June 30, 1994, the monthly retirement benefits payable to
each of the individuals named in the Annual
compensation table above are:

|                     |  |         |          | 
|-------------------- |  | ------- | -------- | 
|                     |  | Monthly |         
|Name                 |  | benefit |         
|                     |  |         |         
|Michael S. Lipscomb  |  | $       | 1,799.32 | 
|Paul R. Keen         |  | $       | 1,188.83 | 
|Frances S. St. Clair |  | $       | 411.56   | 

The benefits shown above are in the form of a
single life annuity commencing as of the first day of the month
after the participant attains age 65. Benefits may commence
at any time after age 55 if the participant had at least
five years of service when the participants employment
terminated. Actuarial reductions would apply for early
commencement and for payment in the form of a joint and survivor
annuity.

The normal form of payment under the Salaried
Pension Plan is a single life annuity. However, participants may
elect payment of retirement benefits under several joint and
survivor forms of payment, subject to the requirement that a
married participant receive benefits in the form of a joint and
survivor annuity with the spouse as contingent annuitant unless
the spouse consents to the participants election of
another form of payment, another contingent annuitant or both,
as applicable.



| |                      
| | ---------------------
| | Salaried Savings Plan

Our Employee Savings Plan for salaried employees
(the Salaried Savings Plan) has been in place since
1987. Regular, permanent salaried employees who have completed
at least 3 months of service are eligible to participate in
the plan. All assets of the plan are held in trust. Participants
may elect to have tax-deferred (401(k) compensation
reduction) contributions made to the plan of up to 40% of their
eligible compensation. Participants may also elect to have
after-tax contributions made to the Plan of up to 20% of their
eligible compensation. In addition, participants over the age of
50 are allowed to make catch-up contributions (up to $2,000 in
2003 and $3,000 in 2004). Employer matching contributions to the
plan ceased on July 1, 1994. For periods before
July 1, 1994, the Salaried Savings Plan provided for
employer matching contributions as follows: Basic matching
contributions of 25% of each participants tax-deferred
contributions not in excess of 3% of compensation and
discretionary additional matching contributions of a percentage
(within the range of 0% and 125% established for each fiscal
year (the plan year)) of each participants
tax-deferred contributions not in

32



---



##### Table of Contents



excess of 3% of compensation. A
participants benefit under the plan is the balance of the
participants accounts attributable to tax-deferred
contributions, after-tax contributions and the vested balance of
the participants accounts attributable to employer
matching contributions. Tax-deferred contributions and after-tax
contributions are always 100% vested. Participants (including
former employees) whose accounts attributable to employer
matching contributions had not been forfeited prior to
November 1, 1994, became, to the extent otherwise
nonvested, 100% vested. Benefits are payable in the form of a
single lump sum payment.


The Code limits the maximum annual contributions
that can be made to the Salaried Savings Plan and the maximum
amount of annual compensation that can be taken into account in
calculating contributions to the Salaried Savings Plan.
Contributions for a plan year on behalf of certain highly
compensated individuals may also be limited to comply with the
Codes nondiscrimination requirements.

Benefits are generally payable after a
participants employment terminates. A participant who is
an employee may, however, apply for an in-service distribution
of all or a portion of the participants vested account
balance after attainment of age 59 1/2 or in the event of a
hardship (as defined in the Salaried Savings Plan). A
participant may apply for an in-service distribution of
after-tax contributions at any age and for any reason. A
participant who is a party in interest may apply for
a loan of up to 50% of the participants vested account
balance (subject to a $50,000 maximum) under the Salaried
Savings Plan.



| |                              
| | -----------------------------
| | Employee Stock Ownership Plan

The ESOP was established in 1994 with the
participation of Argo-Techs salaried employees at its
Cleveland facility. GreatBanc Trust Company serves as the
plans trustee, and holds all of its assets in trust.

On May 17, 1994, the trustee purchased
420,000 shares of common stock of AT Holdings with the
proceeds of a $16.8 million loan from us to the ESOP. The
term of the loan ended on April 28, 2004 and the loan was
repaid in full. The interest rate for the loan was fixed for the
ten-year term at 7.16% per year. The purchase price for the
AT Holdings common stock was $40 per share.

The shares of AT Holdings common stock
purchased by the ESOP with the proceeds of the loan are held in
a suspense account and released to eligible participants on a
pro rata basis as loan principal payments are made. Shares
released from the plan for each plan year are allocated to each
eligible participants account based on the ratio of each
such participants eligible compensation to the total
eligible compensation of all eligible participants. Forfeitures
of the accounts of non-vested participants are reallocated among
eligible participants in the same manner as shares of
AT Holdings common stock released from the suspense account.

For each of the plan years ended October 31,
2002 and October 31, 2003, 42,000 shares of
AT Holdings common stock were released from the suspense
account. In the plan year ending October 31, 2004,
21,000 shares of AT Holdings common stock were
released. The loan was repaid in full in April 2004, and as a
result, no shares of AT Holdings common stock remain in the
suspense account for release in future plan years.

We may, for any plan year, make additional
discretionary contributions for the benefit of plan
participants. These contributions may be made in cash, shares of
qualifying employer securities or other property. Whether the
ESOP will acquire additional shares of AT Holdings common
stock or other qualifying employer securities in the future
depends upon future business conditions. Such purchases, if
made, would be funded through additional borrowings by the plan
or additional contributions from us. The timing, amount and
manner of future contributions to the plan will be affected by
various factors, including prevailing regulatory policies, the
requirements of applicable laws and regulations and market
conditions. We contributed 21,000 shares of
AT Holdings common stock to the plan in October 2004 and
will contribute 42,000 shares in October 2005. All of these
63,000 shares have been repurchased by Argo-Tech from plan
participants who exercised their put option rights under the
plan. These rights are described below.

Participants may elect to receive the shares of
qualifying employer securities credited to their accounts after
their termination of employment. After attaining age 55
with 10 or more years of participation in the ESOP, participants
may also elect to receive a maximum of 50% of their vested
shares over a six year period. Participants vest in their plan
accounts 20% per year of service, and service prior to
the effective date of the plan counts for this purpose. A
participant can require us to purchase qualifying employer
securities received from the

33



---



##### Table of Contents



plan at the value the stock then has, as
determined for plan purposes (a put option). Shares
of qualifying employer securities distributed from the plan are
subject to a right of first refusal in favor of us
or the ESOP at the value the stock then has, as determined
annually by an independent financial consulting firm based on
our performance and financial condition. The put option and
right of first refusal will no longer apply if the qualifying
employer securities become tradable on an established securities
market.


Voting rights on and decisions whether to tender
or exchange shares of qualifying employer securities held in the
ESOP are passed through to participants. Each
participant is entitled to direct the plans trustee as to
the voting of (1) shares of qualifying employer securities
credited to the participants account and (2) a
proportionate part of the unallocated shares of qualifying
employer securities held in the suspense account and shares of
qualifying employer securities allocated to participants
accounts as to which no direction is received by the plans
trustee. In the event of a tender or exchange offer for
qualifying employer securities held in the plan, each
participant is entitled to direct the plans Trustee
whether to tender or exchange shares of qualifying employer
securities held in the plan in a manner similar to the voting
directions described above.

Because the employers contributions to the
ESOP are not fixed, benefits payable under the plan cannot be
estimated.

For the plan year ended October 31, 2004,
the number of shares of AT Holdings common stock allocated under
the ESOP to the accounts of the Named Executives were:

|                     |  |                  |          |  |               |  |            | 
|-------------------- |  | ---------------- | -------- |  | ------------- |  | ---------- | 
|                     |  |                 
|                     |  | Shares allocated |         
|                     |  |                  |         
|                     |  | Year ended       |          |  | Cumulative to | 
|Name                 |  | Oct. 31, 2004    |          |  | Oct. 31, 2004 | 
|                     |  |                  |          |  |               | 
|Michael S. Lipscomb  |  |                  | 514.3801 |  |               |  | 4,557.3995 | 
|Paul R. Keen         |  |                  | 514.3801 |  |               |  | 4,557.3995 | 
|Frances S. St. Clair |  |                  | 514.3801 |  |               |  | 4,508.4351 | 

GAAP requires that any third party borrowing by
the ESOP be reflected as a liability on our statement of
financial condition. Since the plan borrowed from us, the
obligation is not treated as an asset of ours, but will be
deducted from shares of stock held by the ESOP. If the plan
purchases newly issued shares of AT Holdings common stock, total
stockholders equity would neither increase nor decrease.

The Internal Revenue Service has issued a
determination letter that the plan is qualified under
Section 401(a) of the Code and is an employee stock
ownership plan under Section 4975(e)(7) thereof.
Contributions to the plan and allocations to the accounts of
eligible participants thereunder are subject to applicable
limitations imposed under the Code. The plan is subject to the
requirements of the Employee Retirement Income Security Act of
1974, as amended, known as ERISA, and the
regulations thereunder.



| |                                                      
| | -----------------------------------------------------
| | Employee Stock Ownership Plan Excess
    Benefit Plan

We maintain the ESOP Excess Benefit Plan, an
unfunded plan that at all times will be deemed invested in AT
Holdings common stock. This plan is for employees participating
in the ESOP in respect of reduction to allocations to their
accounts because of limitations under the Code applicable to
tax-qualified plans. Benefits under this plan vest in the same
manner as benefits under the ESOP and distributions from the
plan will, subject to certain restrictions, be made in whole or
fractional shares of AT Holdings common stock at the same time
or times as benefits under the ESOP are distributable, or in the
case of benefits with respect to qualifying employer securities
subject to the put option under the ESOP, at the time the plan
participant exercises (or is deemed to have exercised) a
hypothetical put option under the plan.

34



---



##### Table of Contents



We maintain a bookkeeping account for amounts
credited to the accounts of plan participants. For the plan year
ended October 31, 2004, the amounts credited to the
accounts of the Named Executives were:

|                     |  |                             |            |  |               |  |            | 
|-------------------- |  | --------------------------- | ---------- |  | ------------- |  | ---------- | 
|                     |  |                            
|                     |  | Equivalent shares allocated |           
|                     |  |                             |           
|                     |  | Year ended                  |            |  | Cumulative to | 
|Name                 |  | Oct. 31, 2004               |            |  | Oct. 31, 2004 | 
|                     |  |                             |            |  |               | 
|Michael S. Lipscomb  |  |                             | 1,218.2482 |  |               |  | 9,474.2557 | 
|Paul R. Keen         |  |                             | 320.4934   |  |               |  | 2,474.2652 | 
|Frances S. St. Clair |  |                             | 247.5342   |  |               |  | 1,651.5610 | 



| |                             
| | ----------------------------
| | Incentive stock option plans

Aggregate Option/SAR Exercises in Last Fiscal
Year

and Fiscal Year End Option/SAR
Values


|                     |  |          |        |        |             |  |   |                 |  |               |              |  |               |  |         |   |  |   |               | 
|-------------------- |  | -------- | ------ | ------ | ----------- |  | - | --------------- |  | ------------- | ------------ |  | ------------- |  | ------- | - |  | - | ------------- | 
|                     |  |          |        |        |             |  |   | Number of       |  |               |             
|                     |  |          |        |        |             |  |   | Securities      |  |               | Value of     | 
|                     |  |          |        |        |             |  |   | Underlying      |  |               | Unexercised  | 
|                     |  |          |        |        |             |  |   | Unexercisable   |  |               | In-The-Money | 
|                     |  |          |        |        |             |  |   | Options/SARs at |  |               | Options at   | 
|                     |  |          |        |        |             |  |   | FY-End          |  |               | FY-End($)    | 
|                     |  |          |        | Shares |             |  |   |                 |  |               |              |  |              
|                     |  | Exercise |        |        | Acquired on |  |   | Value           |  | Exercisable/  |              |  | Exercisable/  | 
|Name                 |  | Price($) |        |        | Exercise    |  |   | Realized($)     |  | Unexercisable |              |  | Unexercisable | 
|                     |  |          |        |        |             |  |   |                 |  |               |              |  |               | 
|Michael S. Lipscomb  |  | $        | 10.00  |        |             |  |  |                 |  | $             |             |  |               |  | 8,670/  |  |  | $ | 914,598/ $   | 
|                     |  |          | 40.00  |        |             |  |  |                 |  |               |             |  |               |  | 6,125/  |  |  |   | 462,376/     | 
|                     |  |          | 100.11 |        |             |  |  |                 |  |               |             |  |               |  | 4,000/  |  |  |   | 61,520/      | 
|                     |  |          | 49.79  |        |             |  |  |                 |  |               |             |  |               |  | 18,926/ |  |  |   | 1,243,438/   | 
|Paul R. Keen         |  | $        | 10.00  |        |             |  |  |                 |  |               |             |  |               |  | 1,990/  |  |  |   | 209,925/     | 
|                     |  |          | 40.00  |        |             |  |  |                 |  |               |             |  |               |  | 2,760/  |  |  |   | 208,352/     | 
|                     |  |          | 100.11 |        |             |  |  |                 |  |               |             |  |               |  | 1,400/  |  |  |   | 21,532/      | 
|                     |  |          | 49.79  |        |             |  |  |                 |  |               |             |  |               |  | 6,693/  |  |  |   | 439,730/     | 
|Frances S. St. Clair |  | $        | 10.00  |        |             |  |  |                 |  |               |             |  |               |  | 2,990/  |  |  |   | 315,415/     | 
|                     |  |          | 40.00  |        |             |  |  |                 |  |               |             |  |               |  | 2,760/  |  |  |   | 208,352/     | 
|                     |  |          | 100.11 |        |             |  |  |                 |  |               |             |  |               |  | 1,400/  |  |  |   | 21,532/      | 
|                     |  |          | 49.79  |        |             |  |  |                 |  |               |             |  |               |  | 6,693/  |  |  |   | 439,730/     | 

1991 Performance Stock Option
Plan.The 1991 Performance Stock
Option Plan provides for option grants for the purchase of AT
Holdings common stock. The exercise price of each option is
$10.00 per share. All of the options available under this
plan were granted and have been amended by the Compensation
Committee of AT Holdings, upon the recommendation of our
compensation committee, and with the consent of the optionees in
June 2001, to extend the expiration date to November 9,
2011. All of the options granted under this plan became fully
vested in January 1999.

1991 Management Incentive Stock Option
Plan.The 1991 Management Incentive
Stock Option Plan provides for option grants for the purchase of
AT Holdings common stock. The exercise price of each option is
$10.00 per share. All of the options available under this
plan were granted and have been amended by the Compensation
Committee of AT Holdings, upon the recommendation of our
Compensation Committee, and with the consent of the optionees in
June 2001, to extend the expiration date to November 9,
2011. All of the options granted under this plan became fully
vested in January 1999.

1998 Equity Replacement Stock Option
Plan.The 1998 Equity Replacement
Stock Option Plan (as amended June 12, 2001) was
established to provide for option grants for the purchase of AT
Holdings common stock. The exercise price of each option is
$40.00 per share. The options were granted to each person
who was a participant in the 1997 Stock Appreciation Rights Plan
in exchange for, and in cancellation of, all of the rights of

35



---



##### Table of Contents



each such participant under the 1997 Stock
Appreciation Rights Plan, which was terminated in 1999. These
options, which were granted by the Compensation Committee of AT
Holdings upon the recommendation of our compensation committee,
expire on January 2, 2015. All of the options granted under
this plan were fully vested upon issuance.


1998 Incentive Plan.The 1998 Incentive Plan was established to provide option grants
for the purchase of AT Holdings common stock, at prices that may
be more than, less than or equal to the fair market value of the
shares, as the Board or Compensation Committee of AT Holdings
may determine at the time of grant. Options are granted by the
Compensation Committee of AT Holdings upon the recommendation of
our compensation committee. There have been three option grants
under the 1998 Incentive Plan, the first in 1999 with an
exercise price of $100.11, the second in 2001 with an exercise
price of $69.18 and the third in 2002 with an exercise price of
$49.79. None of the Named Executives received option grants in
2001. The option agreement governing the options granted in 1999
provides that such options vest in 20% increments over five
successive years. For any year in which the EBITDA of Argo-Tech
exceeds 105% of the target EBITDA, an additional 13 1/3% of the
optioned shares will vest. Effective November 2, 2000 all
holders of options granted in 1999 agreed to the cancellation of
the portion of the 1999 options which were not vested at such
date. Pursuant to the plan, such cancelled options are available
for new grants. The option agreement governing the options
granted under the plan in September 2001 and March 2002 provides
for vesting as follows: 33.3% at the time of issuance and 33.3%
on the anniversary date of the grant over the next two years.
All options granted under the plan expire ten years from the
date of grant. In the event that AT Holdings common stock
becomes registered or traded on a national exchange or in the
event of a sales transaction (as defined in the plan) or the
involuntary termination (as defined in the agreement), all
options will become exercisable in full.

We are evaluating other stock-based employee
benefit programs to provide appropriate incentives for our
workforce.



| |                              
| | -----------------------------
| | Executive life insurance plan

Our executive life insurance plan permits certain
officers and key employees to obtain life insurance benefits in
addition to those generally provided to salaried employees. The
level of coverage provided to such officers and key employees
consists of basic term and whole life insurance coverage equal
to three times the individuals salary.



| |                          
| | -------------------------
| | Management incentive plan

We have in effect a plan pursuant to which
officers and other key management employees may receive cash
bonuses paid upon (1) the achievement of specified cash
flow goals in the preceding fiscal year and (2) individual
performance. The amounts of such bonus awards are approved by
the Compensation Committee of AT Holdings.









|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management.

Argo-Tech is a wholly-owned subsidiary of AT
Holdings, which owns the only outstanding share of
Argo-Techs common stock, par value $.01 per share.
The following table sets forth the ownership of AT Holdings
common stock, par value $.001 per share, as of
October 30, 2004 by:



| |   |                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------
| |  | each person known to Argo-Tech to be the
    beneficial owner of more than 5% of AT Holdings common stock;
|
| |  | each director of Argo-Tech and AT Holdings;                                                               
|
| |  | each of the Named Executives; and                                                                         
|
| |  | all of Argo-Tech and AT Holdings directors and
    executive officers as a group.                         

On October 30, 2004, there were
653,045 shares of AT Holdings common stock outstanding,
exclusive of treasury shares.

36



---



##### Table of Contents



|                                                            |                                                                    |                                       |         |           |                     |  |        |       |  |  |                  |  |  |  |       |  | 
|----------------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------------- | ------- | --------- | ------------------- |  | ------ | ----- |  |  | ---------------- |  |  |  | ----- |  | 
|                                                            |                                                                    |                                      
|                                                            |                                                                    | Ownership at AT Holdings Common Stock |        
|                                                            |                                                                    |                                       |        
|                                                            |                                                                    |                                       |         | Number of |                     |  |       
|                                                            |                                                                    | Number of                             |         |           | immediately         |  |        |      
|Name of                                                     |                                                                    | outstanding                           |         |           | exercisable options |  |        |      
|beneficial owner                                            |                                                                    | shares owned                          |         |           | or warrants         |  |        | Total |  |  | Percent of class | 
|                                                            |                                                                    |                                       |         |           |                     |  |        |       |  |  |                  | 
|GreatBanc Trust Company(1)                                  |                                                                    |                                       | 354,634 |           |                     |  |       |       |  |  | 354,634          |  |  |  | 54.3% | 
|                                                            | 1301 West 22nd Street
    Oak Brook, IL 60523                      |                                       |         |           |                     |  |        |       |  |  |                  |  |  |  |       |  | 
|YC International, Inc                                       |                                                                    |                                       | 39,000  | (2)       |                     |  |       |       |  |  | 39,000           |  |  |  | 6.0   | 
|                                                            | 725 South Figueroa Street
    Suite 3870
    Los Angeles, CA 90117 |                                       |         |           |                     |  |        |       |  |  |                  |  |  |  |       |  | 
|AT Holdings, LLC                                            |                                                                    |                                       | 187,452 |           |                     |  | 39,000 | (2)   |  |  | 226,452          |  |  |  | 34.7  | 
|                                                            | 1390 Highway 50 East
    Suite 4
    Carson City, NV 89701         |                                       |         |           |                     |  |        |       |  |  |                  |  |  |  |       |  | 
|J.P. Morgan Partners, LLC                                   |                                                                    |                                       |        |           |                     |  | 46,025 | (3)   |  |  | 46,025           |  |  |  | 7.0   | 
|                                                            | 1221 Avenue of the Americas
    New York, NY 10020                 |                                       |         |           |                     |  |        |       |  |  |                  |  |  |  |       |  | 
|Confar, Thomas*                                             |                                                                    |                                       |        |           |                     |  |       |       |  |  |                 |  |  |  | **    | 
|de Chastenet, Remi*                                         |                                                                    |                                       |        |           |                     |  | 500    |       |  |  | 500              |  |  |  | **    | 
|Dougherty, Thomas*                                          |                                                                    |                                       | 2,094   |           |                     |  |       |       |  |  | 2,094            |  |  |  | **    | 
|Keen, Paul                                                 |                                                                    |                                       | 19,058  | (4)       |                     |  | 12,834 |       |  |  | 31,892           |  |  |  | 4.9   | 
|Lipscomb, Michael*                                         |                                                                    |                                       | 36,054  | (5)       |                     |  | 37,721 |       |  |  | 73,775           |  |  |  | 11.3  | 
|Nagata, Robert*                                             |                                                                    |                                       |        |           |                     |  | 500    |       |  |  | 500              |  |  |  | **    | 
|St. Clair, Frances*                                        |                                                                    |                                       | 11,972  | (6)       |                     |  | 13,843 |       |  |  | 25,815           |  |  |  | 4.0   | 
|Storrie, Karl*                                              |                                                                    |                                       | 1,204   |           |                     |  | 450    |       |  |  | 1,654            |  |  |  | **    | 
|Directors and Executive Officers as a Group
    (8 persons) |                                                                    |                                       | 70,382  |           |                     |  | 65,848 |       |  |  | 136,230          |  |  |  | 20.9  | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | Director of AT Holdings Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|**  | Less than 1%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|   | Director of Argo-Tech                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(1) | GreatBanc Trust Company is the trustee of
    the Employee Stock Ownership Plan. The trustee holds shares of
    AT Holdings common stock in trust for the benefit of the ESOP.
    Under normal circumstances, the trustee votes all of the shares
    held by the ESOP in proportion to the actual voting directions
    of the plan participants. Under certain limited circumstances,
    the ESOP trustee may, in the exercise of its fiduciary duty,
    vote the shares held by the ESOP as a block. The share ownership
    numbers for officers do not include shares held through the
    ESOP, other than those shares directly attributed to the
    officers account.
|   
|(2) | AT Holdings, LLC has the option to purchase all
    of YC Internationals shares of AT Holdings common stock.
    AT Holdings, LLC disclaims all beneficial ownership of those
    shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(3) | Represents immediately exercisable warrants to
    purchase 46,025 shares of AT Holdings common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(4) | Includes 4,557 shares attributable to the
    ESOP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(5) | Includes 4,557 shares attributable to the
    ESOP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(6) | Includes 4,508 shares attributable to the
    ESOP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                









|         |                                                    
|-------- | ---------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions.

Distribution
agreements

Upsilon International Corporation, which we
sometimes refer to as UIC, was appointed the
exclusive distributor of our engine fuel pump and certain
airframe products manufactured at our Cleveland facility, first
in 1990 with respect to the Japanese market, and in 1994 for the
entire international market under a long-term distribution
agreement. Effective December 15, 2000, UIC was also
appointed an Argo-Tech non-exclusive sales agent for engine
overhaul and repair and certain other product support
agreements. UIC is owned by YC International, Inc., which is
under the control of Mr. Masashi Yamada, a stockholder of
AT Holdings, our parent company, through his control of YC
International and AT Holdings, LLC. We believe that this
distribution agreement was entered into on terms and conditions
customary for the industry in all respects with the exception of
the contract term of 50 years with respect to UICs
distribution activities, and termination provisions relating to

37



---



##### Table of Contents



such distribution activities which are more
favorable to UIC than industry norm. The agreement provides for
a 15% discount from Argo-Tech catalog prices on all purchases of
our products by UIC and a sales commission of 5% on
international overhaul and repair business obtained by us after
December 15, 2000. For fiscal 2004, sales by UIC accounted
for approximately 10.9% of our net revenues. In addition, two
entities controlled by Mr. Yamada serve as distributors in
the Japanese military market for products manufactured by
Argo-Tech Corporation Costa Mesa. For fiscal year 2004, sales to
these entities accounted for approximately 1.2% of our net
revenues.


Officer
loans

Mr. Lipscomb and Mr. Keen have entered
into presently outstanding recourse loan agreements with AT
Holdings. The largest amount of indebtedness outstanding since
the beginning of fiscal 2004 for each was: $579,913 (Mr.
Lipscomb) and $306,002 (Mr. Keen). Each loan is due
October 30, 2010 and currently accrues interest at 5.0%
annually. These loans were used to purchase AT Holdings common
stock and are secured by that stock. Mr. Lipscomb and
Mr. Keen have each entered into a pledge agreement and
promissory note with AT Holdings in connection with these loans.
We believe that the terms of these loans are no less favorable
to AT Holdings than would have been available pursuant to
arms length negotiations with unaffiliated parties.

Purchase of
senior subordinated notes

On November 22, 2002, Mr. Lipscomb,
Ms. St. Clair and eight other key management employees
purchased a total of $1,000,000 in principal amount of our 8
5/8% senior subordinated notes. These notes were purchased
in an open market transaction arranged by Deutsche Bank
Securities for a total purchase price of $700,000 plus accrued
interest from October 1, 2002 through November 22,
2002. Mr. Lipscomb purchased $652,000 in principal amount
of notes through the Argo-Tech Corporation Trust Agreement,
dated October 28, 1994, which was amended effective
November 22, 2002, to permit this purchase of notes.
Ms. St. Clair purchased $130,000 in principal amount of
notes. These notes were purchased or redeemed in connection with
the Refinancing.

Warrants for
AT Holdings common stock

Simultaneously with its purchase of the Holdings
Preferred Stock in December 1998, J.P. Morgan Partners
(SBIC), LLC received immediately exercisable warrants to
purchase 46,025 shares, or 7.0% as of October 30,
2004, of AT Holdings common stock. The warrants entitle
J.P. Morgan Partners (SBIC), LLC to certain registration,
tag-along, preemptive, board observation and mandatory
redemption rights. In connection with a mandatory redemption, if
AT Holdings does not have sufficient cash available to pay the
redemption price in full, or is prohibited from doing so because
of a restriction in its then existing debt or preferred stock
instruments, it will be required to use its best efforts to
arrange debt or equity financing or to effect a consent
solicitation or a refinancing, as the case may be. Furthermore,
if a leverage ratio threshold is exceeded upon our incurrence of
additional indebtedness, AT Holdings is required to issue to
J.P. Morgan Partners (SBIC), LLC additional warrants to
purchase an additional number of shares of AT Holdings common
stock aggregating to 3% of the fully-diluted common stock of AT
Holdings. As part of the Refinancing, AT Holdings redeemed all
of the outstanding shares of Holdings Preferred Stock. This
redemption was funded by a cash dividend from us. In connection
with this redemption, J.P. Morgan Partners (SBIC), LLC,
waived certain rights contained in the warrants, preferred stock
and related purchase agreements, including certain of those
described above.

AT Holdings
stockholders agreement

On December 17, 1998, AT Holdings,
Sunhorizon International, AT Holdings, LLC, YC International,
J.P. Morgan Partners (SBIC), LLC and representatives of
Argo-Techs management and director investors entered into
the AT Holdings stockholders agreement. Argo-Tech is not a
party to the AT Holdings stockholders agreement. The AT
Holdings stockholders agreement contains customary terms
and conditions, including

38



---



##### Table of Contents



transfer restrictions, registration rights,
tagalong rights and rights of first refusal and provides that
the stockholders party thereto will vote for:




| |   |                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | director nominees designated by the management
    and director investors, comprising a majority of the Board of
    Directors of AT Holdings; and                                                                                         
|
| |  | director nominees designated by Mr. Masashi
    Yamada, who controls AT Holdings, LLC and YC International, each
    a significant stockholder of AT Holdings, which will comprise a
    minority of the Board of Directors of AT Holdings.

Although J.P. Morgan Partners (SBIC), LLC
does not have the right to nominate a voting director nominee,
it has the right to designate one non-voting representative to
attend all AT Holdings Board of Directors and committee meetings.

The management and director investors party to
the AT Holdings stockholders agreement have the right,
upon termination of their employment or directorship, as the
case may be, to put to AT Holdings all but not part of their
shares of AT Holdings common stock for a per share purchase
price equal to the greater of (i) the most recent valuation
of our independent consultant or (ii) the sale price of AT
Holdings common stock in any transaction within the preceding
year in which 10% or more of AT Holdings common stock was sold.

39



---



##### Table of Contents









PART IV








|         |                                              
|-------- | ---------------------------------------------
|Item 15. | Exhibits; Financial Statements
    Schedules.

(a)(1) Financial Statements

The following consolidated financial statements
of the Company are included in a separate section of this report
following the signature page:



| |                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------
| | Report of Independent Registered Public
    Accounting Firm                                                                                            
|
| | Consolidated Balance Sheets as of
    October 30, 2004 and October 25, 2003                                                                            
|
| | Consolidated Statements of Net Income (Loss) For
    the Fiscal Years ended October 30, 2004, October 25,
    2003 and October 26, 2002                
|
| | Consolidated Statements of Shareholders
    Equity/(Deficiency) for the Fiscal Years ended October 30,
    2004, October 25, 2003 and October 26, 2002
|
| | Consolidated Statements of Cash Flows For the
    Fiscal Years ended October 30, 2004, October 25, 2003
    and October 26, 2002                       
|
| | Notes to Consolidated Financial Statements for
    the Fiscal Years ended October 30, 2004, October 25,
    2003 and October 26, 2002                  

(a)(2) Financial Statement Schedules

The following financial statement schedule is
included in a separate section of this report following the
signature page:



| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | Valuation and Qualifying Accounts for the Fiscal
    Years ended October 30, 2004, October 25, 2003 and
    October 26, 2002

(a)(3) Exhibits

|        |       |  |                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | ----- |  | ----------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |                                                                                          
|Number  |       |  | Description of Exhibit (and document from which incorporated by reference, if applicable)
|        |       |  |                                                                                          
|        | 3.1   |  |                                                                                           | Restated Certificate of Incorporation of
    Argo-Tech, dated April 16, 1999 (incorporated herein by
    reference to Exhibit 3.1 of Argo-Techs registration
    statement on form S-4/ A filed April 22, 1999, SEC
    File No. 333-73179)                                                                                                                                                                                  
|        | 3.2   |  |                                                                                           | Restated By-Laws of Argo-Tech dated
    April 16, 1999 (incorporated herein by reference to
    Exhibit 3.2 of Argo-Techs registration statement on
    form S-4/ A filed April 22, 1999, SEC File
    No. 333-73179)                                                                                                                                                                                                        
|        | 4.1   |  |                                                                                           | Indenture dated June 23, 2004, between
    Argo-Tech, the Subsidiary Guarantors signatory thereto and BNY
    Midwest Trust Company, as Trustee, relating to the 9
    1/4% Senior Notes due 2010 (the form of which is included
    in such Indenture) (incorporated herein by reference to
    Exhibit 4.1 of Argo-Techs quarterly report on
    form 10-Q for the quarter ended July 31, 2004, SEC
    File No. 333-38223)
|        | 10.1* |  |                                                                                           | Form of Stay Pay and Severance Agreement dated
    June 6, 1996, between Argo-Tech and certain Executive
    Officers of Argo-Tech (Michael S. Lipscomb, Frances S.
    St. Clair, and Paul R. Keen) (incorporated herein by
    reference to Exhibit 10.1 of Argo-Techs Registration
    Statement on form S-1, filed October 17, 1997, SEC
    File No. 333-38223)                                                         
|        | 10.2* |  |                                                                                           | Employment Agreement dated February 13, 1989
    between Argo-Tech and Paul R. Keen (incorporated herein by
    reference to Exhibit 10.2 of Argo-Techs Registration
    Statement on form S-1, filed October 17, 1997, SEC
    File No. 333-38223)                                                                                                                                                                          
|        | 10.3* |  |                                                                                           | Employment Agreement dated October 15, 1986
    between Argo-Tech and Michael S. Lipscomb (incorporated
    herein by reference to Exhibit 10.3 of Argo-Techs
    Registration Statement on form S-1, filed October 17,
    1997, SEC File No. 333-38223)                                                                                                                                                                    

40



---



##### Table of Contents



|        |       |   |                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | ----- | - | ----------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |   |                                                                                          
|Number  |       |   | Description of Exhibit (and document from which incorporated by reference, if applicable)
|        |       |   |                                                                                          
|        | 10.4* |   |                                                                                           | Argo-Tech Corporation Trust Agreement dated
    October 28, 1994 between Argo-Tech and Society National
    Bank, as Trustee, relating to the Employment Agreement dated
    October  15, 1986 between Argo-Tech and
    Michael S. Lipscomb (incorporated herein by reference to
    Exhibit 10.4 of Argo-Techs Registration Statement on
    form S-1, filed October 17, 1997, SEC File
    No. 333-38223)
|        | 10.5* |   |                                                                                           | Argo-Tech Corporation Salaried Pension Plan,
    dated November 1, 1995 (incorporated herein by reference to
    Exhibit 10.5 of Argo-Techs Registration Statement on
    form S-1, filed October 17, 1997, SEC File
    No. 333-38223)                                                                                                                                                                     
|        | 10.6* |   |                                                                                           | First Amendment to Argo-Tech Corporation Salaried
    Pension Plan (incorporated herein by reference to
    Exhibit 10.6 of Argo-Techs Registration Statement on
    form S-1, filed October 17, 1997, SEC File
    No. 333-38223)                                                                                                                                                                          
|        | 10.7* |   |                                                                                           | Argo-Tech Corporation Employee Stock Ownership
    Plan and Trust Agreement, dated May 17, 1994
    (incorporated herein by reference to Exhibit 10.7 of
    Argo-Techs Registration Statement on form S-1, filed
    October 17, 1997, SEC File No. 333-38223)                                                                                                                                             
|        | 10.8* |   |                                                                                           | First Amendment to the Argo-Tech Corporation
    Employee Stock Ownership Plan and Trust Agreement, dated
    October 26, 1994 (incorporated herein by reference to
    Exhibit 10.8 of Argo-Techs Registration Statement on
    form S-1, filed October 17, 1997, SEC File
    No. 333-38223)                                                                                                              
|        | 10.9* |   |                                                                                           | Second Amendment to the Argo-Tech Corporation
    Employee Stock Ownership Plan and Trust Agreement, dated
    May 9, 1996 (incorporated herein by reference to
    Exhibit 10.9 of Argo-Techs Registration Statement on
    form S-1, filed October 17, 1997, SEC File
    No. 333-38223)                                                                                                                  
|        | 10.10 | * |                                                                                           | Third Amendment to the Argo-Tech Corporation
    Employee Stock Ownership Plan and Trust Agreement, dated
    July 18, 1997 (incorporated herein by reference to
    Exhibit 10.10 of Argo-Techs Registration Statement on
    form S-1, filed October 17, 1997, SEC File
    No. 333-38223)                                                                                                                
|        | 10.11 | * |                                                                                           | Argo-Tech Corporation Employee Stock Ownership
    Plan Excess Benefit Plan, dated May 17, 1994 (incorporated
    herein by reference to Exhibit 10.11 of Argo-Techs
    Registration Statement on form S-1, filed October 17,
    1997, SEC File No. 333-38223)                                                                                                                                            
|        | 10.12 |   |                                                                                           | AT Holdings Corporation Stockholders
    Agreement, dated December 17, 1998 (incorporated herein by
    reference to Exhibit 10.12 of Argo-Techs Annual
    Report on form 10-K for the year ended October 30,
    1999, SEC File No. 333-38223)                                                                                                                                                           
|        | 10.13 |   |                                                                                           | AT Holdings Corporation 1998 Supplemental
    Stockholders Agreement, dated December 17, 1998
    (incorporated herein by reference to Exhibit 10.13 of
    Argo-Techs Annual Report on form 10-K for the year
    ended October 30, 1999, SEC File No. 333-38223)                                                                                                                                         
|        | 10.14 | * |                                                                                           | Form of Management Incentive Compensation Plan
    for key employees of Argo-Tech (incorporated herein by reference
    to Exhibit 10.19 of Argo-Techs Registration Statement
    on form S-1, filed October 17, 1997, SEC File
    No. 333-38223)                                                                                                                                                          
|        | 10.15 | * |                                                                                           | 1991 Management Incentive Stock Option Plan, as
    amended, dated May 16, 1994 (incorporated herein by
    reference to Exhibit 10.20 of Argo-Techs Registration
    Statement on form S-1, filed October 17, 1997, SEC
    File No. 333-38223)                                                                                                                                                            
|        | 10.16 | * |                                                                                           | Amendment to the 1991 Management Incentive Stock
    Option Plan, as amended, dated June 12, 2001 (incorporated
    herein by reference to Exhibit 10.3 of Argo-Techs
    Quarterly Report on form 10-Q for the quarter ended
    July 28, 2001)                                                                                                                                                            
|        | 10.17 | * |                                                                                           | Form of Stock Option Agreement in connection with
    the Management Incentive Stock Option Plan, as amended, between
    Argo-Tech and each member of Argo-Techs Executive Staff
    (incorporated herein by reference to Exhibit 10.21 of
    Argo-Techs Registration Statement on form S-1, filed
    October 17, 1997, SEC File No. 333-38223)                                                         
|        | 10.18 | * |                                                                                           | 1991 Performance Stock Option Plan, as amended,
    dated May 16, 1997 (incorporated herein by reference to
    Exhibit 10.22 of Argo-Techs Registration Statement on
    form S-1, filed October 17, 1997, SEC File
    No. 333-38223)                                                                                                                                                                     

41



---



##### Table of Contents



|        |       |   |                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | ----- | - | ----------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |   |                                                                                          
|Number  |       |   | Description of Exhibit (and document from which incorporated by reference, if applicable)
|        |       |   |                                                                                          
|        | 10.19 | * |                                                                                           | Amendment to the 1991 Performance Stock Option
    Plan, as amended, June 12, 2001 (incorporated herein by
    reference to Exhibit 10.1 of Argo-Techs Quarterly
    Report on form 10-Q for the quarter ended July 28,
    2001)                                                                                                                                                                                                                                                                                                                                                   
|        | 10.20 | * |                                                                                           | Form of Stock Option Agreement in connection with
    the 1991 Performance Stock Option Plan, as amended, between
    Argo-Tech and certain key employees (incorporated herein by
    reference to Exhibit 10.23 of Argo-Techs Registration
    Statement on form S-1, filed October 17, 1997, SEC
    File No. 333-38223)                                                                                                                                                                                                                                                          
|        | 10.21 |   |                                                                                           | Amended and Restated Credit Facility, dated
    June 23, 2004, by and among Argo-Tech Corporation, the
    Guarantors party thereto, the Lenders party thereto and National
    City Bank, as administrative agent. (incorporated herein by
    reference to Exhibit 10.1 of Argo-Techs quarterly
    report on form 10-Q for the quarter ended July 31,
    2004, SEC File No. 333-38223)                                                                                                                                                                                          
|        | 10.22 |   |                                                                                           | First Amendment, dated as of January 19,
    2005, to Third Amended and Restated Credit Agreement, dated as
    of June 23, 2004, by and among Argo-Tech Corporation, AT
    Holdings Corporation, National City Bank, as administrative
    agent and an issuing bank, JPMorgan Chase Bank, as an issuing
    bank with respect to existing letters of credit issued
    thereunder and the other lenders signatory thereto.
    (incorporated herein by reference to Exhibit 10.1 of
    Argo-Techs current report on Form 8-K filed
    January 21, 2005, SEC File No. 333-38223)
|        | 10.23 |   |                                                                                           | Distributorship Agreement, dated
    December 24, 1990, between Argo-Tech, Yamada Corporation
    and Vestar Capital Partners, Inc. (incorporated herein by
    reference to Exhibit 10.25 of Argo-Techs Registration
    Statement on form S-1, filed October 17, 1997, SEC
    File No. 333-38223)                                                                                                                                                                                                                                                                                
|        | 10.24 |   |                                                                                           | Japan Distributorship Agreement, dated
    December 24, 1990, between Argo-Tech, Aerotech World Trade
    Corporation, Yamada Corporation, Yamada International
    Corporation and Vestar Capital Partners, Inc. (incorporated
    herein by reference to Exhibit 10.26 of Argo-Techs
    Registration Statement on form S-1, filed October 17,
    1997, SEC File No. 333-38223)                                                                                                                                                                                                  
|        | 10.25 |   |                                                                                           | Stock Purchase Agreement, dated August 1,
    1997, between Argo-Tech, J.C. Carter Company, Inc.,
    Robert L. Veloz, Individually and as Trustee,
    Marlene J. Veloz, Individually and as Trustee,
    Edith T. Derbyshire, Individually and as Trustee,
    Harry S. Derbyshire, Individually and as Trustee, Michael
    Veloz, Katherine Canfield and Maureen Partch, as Trustee
    (incorporated herein by reference to Exhibit 10.27 of
    Argo-Techs Registration Statement on form S-1, filed
    October 17, 1997, SEC File No. 333-38223)                            
|        | 10.26 |   |                                                                                           | Prism Prototype Retirement Plan &
    Trust & 401(k) Profit Sharing Plan Adoption Agreement,
    dated November 1, 1994 (incorporated herein by reference to
    Exhibit 10.28 of Argo-Techs Registration Statement on
    form S-1, filed October 17, 1997, SEC File
    No. 333-38223)                                                                                                                                                                                                                                                                                            
|        | 10.27 |   |                                                                                           | Prism Prototype Retirement Plan and Trust
    (incorporated herein by reference to Exhibit 10.29 of
    Argo-Techs Registration Statement on form S-1, filed
    October 17, 1997, SEC File No. 333-38223)                                                                                                                                                                                                                                                                                                                                                                          
|        | 10.28 |   |                                                                                           | Agreement of Purchase and Sale between Agnem
    Holdings, Inc. and TRW Inc. dated as of August 5, 1986
    (incorporated herein by reference to Exhibit 10.30 of
    Argo-Techs Registration Statement on form S-1, filed
    October 17, 1997, SEC File No. 333-38223)                                                                                                                                                                                                                                                                                                            
|        | 10.29 | * |                                                                                           | 1997 Stock Appreciation Rights Plan (incorporated
    herein by reference to Exhibit 10.31 of Argo-Techs
    Annual Report on form 10-K, for the year ended
    October 31, 1998)                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 10.30 | * |                                                                                           | AT Holdings Corporation/ Argo-Tech Corporation
    1998 Equity Replacement Stock Option Plan (incorporated herein
    by reference to Exhibit 10.32 of Argo-Techs
    registration statement on form S-4 filed March 1,
    1999, SEC File No. 333-73179)                                                                                                                                                                                                                                                                                                                           
|        | 10.31 | * |                                                                                           | Amendment to the AT Holdings Corporation/
    Argo-Tech Corporation 1998 Equity Replacement Stock Option Plan
    dated June 12, 2001 (incorporated herein by reference to
    Exhibit 10.2 of Argo-Techs Quarterly Report on
    form 10-Q for the quarter ended July 28, 2001)                                                                                                                                                                                                                                                                                                    

42



---



##### Table of Contents



|        |       |   |                                                                                           |                                                                                                                                                                                                                                                                                                                     
|------- | ----- | - | ----------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |   |                                                                                          
|Number  |       |   | Description of Exhibit (and document from which incorporated by reference, if applicable)
|        |       |   |                                                                                          
|        | 10.32 | * |                                                                                           | Form of Stock Option Agreement in connection with
    the AT Holdings Corporation/ Argo-Tech Corporation 1998 Equity
    Replacement Stock Option Plan (incorporated herein by reference
    to Exhibit 10.33 of Argo-Techs registration statement
    on form S-4 filed March 1, 1999, SEC File
    No. 333-73179)
|        | 10.33 | * |                                                                                           | First Amendment to the Argo-Tech Corporation
    Employee Stock Ownership Plan Excess Benefit Plan (incorporated
    herein by reference to Exhibit 10.34 of Argo-Techs
    registration statement on form S-4 filed March 1,
    1999, SEC File No. 333-73179)                                                    
|        | 10.34 | * |                                                                                           | Amendment, dated November 22, 2002, to
    Argo-Tech Corporation Trust Agreement, dated
    October 28, 1994 (incorporated herein by reference to
    Exhibit 10.36 of Argo-Techs annual report on
    form 10-K for the year ended October 26, 2002, SEC
    File No. 333-73179)                                  
|        | 10.35 |   |                                                                                           | Distribution Agreement, dated April 1, 2003,
    between Argo-Tech Corporation and Yamada Corporation
    (incorporated herein by reference to Exhibit 10.34 of
    Argo-Techs registration statement on form S-4 filed
    September 23, 2004, SEC File No. 333-119227)                                           
|        | 12.1* | * |                                                                                           | Statement re Computation of Ratios                                                                                                                                                                                                                                                                                  
|        | 21.1  |   |                                                                                           | List of Subsidiaries (incorporated herein by
    reference to Exhibit 21.1 of Argo-Techs registration
    statement on form S-4 filed September 23, 2004, SEC
    File No. 333-119227)                                                                                                                             
|        | 31**  |   |                                                                                           | Certifications pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                        
|        | 32**  |   |                                                                                           | Certification 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 other compensatory
    arrangement required to be filed as an exhibit pursuant to
    Item 14(c) of this report.
|  
|** | Filed herewith.                                                                                                                                

43



---



##### Table of Contents






SIGNATURES

Pursuant to the requirements of
Section 13 of the Securities Exchange Act of 1934,
Argo-Tech Corporation has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in
the city of Cleveland, state of Ohio, on January 27,
2005.



| |                      
| | ---------------------
| | ARGO-TECH CORPORATION



| |     |                 
| | --- | ----------------
| | By: | /s/ PAUL R. KEEN

| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Name:     Paul R. Keen                                                            
| | Title:       Executive
    Vice President, General Counsel, Secretary and Director



| |                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Pursuant to the requirements of the Securities
    Exchange Act of 1934, this report has been signed by the
    following persons in the capacities and on the dates
    indicated.

|                                             |  |                                                                                                  |  |                 
|-------------------------------------------- |  | ------------------------------------------------------------------------------------------------ |  | ----------------
|SIGNATURE                                    |  | TITLE                                                                                            |  | DATE            
|                                             |  |                                                                                                  |  |                 
|                                            
|/s/ MICHAEL S. LIPSCOMBMichael S. Lipscomb   |  | Chairman, Chief Executive Officer, President and
    Director (Principal Executive Officer)      |  | January 27, 2005
|                                            
|/s/ FRANCES S. ST. CLAIRFrances S. St. Clair |  | Executive Vice President, Chief Financial Officer
    and Director (Principal Financial Officer) |  | January 27, 2005
|                                            
|/s/ PAUL R. KEENPaul R. Keen                 |  | Executive Vice President, General Counsel,
    Secretary and Director                            |  | January 27, 2005
|                                            
|/s/ PAUL A. SKLADPaul A. Sklad               |  | Controller (Principal Accounting Officer)                                                        |  | January 27, 2005

44



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES

(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


ANNUAL REPORT ON FORM 10-K:

FISCAL YEAR ENDED OCTOBER 30,
2004


ITEM 8 AND ITEM 15(a)(1)


FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA


INDEX

|                                                                                                                                                        |  |      |          | 
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | 
|                                                                                                                                                        |  | Page |         
|                                                                                                                                                        |  |      |         
|FINANCIAL STATEMENTS:                                                                                                                                   |  |      |          | 
|REPORT OF INDEPENDENT REGISTERED PUBLIC
    ACCOUNTING FIRM                                                                                             |  |      | F-1      | 
|CONSOLIDATED BALANCE SHEETS AS OF
    OCTOBER 30, 2004 AND OCTOBER 25, 2003                                                                             |  |      | F-2      | 
|CONSOLIDATED STATEMENTS OF NET INCOME/(LOSS) FOR
    THE FISCAL YEARS ENDED OCTOBER 30, 2004, OCTOBER 25,
    2003 AND OCTOBER 26, 2002                 |  |      | F-3      | 
|CONSOLIDATED STATEMENTS OF SHAREHOLDERS
    EQUITY/(DEFICIENCY) FOR THE FISCAL YEARS ENDED OCTOBER 30,
    2004, OCTOBER 25, 2003 AND OCTOBER 26, 2002 |  |      | F-4      | 
|CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
    FISCAL YEARS ENDED OCTOBER 30, 2004, OCTOBER 25, 2003
    AND OCTOBER 26, 2002                        |  |      | F-5      | 
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR
    THE FISCAL YEARS ENDED OCTOBER 30, 2004, OCTOBER 25,
    2003 AND OCTOBER 26, 2002                   |  |      | F-6F-26 | 
|SUPPLEMENTARY DATA:                                                                                                                                     |  |      |          | 
|VALUATION AND QUALIFYING ACCOUNTS FOR THE FISCAL
    YEARS ENDED OCTOBER 30, 2004, OCTOBER 25, 2003 AND
    OCTOBER 26, 2002                            |  |      | F-27     | 



---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

To the Shareholder and Board of Directors

of Argo-Tech Corporation and subsidiaries


(a wholly-owned subsidiary of AT Holdings
Corporation)


We have audited the accompanying consolidated
balance sheets of Argo-Tech Corporation and subsidiaries (a
wholly-owned subsidiary of AT Holdings Corporation) (the
Company) as of October 30, 2004 and
October 25, 2003, and the related consolidated statements
of net income/(loss), shareholders equity/(deficiency),
and cash flows for each of the three years in the period ended
October 30, 2004. Our audits also included the financial
statement schedules listed in the Index at Item 15. These
financial statements and financial statement schedules are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes consideration of internal control over financial
reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys
internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.

In our opinion, such consolidated financial
statements present fairly, in all material respects, the
financial position of the Company as of October 30, 2004
and October 25, 2003, and the results of its operations and
its cash flows for each of the three years in the period ended
October 30, 2004, in conformity with accounting principles
generally accepted in the United States of America. Also, in our
opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as
a whole, present fairly in all material respects the information
set forth therein.

/s/ Deloitte & Touche LLP

Cleveland, Ohio

January 24, 2005


F-1



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES

(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


CONSOLIDATED BALANCE SHEETS

October 30, 2004 and October 25,
2003


|                                                            |                                                                                           |                                         |         |          |          |   |         |         |         |  
|----------------------------------------------------------- | ----------------------------------------------------------------------------------------- | --------------------------------------- | ------- | -------- | -------- | - | ------- | ------- | ------- | -
|                                                            |                                                                                           | 2004                                    |         |          | 2003     |  
|                                                            |                                                                                           |                                         |         |          |          |  
|                                                            |                                                                                           |                                        
|                                                            |                                                                                           | (In thousands, except                   |        
|                                                            |                                                                                           | share data)                             |        
|ASSETS                                                     
|CURRENT ASSETS:                                             |                                                                                           |                                         |         |          |          |   |         |        
|                                                            | Cash and cash equivalents                                                                 |                                         | $       | 15,857   |          |   | $       | 14,057  |        
|                                                            | Receivables, net                                                                          |                                         |         | 29,013   |          |   |         | 28,335  |        
|                                                            | Income tax receivable                                                                     |                                         |         | 1,203    |          |   |         | 3,500   |        
|                                                            | Inventories, net                                                                          |                                         |         | 28,557   |          |   |         | 25,701  |        
|                                                            | Deferred income taxes and prepaid expenses                                                |                                         |         | 6,245    |          |   |         | 5,352   |        
|                                                            |                                                                                           |                                         |         |          |          |  
|                                                            |                                                                                           | Total current assets                    |         |          | 80,875   |   |         |         | 76,945  |  
|                                                            |                                                                                           |                                         |         |          |          |  
|PROPERTY AND EQUIPMENT, net of accumulated
    depreciation |                                                                                           |                                         | 23,213  |          |          |   | 23,956  |        
|GOODWILL, net of accumulated amortization                   |                                                                                           |                                         | 110,059 |          |          |   | 110,059 |        
|INTANGIBLE ASSETS, net of accumulated amortization          |                                                                                           |                                         | 31,502  |          |          |   | 34,916  |        
|OTHER ASSETS                                                |                                                                                           |                                         | 8,613   |          |          |   | 9,921   |        
|                                                            |                                                                                           |                                         |         |          |          |  
|Total Assets                                                |                                                                                           | $                                       | 254,262 |          |          | $ | 255,797 |        
|                                                            |                                                                                           |                                         |         |          |          |  
|LIABILITIES AND SHAREHOLDERS
    EQUITY/(DEFICIENCY)      
|CURRENT LIABILITIES:                                        |                                                                                           |                                         |         |          |          |   |         |        
|                                                            | Current portion of long-term debt                                                         |                                         | $       | 750      |          |   | $       | 12,000  |        
|                                                            | Accounts payable                                                                          |                                         |         | 9,396    |          |   |         | 7,254   |        
|                                                            | Accrued liabilities                                                                       |                                         |         | 28,766   |          |   |         | 22,757  |        
|                                                            |                                                                                           |                                         |         |          |          |  
|                                                            |                                                                                           | Total current liabilities               |         |          | 38,912   |   |         |         | 42,011  |  
|                                                            |                                                                                           |                                         |         |          |          |  
|LONG-TERM DEBT, net of current maturities                   |                                                                                           |                                         | 264,063 |          |          |   | 207,349 |        
|OTHER NONCURRENT LIABILITIES                                |                                                                                           |                                         | 21,306  |          |          |   | 21,753  |        
|                                                            |                                                                                           |                                         |         |          |          |  
|                                                            |                                                                                           | Total Liabilities                       |         |          | 324,281  |   |         |         | 271,113 |  
|                                                            |                                                                                           |                                         |         |          |          |  
|REDEEMABLE ESOP STOCK                                       |                                                                                           |                                         | 40,957  |          |          |   | 15,452  |        
|                                                            | Unearned ESOP stock                                                                       |                                         |         |         |          |   |         | (840    | )      
|                                                            |                                                                                           |                                         |         |          |          |  
|                                                            |                                                                                           |                                         | 40,957  |          |          |   | 14,612  |        
|SHAREHOLDERS EQUITY/(DEFICIENCY):                          |                                                                                           |                                         |         |          |          |   |         |        
|                                                            | Common Stock, $.01 par value, authorized
    3,000 shares; 1 share issued and outstanding |                                         |         |         |          |   |         |        |        
|                                                            | Paid-in capital                                                                           |                                         |         |         |          |   |         |        |        
|                                                            | Accumulated other comprehensive loss                                                      |                                         |         | (3,315   | )        |   |         | (2,143  | )      
|                                                            | Accumulated deficit                                                                       |                                         |         | (107,661 | )        |   |         | (27,785 | )      
|                                                            |                                                                                           |                                         |         |          |          |  
|                                                            |                                                                                           | Total shareholders equity/(deficiency) |         |          | (110,976 | ) |         |         | (29,928 | )
|                                                            |                                                                                           |                                         |         |          |          |  
|Total Liabilities and Shareholders
    Equity/(Deficiency) |                                                                                           | $                                       | 254,262 |          |          | $ | 255,797 |        
|                                                            |                                                                                           |                                         |         |          |          |  



The accompanying notes to consolidated financial
statements are an integral part of these statements.


F-2



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES

(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


CONSOLIDATED STATEMENTS OF NET
INCOME/(LOSS)

For the Fiscal Years Ended October 30,
2004, October 25, 2003 and October 26, 2002


|                                    |                    |                |         |        |      |   |         |        |  |   |         |        | 
|----------------------------------- | ------------------ | -------------- | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ | 
|                                    |                    | 2004           |         |        | 2003 |   |         | 2002   | 
|                                    |                    |                |         |        |      |   |         |        | 
|                                    |                    |               
|                                    |                    | (In thousands) |        
|Net revenues                        |                    | $              | 187,328 |        |      | $ | 160,726 |        |  | $ | 155,303 |       
|Cost of revenues                    |                    |                | 109,203 |        |      |   | 94,535  |        |  |   | 88,669  |       
|                                    |                    |                |         |        |      |   |         |        | 
|                                    | Gross profit       |                |         | 78,125 |      |   |         | 66,191 |  |   |         | 66,634 | 
|                                    |                    |                |         |        |      |   |         |        | 
|Selling, general and administrative |                    |                | 31,166  |        |      |   | 26,417  |        |  |   | 23,359  |       
|Research and development            |                    |                | 11,934  |        |      |   | 9,525   |        |  |   | 11,722  |       
|Amortization of intangible assets   |                    |                | 3,414   |        |      |   | 3,414   |        |  |   | 3,721   |       
|                                    |                    |                |         |        |      |   |         |        | 
|                                    | Operating expenses |                |         | 46,514 |      |   |         | 39,356 |  |   |         | 38,802 | 
|                                    |                    |                |         |        |      |   |         |        | 
|Income from operations              |                    |                | 31,611  |        |      |   | 26,835  |        |  |   | 27,832  |       
|Interest expense                    |                    |                | 22,705  |        |      |   | 21,257  |        |  |   | 21,434  |       
|Debt extinguishment expense         |                    |                | 12,961  |        |      |   |        |        |  |   |        |       
|Other, net                          |                    |                | (95     | )      |      |   | (529    | )      |  |   | (97     | )     
|                                    |                    |                |         |        |      |   |         |        | 
|Income/(loss) before income taxes   |                    |                | (3,960  | )      |      |   | 6,107   |        |  |   | 6,495   |       
|Income tax (benefit)/provision      |                    |                | (3,499  | )      |      |   | 1,579   |        |  |   | 569     |       
|                                    |                    |                |         |        |      |   |         |        | 
|Net income/(loss)                   |                    | $              | (461    | )      |      | $ | 4,528   |        |  | $ | 5,926   |       
|                                    |                    |                |         |        |      |   |         |        | 

The accompanying notes to consolidated financial
statements are an integral part of these statements.

F-3



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES

(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY/(DEFICIENCY)

For the Fiscal Years Ended October 30,
2004, October 25, 2003 and October 26, 2002


|                                                |  |                |   |         |  |               |   |  |             |   |        |       |  |   |          |   |  |   |          |  
|----------------------------------------------- |  | -------------- | - | ------- |  | ------------- | - |  | ----------- | - | ------ | ----- |  | - | -------- | - |  | - | -------- | -
|                                                |  |                |   |         |  | Accumulated   |   |  |             |   |       
|                                                |  | Common         |   | Paid-In |  | Comprehensive |   |  | Accumulated |   |        |      
|                                                |  | Stock          |   | Capital |  | Income/(Loss) |   |  | Deficit     |   |        | Total | 
|                                                |  |                |   |         |  |               |   |  |             |   |        |       | 
|                                                |  |               
|                                                |  | (In thousands) |  
|BALANCE, OCTOBER 27, 2001                       |  | $              |  |         |  | $             |  |  |             | $ | (1,948 | )     |  | $ | (40,171  | ) |  | $ | (42,119  | )
|Net income                                      |  |                |   |         |  |               |   |  |             |   |        |       |  |   | 5,926    |   |  |   | 5,926    |  
|Additional minimum pension liability            |  |                |   |         |  |               |   |  |             |   | (1,273 | )     |  |   |          |   |  |   | (1,273   | )
|Reduction of redeemable ESOP stock              |  |                |   |         |  |               |   |  |             |   |        |       |  |   | 6,504    |   |  |   | 6,504    |  
|Dividend                                        |  |                |   |         |  |               |   |  |             |   |        |       |  |   | (578     | ) |  |   | (578     | )
|Foreign currency translation adjustment         |  |                |   |         |  |               |   |  |             |   | (14    | )     |  |   |          |   |  |   | (14      | )
|Other, net                                      |  |                |   |         |  |               |   |  |             |   |        |       |  |   | (79      | ) |  |   | (79      | )
|                                                |  |                |   |         |  |               |   |  |             |   |        |       |  |   |         
|BALANCE, OCTOBER 26, 2002                       |  |                |  |         |  |               |  |  |             |   | (3,235 | )     |  |   | (28,398  | ) |  |   | (31,633  | )
|Net income                                      |  |                |   |         |  |               |   |  |             |   |        |       |  |   | 4,528    |   |  |   | 4,528    |  
|Reduction of minimum pension liability          |  |                |   |         |  |               |   |  |             |   | 973    |       |  |   |          |   |  |   | 973      |  
|Accretion of redeemable ESOP stock              |  |                |   |         |  |               |   |  |             |   |        |       |  |   | (3,903   | ) |  |   | (3,903   | )
|Dividend                                        |  |                |   |         |  |               |   |  |             |   |        |       |  |   | (222     | ) |  |   | (222     | )
|Foreign currency translation adjustment         |  |                |   |         |  |               |   |  |             |   | 119    |       |  |   |          |   |  |   | 119      |  
|Other, net                                      |  |                |   |         |  |               |   |  |             |   |        |       |  |   | 210      |   |  |   | 210      |  
|                                                |  |                |   |         |  |               |   |  |             |   |        |       |  |   |         
|BALANCE, OCTOBER 25, 2003                       |  |                |  |         |  |               |  |  |             |   | (2,143 | )     |  |   | (27,785  | ) |  |   | (29,928  | )
|Net loss                                        |  |                |   |         |  |               |   |  |             |   |        |       |  |   | (461     | ) |  |   | (461     | )
|Additional minimum pension liability            |  |                |   |         |  |               |   |  |             |   | (1,179 | )     |  |   |          |   |  |   | (1,179   | )
|Accretion of redeemable ESOP stock              |  |                |   |         |  |               |   |  |             |   |        |       |  |   | (23,918  | ) |  |   | (23,918  | )
|Contributed redeemable ESOP stock               |  |                |   |         |  |               |   |  |             |   |        |       |  |   | 2,425    |   |  |   | 2,425    |  
|Dividend                                        |  |                |   |         |  |               |   |  |             |   |        |       |  |   | (59,046  | ) |  |   | (59,046  | )
|Change in supplemental employee retirement plan |  |                |   |         |  |               |   |  |             |   |        |       |  |   | 1,123    |   |  |   | 1,123    |  
|Foreign currency translation adjustment         |  |                |   |         |  |               |   |  |             |   | 7      |       |  |   |          |   |  |   | 7        |  
|Other, net                                      |  |                |   |         |  |               |   |  |             |   |        |       |  |   | 1        |   |  |   | 1        |  
|                                                |  |                |   |         |  |               |   |  |             |   |        |       |  |   |         
|BALANCE, OCTOBER 30, 2004                       |  | $              |  |         |  | $             |  |  |             | $ | (3,315 | )     |  | $ | (107,661 | ) |  | $ | (110,976 | )
|                                                |  |                |   |         |  |               |   |  |             |   |        |       |  |   |         

The accompanying notes to consolidated financial
statements are an integral part of these statements.

F-4



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES

(A Wholly-Owned Subsidiary of AT Holdings
Corporation)







CONSOLIDATED STATEMENTS OF CASH
FLOWS


For the Fiscal Years Ended October 30,
2004, October 25, 2003 and October 26, 2002


|                                       |                                                                                              |                               |        |          |        |   |        |         |        |   |        |         |       |  
|-------------------------------------- | -------------------------------------------------------------------------------------------- | ----------------------------- | ------ | -------- | ------ | - | ------ | ------- | ------ | - | ------ | ------- | ----- | -
|                                       |                                                                                              | 2004                          |        |          | 2003   |   |        | 2002    |       
|                                       |                                                                                              |                               |        |          |        |   |        |         |       
|                                       |                                                                                              |                              
|                                       |                                                                                              | (In thousands)                |       
|CASH FLOWS FROM OPERATING ACTIVITIES:  |                                                                                              |                               |        |          |        |   |        |         |        |   |        |        
|                                       | Net income/(loss)                                                                            |                               | $      | (461     | )      |   | $      | 4,528   |        |   | $      | 5,926   |      
|                                       | Adjustments to reconcile net income/(loss) to net
    cash provided by operating activities: |                               |        |          |        |   |        |         |        |   |        |         |      
|                                       | Depreciation                                                                                 |                               |        | 3,799    |        |   |        | 4,187   |        |   |        | 4,608   |      
|                                       | Amortization of intangible assets and deferred
    financing costs                           |                               |        | 5,376    |        |   |        | 5,866   |        |   |        | 5,779   |      
|                                       | Accretion of bond discount                                                                   |                               |        | 219      |        |   |        | 304     |        |   |        | 277     |      
|                                       | Debt extinguishment expense                                                                  |                               |        | 12,961   |        |   |        |         |        |   |        |         |      
|                                       | Compensation expense recognized in connection
    with employee stock ownership plan         |                               |        | 4,851    |        |   |        | 1,874   |        |   |        | 1,344   |      
|                                       | Compensation expense recognized in connection
    with supplemental employee retirement plan |                               |        | 1,123    |        |   |        |         |        |   |        |         |      
|                                       | Deferred pension cost                                                                        |                               |        | (912     | )      |   |        | 731     |        |   |        | (1,375  | )    
|                                       | Deferred income taxes                                                                        |                               |        | (2,150   | )      |   |        | (1,227  | )      |   |        | (808    | )    
|                                       | Changes in operating assets and liabilities:                                                 |                               |        |          |        |   |        |         |        |   |        |         |      
|                                       |                                                                                              | Receivables                   |        |          | 1,619  |   |        |         | (4,010 | ) |        |         | 8,112 |  
|                                       |                                                                                              | Inventories                   |        |          | (2,856 | ) |        |         | (578   | ) |        |         | 3,738 |  
|                                       |                                                                                              | Prepaid expenses              |        |          | (135   | ) |        |         | (348   | ) |        |         | 307   |  
|                                       |                                                                                              | Accounts payable              |        |          | 2,142  |   |        |         | 2,002  |   |        |         | 412   |  
|                                       |                                                                                              | Accrued and other liabilities |        |          | 7,639  |   |        |         | 2,220  |   |        |         | 2,434 |  
|                                       |                                                                                              | Other, net                    |        |          | 15     |   |        |         | 124    |   |        |         | (30   | )
|                                       |                                                                                              |                               |        |          |        |   |        |         |       
|                                       | Net cash provided by operating activities                                                    |                               |        | 33,230   |        |   |        | 15,673  |        |   |        | 30,724  |      
|                                       |                                                                                              |                               |        |          |        |   |        |         |       
|CASH FLOWS FROM INVESTING ACTIVITIES:  |                                                                                              |                               |        |          |        |   |        |         |        |   |        |        
|                                       | Capital expenditures                                                                         |                               |        | (3,056   | )      |   |        | (1,939  | )      |   |        | (1,785  | )    
|                                       |                                                                                              |                               |        |          |        |   |        |         |       
|                                       | Net cash used in investing activities                                                        |                               |        | (3,056   | )      |   |        | (1,939  | )      |   |        | (1,785  | )    
|                                       |                                                                                              |                               |        |          |        |   |        |         |       
|CASH FLOWS FROM FINANCING ACTIVITIES:  |                                                                                              |                               |        |          |        |   |        |         |        |   |        |        
|                                       | Sale of senior notes                                                                         |                               |        | 250,000  |        |   |        |         |        |   |        |         |      
|                                       | Purchase of senior subordinated notes                                                        |                               |        | (200,571 | )      |   |        |         |        |   |        |         |      
|                                       | Additional borrowing of long term debt                                                       |                               |        | 15,000   |        |   |        |         |        |   |        |         |      
|                                       | Repayment of long-term debt                                                                  |                               |        | (26,038  | )      |   |        | (16,000 | )      |   |        | (18,612 | )    
|                                       | Payment of financing related fees                                                            |                               |        | (7,719   | )      |   |        | (1,224  | )      |   |        | (37     | )    
|                                       | Purchase of AT Holdings stock from former ESOP
    participants                              |                               |        | (567     | )      |   |        | (273    | )      |   |        | (526    | )    
|                                       | Dividend to AT Holdings                                                                      |                               |        | (58,479  | )      |   |        |         |        |   |        |         |      
|                                       | Other, net                                                                                   |                               |        |         |        |   |        | 51      |        |   |        | (52     | )    
|                                       |                                                                                              |                               |        |          |        |   |        |         |       
|                                       | Net cash used in financing activities                                                        |                               |        | (28,374  | )      |   |        | (17,446 | )      |   |        | (19,227 | )    
|                                       |                                                                                              |                               |        |          |        |   |        |         |       
|CASH AND CASH EQUIVALENTS:             |                                                                                              |                               |        |          |        |   |        |         |        |   |        |        
|Net increase (decrease) for the period |                                                                                              |                               | 1,800  |          |        |   | (3,712 | )       |        |   | 9,712  |        
|Balance, beginning of period           |                                                                                              |                               | 14,057 |          |        |   | 17,769 |         |        |   | 8,057  |        
|                                       |                                                                                              |                               |        |          |        |   |        |         |       
|Balance, end of period                 |                                                                                              | $                             | 15,857 |          |        | $ | 14,057 |         |        | $ | 17,769 |        
|                                       |                                                                                              |                               |        |          |        |   |        |         |       

The accompanying notes to consolidated financial
statements are an integral part of these statements.

F-5



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES

(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

For the Fiscal Years Ended October 30,
2004, October 25, 2003 and October 26, 2002




|   |                      
|-- | ---------------------
|1. | Basis of Presentation

The principal operations of Argo-Tech Corporation
(a wholly-owned subsidiary of AT Holdings Corporation) and its
subsidiaries (the Company) include the design,
manufacture and distribution of aviation products, primarily
aircraft fuel pumps. In addition, Argo-Tech leases a portion of
its Cleveland, Ohio manufacturing facility to other parties.
Argo-Techs fiscal year ends on the last Saturday in
October. The fiscal year ended October 30, 2004 consisted
of 53 weeks and the fiscal years ended October 25,
2003 and October 26, 2002 consisted of 52 weeks.
Argo-Tech is obligated to fulfill certain obligations of AT
Holdings Corporation to purchase AT Holdings common stock
in accordance with the provisions of the Argo-Tech Corporation
Employee Stock Ownership Plan. As a result, that obligation has
been reflected in its financial statements. Certain
reclassifications have been made in the prior years
financial statements to conform to the current year presentation.

Argo-Tech Corporation is a parent holding company
and all of its domestic subsidiaries guarantee Argo-Techs
senior notes. Argo-Tech also has two wholly-owned, non-guarantor
foreign subsidiaries which have inconsequential assets,
liabilities and equity. Argo-Tech has no outside assets,
liabilities or operations apart from its wholly-owned
subsidiaries. The senior notes (Note 12) are fully,
unconditionally, jointly and severally guaranteed by the
guarantor subsidiaries, and therefore, separate financial
statements of the guarantor subsidiaries will not be presented.
Management has determined that the information presented by such
separate financial statements is not material to investors.



|   |                                               
|-- | ----------------------------------------------
|2. | Summary of Significant Accounting
    Policies

Principles of Consolidation The consolidated financial
statements include the accounts of the Company. All material
intercompany accounts and transactions between the wholly-owned
subsidiaries have been eliminated.

Cash Equivalents Cash equivalents represent
short-term investments with an original maturity of three months
or less.

Receivables The Company evaluates the
collectibility of its trade receivables based on a combination
of factors. The Company regularly analyzes its customer
accounts, and when it becomes aware of a specific
customers inability to meet its financial obligation to
us, such as in the case of bankruptcy filings, the Company
immediately records a bad debt expense and reduces the related
receivable to the amount it reasonably believes is collectible.
The Company estimates the allowance for doubtful accounts based
on the aging of the accounts receivable, customer
creditworthiness and historical experience. Its estimate of the
allowance amounts includes amounts for specifically identified
losses and a general amount for estimated losses. If
circumstances change or economic conditions deteriorate, the
Companys estimates of the recoverability of receivables
could be further adjusted.

Inventories The Companys inventory
purchases and commitments are made in order to build inventory
to meet future shipment schedules based on forecasted demand for
our products. Inventories are stated at the lower of cost or
market, with cost being determined on the first-in, first-out,
or FIFO, method. Periodically, the Company performs a detailed
assessment of inventory, which includes a review of, among other
factors, historical sales activity, future demand requirements,
product life cycle and development plans and quality issues.
Based on this analysis, the Company records provisions for
potentially obsolete or slow-moving inventory to reflect
inventory at net realizable value. These provisions could vary
significantly, either favorably or unfavorably, from actual
requirements based upon future economic conditions, customer
inventory levels or competitive factors that were not foreseen,
or did not exist, when the valuation allowances were established.

F-6



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Property and Equipment Property and equipment are stated
at cost and are depreciated using the straight-line or an
accelerated method over their estimated useful lives as follows:

|                           |  |  |                | 
|-------------------------- |  |  | -------------- | 
|Buildings and improvements |  |  | 7 to 30  years | 
|Equipment                  |  |  | 3 to 10  years | 

Goodwill and Intangible Assets Goodwill and identified intangible
assets are recorded at fair value on the date of acquisition.
Intangible assets other than goodwill are recognized if the
benefit of the intangible asset is obtained through contractual
or other legal rights, or if the intangible asset can be sold,
transferred, licensed or exchanged, regardless of our intent to
do so. Intangible assets, such as goodwill, that have an
indefinite useful life are not amortized. All other intangible
assets are amortized over their estimated useful lives. The
Company reviews goodwill and purchased intangible assets for
impairment annually, or whenever events or changes in
circumstances indicate the carrying value of an asset may not be
recoverable. The asset impairment review assesses the fair value
of the assets based on the future cash flows the assets are
expected to generate. This approach uses the Companys
estimate of future market growth, forecasted revenue and costs
and appropriate discount rates. When impairment is identified,
the carrying amount of the asset is reduced to its estimated
fair value.

In conjunction with the acquisition of Argo-Tech
Corporation Costa Mesa in 1997, the Company recognized
identified intangible assets, which are amortized on a
straight-line basis over their estimated economic lives as
follows:

|                    |  |  |              | 
|------------------- |  |  | ------------ | 
|Contracts           |  |  | 10 Years     | 
|Spare Parts Annuity |  |  | 10-28  Years | 
|Patents             |  |  | 14-17  Years | 

Deferred Financing Costs The costs of obtaining financing
are included in Other Assets in the consolidated balance sheets
and are amortized over the terms of the financing. The cost
balance at October 30, 2004 and October 25, 2003 was
$7,719,000 and $19,549,000, respectively. The amortized cost is
included in interest expense in the consolidated statements of
net income/(loss). Accumulated amortization at October 30,
2004 and October 25, 2003 was $376,000 and $11,856,000,
respectively.

Redeemable Stock Redeemable ESOP Stock has been
excluded from Shareholders Equity/(Deficiency) due to the
ability of the holders of AT Holdings common stock to
put, subject to certain restrictions, the shares to
the Company. The increase/(decrease) in the Redeemable ESOP
Stock has been recorded in Accumulated Deficit.

Foreign Currency Translation Assets and liabilities of the
Companys foreign subsidiaries are translated into
U.S. dollars at the current rate of exchange, while
revenues and expenses are translated at the average exchange
rate during the year. Adjustments from translating foreign
subsidiaries financial statements are excluded from the
consolidated statements of net income/(loss) and are reported as
a component of shareholders equity/(deficiency).

Derivative Financial
Instruments All
derivative financial instruments, such as interest rate swap
contracts and foreign exchange contracts, are recognized in the
financial statements and measured at fair value regardless of
the purpose or intent for holding them. Changes in the fair
value of derivative financial instruments are either recognized
periodically in income or shareholders equity (as a
component of comprehensive income), depending on whether the
derivative is being used to hedge changes in fair value or cash
flows. At October 30, 2004 the Company did not have any
open derivative contracts.

Revenue Recognition Revenues are generally recognized
when goods are shipped or services provided, at which time title
and risk of loss passes to the customer. Substantially all sales
are made pursuant to firm, fixed-

F-7



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

price purchase orders received from customers. We
have executed long-term supply agreements with certain of our
OEM customers. These agreements require Argo-Tech to supply all
the amounts ordered by the customers during the term of the
agreements (generally three to five years) at specified prices.
Under certain of these agreements, we expect to incur losses.
Provisions for estimating losses on these contracts are made in
the period in which such losses are identified based on cost and
pricing information and estimated future shipment quantities
provided by the customer. The cumulative effect of revisions to
estimated losses on contracts is recorded in the accounting
period in which the amounts become known and can be reasonably
estimated. Such revisions could occur at any time there are
changes to estimated future revenues or costs. Revenue from
certain fixed price engineering contracts for which costs can be
reliably estimated are recognized based on milestone billings.
Variations in actual labor performance, changes to estimated
profitability and final contract settlements may result in
revisions to the cost estimates. Revisions in cost estimates as
contracts progress have the effect of increasing or decreasing
profits in the period of revision. We record estimated
reductions to revenue for volume-based incentives based on
expected customer activity for the applicable period. Revisions
for volume-based incentives are recorded in the accounting
period in which such estimates can be reasonably determined.

Stock Options At October 30, 2004, the
Company has four stock-based compensation plans. The Company
applies Accounting Principals Board (APB)
Opinion 25 and related Interpretations in accounting for
its plans. Accordingly, no compensation cost has been recognized
for its fixed stock option plans. Had compensation cost for the
Companys four stock-based compensation plans been
determined based on the fair value at the grant dates for awards
under those plans consistent with the method of Statement of
Financial Accounting Standard (SFAS) No. 123,
the Companys net income/(loss) for the fiscal years ended
2004, 2003 and 2002 would have been adjusted to the pro forma
amount indicated below (in thousands):

|                                                                 |  |             |      |   |             |   |       |             |  |   |       |  
|---------------------------------------------------------------- |  | ----------- | ---- | - | ----------- | - | ----- | ----------- |  | - | ----- | -
|                                                                 |  | October 30, |      |   | October 25, |   |       | October 26, | 
|                                                                 |  | 2004        |      |   | 2003        |   |       | 2002        | 
|                                                                 |  |             |      |   |             |   |       |             | 
|Net income/(loss)  As reported                                  |  | $           | (461 | ) |             | $ | 4,528 |             |  | $ | 5,926 |  
|Compensation cost based on the fair value method
    (after tax) |  |             | (76  | ) |             |   | (254  | )           |  |   | (577  | )
|                                                                 |  |             |      |   |             |   |       |             | 
|Net income/(loss)  Pro forma                                    |  | $           | (537 | ) |             | $ | 4,274 |             |  | $ | 5,349 |  
|                                                                 |  |             |      |   |             |   |       |             | 

Income Taxes Income taxes are accounted for
under the asset and liability approach, which can result in
recording tax provisions or benefits in periods different than
the periods in which such taxes are paid or benefits realized.
Expected tax benefits from temporary differences that will
result in deductible amounts in future years and from
carryforwards, if it is more likely than not that such tax
benefits will be realized, are recognized currently.

Use of Estimates The preparation of financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

F-8



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |                                
|-- | -------------------------------
|3. | Other Balance Sheet Information

The major components of the following balance
sheet captions were (in thousands):

|                              |                                   |             |   |        |             |  |   |        |        | 
|----------------------------- | --------------------------------- | ----------- | - | ------ | ----------- |  | - | ------ | ------ | 
|                              |                                   | October 30, |   |        | October 25, | 
|                              |                                   | 2004        |   |        | 2003        | 
|                              |                                   |             |   |        |             | 
|Accrued liabilities:          |                                   |             |   |        |             |  |   |       
|                              | Salaries and accrued compensation |             | $ | 9,843  |             |  | $ | 6,889  |       
|                              | Accrued interest                  |             |   | 8,222  |             |  |   | 1,319  |       
|                              | Accrued warranty                  |             |   | 2,084  |             |  |   | 2,130  |       
|                              | Accrued income taxes              |             |   | 810    |             |  |   | 5,787  |       
|                              | Other                             |             |   | 7,807  |             |  |   | 6,632  |       
|                              |                                   |             |   |        |             | 
|                              |                                   | Total       |   | $      | 28,766      |  |   | $      | 22,757 | 
|                              |                                   |             |   |        |             | 
|Other noncurrent liabilities: |                                   |             |   |        |             |  |   |       
|                              | Deferred income taxes             |             | $ | 7,747  |             |  | $ | 9,821  |       
|                              | Accrued post retirement benefits  |             |   | 11,397 |             |  |   | 10,611 |       
|                              | Other                             |             |   | 2,162  |             |  |   | 1,321  |       
|                              |                                   |             |   |        |             | 
|                              |                                   | Total       |   | $      | 21,306      |  |   | $      | 21,753 | 
|                              |                                   |             |   |        |             | 



|   |            
|-- | -----------
|4. | Receivables

Receivables consist of the following (in
thousands):

|                                                                                 |                                                              |                      |        |        |             |   |        |        |      |  
|-------------------------------------------------------------------------------- | ------------------------------------------------------------ | -------------------- | ------ | ------ | ----------- | - | ------ | ------ | ---- | -
|                                                                                 |                                                              | October 30,          |        |        | October 25, |  
|                                                                                 |                                                              | 2004                 |        |        | 2003        |  
|                                                                                 |                                                              |                      |        |        |             |  
|Amounts billed  net of allowance for
    uncollectible amounts of $310 and $266 |                                                              | $                    | 29,280 |        |             | $ | 28,572 |       
|Amounts unbilled (principally commercial
    customers):                         |                                                              |                      |        |        |             |   |        |       
|                                                                                 | Net reimbursable costs incurred on uncompleted
    contracts |                      |        | 3,514  |             |   |        | 1,556  |     
|                                                                                 | Billings to date                                             |                      |        | (3,781 | )           |   |        | (1,793 | )   
|                                                                                 |                                                              |                      |        |        |             |  
|                                                                                 |                                                              | Total unbilled  net |        |        | (267        | ) |        |        | (237 | )
|                                                                                 |                                                              |                      |        |        |             |  
|Net receivables                                                                  |                                                              | $                    | 29,013 |        |             | $ | 28,335 |       
|                                                                                 |                                                              |                      |        |        |             |  



|   |            
|-- | -----------
|5. | Inventories

Inventories consist of the following (in
thousands):

|                                          |       |             |        |        |             |   |        |        | 
|----------------------------------------- | ----- | ----------- | ------ | ------ | ----------- | - | ------ | ------ | 
|                                          |       | October 30, |        |        | October 25, |  
|                                          |       | 2004        |        |        | 2003        |  
|                                          |       |             |        |        |             |  
|Finished goods                            |       | $           | 2,686  |        |             | $ | 1,481  |       
|Work-in-process and purchased parts       |       |             | 17,867 |        |             |   | 16,938 |       
|Raw materials and supplies                |       |             | 11,872 |        |             |   | 11,478 |       
|                                          |       |             |        |        |             |  
|                                          | Total |             |        | 32,425 |             |   |        | 29,897 | 
|Reserve for excess and obsolete inventory |       |             | (3,868 | )      |             |   | (4,196 | )     
|                                          |       |             |        |        |             |  
|Inventories  net                         |       | $           | 28,557 |        |             | $ | 25,701 |       
|                                          |       |             |        |        |             |  

F-9



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |                  
|-- | -----------------
|6. | Intangible Assets

The following is a summary of intangible assets,
other than goodwill (in thousands):

|                   |                     |                  |   |        |                  |  |   |        |        |  |              |        |        |  |   |        |        | 
|------------------ | ------------------- | ---------------- | - | ------ | ---------------- |  | - | ------ | ------ |  | ------------ | ------ | ------ |  | - | ------ | ------ | 
|                   |                     |                  |   |       
|                   |                     | October 30, 2004 |   |        | October 25, 2003 | 
|                   |                     |                  |   |        |                  | 
|                   |                     | Gross            |   |        | Accumulated      |  |   | Gross  |        |  | Accumulated  |       
|                   |                     | Amount           |   |        | Amortization     |  |   | Amount |        |  | Amortization |       
|                   |                     |                  |   |        |                  |  |   |        |        |  |              |       
|Intangible Assets: |                     |                  |   |        |                  |  |   |        |        |  |              |        |        |  |   |       
|                   | Contracts           |                  | $ | 17,100 |                  |  | $ | 12,115 |        |  | $            | 17,100 |        |  | $ | 10,404 |       
|                   | Spare parts annuity |                  |   | 38,200 |                  |  |   | 11,896 |        |  |              | 38,200 |        |  |   | 10,217 |       
|                   | Patents             |                  |   | 387    |                  |  |   | 174    |        |  |              | 387    |        |  |   | 150    |       
|                   |                     |                  |   |        |                  |  |   |        |        |  |              |       
|                   |                     | Total            |   | $      | 55,687           |  |   | $      | 24,185 |  |              | $      | 55,687 |  |   | $      | 20,771 | 
|                   |                     |                  |   |        |                  |  |   |        |        |  |              |       

Amortization expense recorded on the intangible
assets for each of the fiscal years ended October 30, 2004,
October 25, 2003 and October 26, 2002 was
$3.4 million. The estimated amortization expense for each
of the two succeeding fiscal years 2005 and 2006 is
$3.4 million, fiscal year 2007 is $3.3 million and
fiscal years 2008 and 2009 are each $1.7 million. The
weighted-average amortization period for contracts is
10 years, spare parts annuity is 26 years and patents
is 15 years. The intangible asset Spare Parts
Annuity is the result of customer relationships that have
been developed by supplying spare parts to our aftermarket
customers.



|   |         
|-- | --------
|7. | Goodwill

Argo-Tech adopted SFAS No. 142,
Goodwill and Other Intangible Assets as of
October 28, 2001. Under this statement, goodwill and other
intangibles determined to have an infinite life are no longer
amortized; however, these assets are to be reviewed for
impairment on a periodic basis. Argo-Tech completed its
transitional impairment test for goodwill during the second
fiscal quarter of 2002 using a present value of future cash
flows valuation method. This process did not result in any
impairment being recorded upon the adoption of
SFAS No. 142. Goodwill is subject to an impairment
test at least annually thereafter. All of the Companys
goodwill is allocated to its Aerospace segment.



|   |                       
|-- | ----------------------
|8. | Property and Equipment

Owned Property Property and equipment owned by
the Company consists of the following (in thousands):

|                                 |       |             |         |        |             |   |         |        | 
|-------------------------------- | ----- | ----------- | ------- | ------ | ----------- | - | ------- | ------ | 
|                                 |       | October 30, |         |        | October 25, |  
|                                 |       | 2004        |         |        | 2003        |  
|                                 |       |             |         |        |             |  
|Land and land improvements       |       | $           | 7,663   |        |             | $ | 7,663   |       
|Buildings and building equipment |       |             | 34,548  |        |             |   | 34,448  |       
|Machinery and equipment          |       |             | 41,694  |        |             |   | 40,360  |       
|Office and automotive equipment  |       |             | 8,504   |        |             |   | 8,128   |       
|Construction-in-progress         |       |             | 1,325   |        |             |   | 333     |       
|                                 |       |             |         |        |             |  
|                                 | Total |             |         | 93,734 |             |   |         | 90,932 | 
|Accumulated depreciation         |       |             | (70,521 | )      |             |   | (66,976 | )     
|                                 |       |             |         |        |             |  
|Total  net                      |       | $           | 23,213  |        |             | $ | 23,956  |       
|                                 |       |             |         |        |             |  

Property Leased to Others The Company leases certain
portions of its facility in Euclid, Ohio. The leases have been
accounted for as operating leases whereby revenue is recognized
as earned over the lease terms. The

F-10



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

cost of property leased to others is included in
property and equipment and is being depreciated over its
estimated useful life. It is not practical to determine the cost
of the property that is being leased to others or the related
amount of accumulated depreciation. In addition, the Company has
separate service contracts with its tenants under which the
Company provides maintenance, telecommunications and various
other services.

Total rental revenue under the property leases
and service contracts is included in Net revenues
and was as follows for the fiscal years ended 2004, 2003 and
2002 (in thousands):

|                                                  |       |      |       |       |      |   |       |       |  |   |       |       | 
|------------------------------------------------- | ----- | ---- | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                                                  |       | 2004 |       |       | 2003 |   |       | 2002  | 
|                                                  |       |      |       |       |      |   |       |       | 
|Minimum contractual amounts under property leases |       | $    | 4,126 |       |      | $ | 4,498 |       |  | $ | 4,526 |      
|Service contracts revenue based on usage          |       |      | 828   |       |      |   | 774   |       |  |   | 792   |      
|                                                  |       |      |       |       |      |   |       |       | 
|                                                  | Total |      | $     | 4,954 |      |   | $     | 5,272 |  |   | $     | 5,318 | 
|                                                  |       |      |       |       |      |   |       |       | 

Future minimum rentals under the noncancelable
property leases and service contracts at October 30, 2004
are (in thousands): $3,354 in 2005, $1,336 in 2006, $821 in
2007, $646 in 2008, and $0 in 2009.



|   |                 
|-- | ----------------
|9. | Product Warranty

The Company accrues for warranty obligations for
products sold based on management estimates of the amount that
may be required to settle such potential obligations. These
estimates are prepared with support from our sales, engineering,
quality and legal functions. This accrual, which is reviewed in
detail on a regular basis, is based on several factors: past
experience, current claims, production changes and various other
considerations. The following table presents a reconciliation of
changes in the product warranty liability (in thousands):

|                                                                         |  |             |       |   |             |   |       |  
|------------------------------------------------------------------------ |  | ----------- | ----- | - | ----------- | - | ----- | -
|                                                                         |  | October 30, |       |   | October 25, |  
|                                                                         |  | 2004        |       |   | 2003        |  
|                                                                         |  |             |       |   |             |  
|Beginning balance                                                        |  | $           | 2,130 |   |             | $ | 2,064 |  
|Accruals for warranties issued                                           |  |             | 20    |   |             |   | 325   |  
|Accruals for pre-existing warranties (including
    changes in estimate) |  |             | 780   |   |             |   | 448   |  
|Warranty claims settled                                                  |  |             | (846  | ) |             |   | (707  | )
|                                                                         |  |             |       |   |             |  
|Ending balance                                                           |  | $           | 2,084 |   |             | $ | 2,130 |  
|                                                                         |  |             |       |   |             |  



|    |                       
|--- | ----------------------
|10. | Employee Benefit Plans

Employee Stock Ownership Plan The Company has an Employee Stock
Ownership Plan (ESOP) to provide retirement benefits to
qualifying, salaried employees. The ESOP grants to participants
in the plan certain ownership rights in, but not possession of,
the common stock of AT Holdings Corporation held by the Trustee
of the Plan. Shares of common stock are allocated annually to
participants in the ESOP pursuant to a prescribed formula. The
value of the shares committed to be released by the Trustee
under the Plans provisions for allocation to participants
was recognized as an expense of $4,851,000, $1,874,000 and
$1,344,000 for the fiscal years ended 2004, 2003 and 2002,
respectively. The cost of the shares acquired for the ESOP that
are not committed to be released to participants is shown as a
contra-account, Unearned ESOP shares. In October
2004, the Company contributed 21,000 shares of AT Holdings
common stock to the plan. These shares were repurchased by
Argo-Tech from plan participants who exercised their put option
rights under the plan. These rights are described below.

F-11



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Summary information regarding ESOP activity
consists of the following:

|                                             |  |             |         |   |             |   |         |  
|-------------------------------------------- |  | ----------- | ------- | - | ----------- | - | ------- | -
|                                             |  | October 30, |         |   | October 25, |  
|                                             |  | 2004        |         |   | 2003        |  
|                                             |  |             |         |   |             |  
|Allocated shares                             |  |             | 399,000 |   |             |   | 357,000 |  
|Shares released for allocation(a)            |  |             | 42,000  |   |             |   | 42,000  |  
|Unearned ESOP shares                         |  |             |        |   |             |   | 21,000  |  
|                                             |  |             |         |   |             |  
|Total ESOP shares                            |  |             | 441,000 |   |             |   | 420,000 |  
|Repurchased shares received as distributions |  |             | (86,366 | ) |             |   | (73,692 | )
|                                             |  |             |         |   |             |  
|Total available ESOP shares                  |  |             | 354,634 |   |             |   | 346,308 |  
|                                             |  |             |         |   |             |  
|Fair market value of unearned ESOP shares    |  | $           |        |   |             | $ | 937,020 |  
|                                             |  |             |         |   |             |  



---



|       |                             
|------ | ----------------------------
|(a)  - | Includes contributed shares.

All of the shares acquired for the ESOP (both
allocated and unearned shares) are owned and held in trust by
the ESOP.

The stock of AT Holdings Corporation is not
listed or traded on an active stock market and market prices
are, therefore, not available. Annually, an independent
financial consulting firm determines the fair market value based
upon the Companys performance and financial condition.

The Company provides an internal
market for stockholders through its purchase of their
shares of common stock. Participants in the Companys ESOP
who have left the Company or are employees eligible for stock
diversification have the right to require the Company, within a
specified period, to repurchase shares of stock received as
distributions under the ESOP at fair market value. For each year
presented, the total available ESOP shares are multiplied by the
fair market value of the common stock and shown as
Redeemable ESOP Stock on the Balance Sheet.

The Company maintains a supplemental employee
retirement plan, an unfunded plan that at all times will be
deemed invested in AT Holdings common stock. This plan is for
employees participating in the ESOP in respect of reduction to
allocations to their accounts because of limitations under the
tax code applicable to tax-qualified plans. Benefits under this
plan vest in the same manner as benefits under the ESOP and
distributions from the plan will, subject to certain
restrictions, be made in whole or fractional shares of AT
Holdings common stock at the same time or times as benefits
under the ESOP are distributable, or in the case of benefits
with respect to qualifying employer securities subject to the
put option under the ESOP, at the time the plan participant
exercises (or is deemed to have exercised) a hypothetical
put option under the plan.

Pension and Savings Plans The Company has two
noncontributory defined benefit pension plans for qualifying
hourly and salary employees. A plan covering salaried employees
provides pension benefits that are based on the employees
compensation and years of service. The future accrual of
benefits was terminated in connection with the formation of the
ESOP. A plan covering hourly employees provides benefits of
stated amounts for each year of service. The Companys
funding policy is to contribute actuarially determined amounts
allowable under Internal Revenue Service regulations. The
Company also sponsors three employee savings plans, which cover
substantially all of the Companys employees. The plan
covering Argo-Tech Corporation Costa Mesa employees provides for
a match of participating employees contributions. The
Companys contribution, recognized as expense was
approximately $560,000, $488,000 and $408,000 in fiscal years
2004, 2003 and 2002 respectively.

The Company uses an
October 31st measurement date for its defined benefit
pension plans.

F-12



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

A summary of the components of net periodic
pension cost for the pension plans for the fiscal years ended
2004, 2003 and 2002 is as follows (in thousands):

|                                                     |  |      |        |   |      |   |        |      |  |   |        |  
|---------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                     |  | 2004 |        |   | 2003 |   |        | 2002 | 
|                                                     |  |      |        |   |      |   |        |      | 
|Service cost  benefits earned during
    the period |  | $    | 279    |   |      | $ | 277    |      |  | $ | 255    |  
|Interest cost on projected benefit obligation        |  |      | 1,324  |   |      |   | 1,299  |      |  |   | 1,279  |  
|Expected return on plan assets                       |  |      | (1,756 | ) |      |   | (1,491 | )    |  |   | (1,628 | )
|Net amortization and deferral                        |  |      | 348    |   |      |   | 384    |      |  |   | 218    |  
|                                                     |  |      |        |   |      |   |        |      | 
|Net periodic pension cost                            |  |      | 195    |   |      |   | 469    |      |  |   | 124    |  
|                                                     |  |      |        |   |      |   |        |      | 
|Settlement (gain)/loss                               |  |      |        |   |      |   |        |      |  |   | (184   | )
|Special termination benefits                         |  |      |        |   |      |   |        |      |  |   | 770    |  
|                                                     |  |      |        |   |      |   |        |      | 
|Net periodic pension cost after settlements          |  | $    | 195    |   |      | $ | 469    |      |  | $ | 710    |  
|                                                     |  |      |        |   |      |   |        |      | 

The following table sets forth the change in
projected benefit obligation (in thousands):

|                                        |                                   |             |        |        |             |   |        |        |  
|--------------------------------------- | --------------------------------- | ----------- | ------ | ------ | ----------- | - | ------ | ------ | -
|                                        |                                   | October 30, |        |        | October 25, |  
|                                        |                                   | 2004        |        |        | 2003        |  
|                                        |                                   |             |        |        |             |  
|Benefit obligation at beginning of year |                                   | $           | 20,809 |        |             | $ | 19,180 |       
|                                        | Service cost                      |             |        | 279    |             |   |        | 277    |  
|                                        | Interest cost                     |             |        | 1,324  |             |   |        | 1,299  |  
|                                        | Benefits paid                     |             |        | (923   | )           |   |        | (914   | )
|                                        | Actuarial (gain)/loss             |             |        | 16     |             |   |        | (127   | )
|                                        | Change due to assumptions         |             |        | 58     |             |   |        | (201   | )
|                                        | Change in discount rate           |             |        | 1,414  |             |   |        | 1,295  |  
|                                        |                                   |             |        |        |             |  
|                                        | Benefit obligation at end of year |             | $      | 22,977 |             |   | $      | 20,809 |  
|                                        |                                   |             |        |        |             |  

The following table sets forth the change in plan
assets (in thousands):

|                                               |  |             |        |   |             |   |        |  
|---------------------------------------------- |  | ----------- | ------ | - | ----------- | - | ------ | -
|                                               |  | October 30, |        |   | October 25, |  
|                                               |  | 2004        |        |   | 2003        |  
|                                               |  |             |        |   |             |  
|Fair value of plan assets at beginning of year |  | $           | 19,974 |   |             | $ | 16,684 |  
|Actual return on plan assets                   |  |             | 1,876  |   |             |   | 2,914  |  
|Employer contributions                         |  |             | 185    |   |             |   | 1,290  |  
|Benefits paid                                  |  |             | (923   | ) |             |   | (914   | )
|                                               |  |             |        |   |             |  
|Fair value of plan assets at end of year       |  | $           | 21,112 |   |             | $ | 19,974 |  
|                                               |  |             |        |   |             |  

The following table sets forth the funded status
of the plans (in thousands):

|                                |  |             |        |   |             |   |       |  
|------------------------------- |  | ----------- | ------ | - | ----------- | - | ----- | -
|                                |  | October 30, |        |   | October 25, |  
|                                |  | 2004        |        |   | 2003        |  
|                                |  |             |        |   |             |  
|Funded status                   |  | $           | (1,865 | ) |             | $ | (834  | )
|Unrecognized net loss           |  |             | 5,512  |   |             |   | 4,410 |  
|Unrecognized prior service cost |  |             | 380    |   |             |   | 461   |  
|                                |  |             |        |   |             |  
|Net amount recognized           |  | $           | 4,027  |   |             | $ | 4,037 |  
|                                |  |             |        |   |             |  

F-13



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table shows the development of the
prepaid pension cost prior to reflection of additional minimum
liability (in thousands):

|                                                  |  |             |       |   |             |   |       |  
|------------------------------------------------- |  | ----------- | ----- | - | ----------- | - | ----- | -
|                                                  |  | October 30, |       |   | October 25, |  
|                                                  |  | 2004        |       |   | 2003        |  
|                                                  |  |             |       |   |             |  
|Prepaid pension cost at the beginning of the year |  | $           | 4,037 |   |             | $ | 3,216 |  
|Net periodic pension cost                         |  |             | (195  | ) |             |   | (469  | )
|Employer contributions                            |  |             | 185   |   |             |   | 1,290 |  
|                                                  |  |             |       |   |             |  
|Prepaid pension cost at the end of the year       |  | $           | 4,027 |   |             | $ | 4,037 |  
|                                                  |  |             |       |   |             |  

Amounts recognized in the consolidated balance
sheets consist of (in thousands):

|                                     |  |             |        |   |             |   |       |  
|------------------------------------ |  | ----------- | ------ | - | ----------- | - | ----- | -
|                                     |  | October 30, |        |   | October 25, |  
|                                     |  | 2004        |        |   | 2003        |  
|                                     |  |             |        |   |             |  
|Prepaid benefit cost                 |  | $           |       |   |             | $ | 972   |  
|Accrued benefit liability            |  |             | (1,865 | ) |             |   | (943  | )
|Intangible asset                     |  |             | 380    |   |             |   | 461   |  
|Accumulated other comprehensive loss |  |             | 5,512  |   |             |   | 3,547 |  
|                                     |  |             |        |   |             |  
|Net amount recognized                |  | $           | 4,027  |   |             | $ | 4,037 |  
|                                     |  |             |        |   |             |  

The foregoing net amounts regarding the pension
benefit obligation and the value of plan assets for the year
ended October 25, 2003 are based on a combination of both
overfunded and underfunded plans. The aggregate amounts relating
to the underfunded plan are as follows (in thousands):

|                             |  |             |       | 
|---------------------------- |  | ----------- | ----- | 
|                             |  | October 25, |      
|                             |  | 2003        |      
|                             |  |             |      
|Projected benefit obligation |  | $           | 9,792 | 
|Fair value of plan assets    |  |             | 8,849 | 

The following table sets forth additional
information of the plans (in thousands):

|                                                                                    |  |             |        |  |             |   |        |  
|----------------------------------------------------------------------------------- |  | ----------- | ------ |  | ----------- | - | ------ | -
|                                                                                    |  | October 30, |        |  | October 25, |  
|                                                                                    |  | 2004        |        |  | 2003        |  
|                                                                                    |  |             |        |  |             |  
|Accumulated benefit obligation at the end of the
    year                           |  | $           | 22,977 |  |             | $ | 20,809 |  
|Increase (decrease) in minimum liability included
    in other comprehensive income |  |             | 1,966  |  |             |   | (1,622 | )

The weighted average assumptions used to
determine net periodic pension cost as well as the funded status
are:

|                                                 |  |      |      |   |      |  |      |      |  |  |      |  
|------------------------------------------------ |  | ---- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                                                 |  | 2004 |      |   | 2003 |  |      | 2002 | 
|                                                 |  |      |      |   |      |  |      |      | 
|Discount rate                                    |  |      | 6.00 | % |      |  | 6.50 | %    |  |  | 7.00 | %
|Expected long-term rate of return on plan assets |  |      | 9.00 | % |      |  | 9.00 | %    |  |  | 9.00 | %

F-14



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table sets forth the
weighted-average asset allocations, by asset category:

|                  |  |            |           |           |             |  |       |             |  |  |       |  
|----------------- |  | ---------- | --------- | --------- | ----------- |  | ----- | ----------- |  |  | ----- | -
|                  |  |            |           |          
|                  |  |            |           | Assets at |            
|                  |  |            |           |           |            
|                  |  | Target     |           |           | October 30, |  |       | October 25, | 
|Asset Category    |  | Allocation |           |           | 2004        |  |       | 2003        | 
|                  |  |            |           |           |             |  |       |             | 
|Equity securities |  |            | 60% - 70% |           |             |  | 61.2  | %           |  |  | 65.6  | %
|Debt securities   |  |            | 30% - 40% |           |             |  | 38.3  | %           |  |  | 31.9  | %
|Cash              |  |            | 0% - 10%  |           |             |  | 0.5   | %           |  |  | 2.5   | %
|                  |  |            |           |           |             |  |       |             | 
|Total             |  |            |           |           |             |  | 100.0 | %           |  |  | 100.0 | %
|                  |  |            |           |           |             |  |       |             | 

The expected long-term rate of return for the
plans assets is based on the expected return of each of
the above categories, weighted based on the median of the target
allocation for each class. Based on respective market indices,
equity securities are expected to return 8% to 10% over the
long-term, while cash and fixed income is expected to return
between 4% and 6%. The committee expects that the plans
asset manager will provide a modest (1% to 2% per annum)
premium to the respective market benchmark indices.

The plans investment policy is to provide a
long-term investment return greater than the actuarial
assumptions, maximize investment return commensurate with
appropriate levels of risk and comply with the Employee
Retirement Income Security Act of 1974 (ERISA) by investing
the funds in a manner consistent with ERISAs fiduciary
standards.

The company expects to contribute $352,000 to the
plans for the fiscal year ending October 31, 2005.

The following benefit payments, which reflect
expected future service, are expected to be paid for the fiscal
years ending (in thousands):

|                                     |  |   |       | 
|------------------------------------ |  | - | ----- | 
|October 31, 2005                     |  | $ | 1,051 | 
|October 31, 2006                     |  |   | 1,050 | 
|October 31, 2007                     |  |   | 1,055 | 
|October 31, 2008                     |  |   | 1,065 | 
|October 31, 2009                     |  |   | 1,112 | 
|October 31, 2010 to October 31, 2014 |  |   | 7,137 | 

Other Postretirement Benefits The Company provides certain
postretirement health care benefits to qualifying hourly
retirees and their dependents.

The Company uses an
October 31st measurement date for its postretirement
health care benefit.

The net postretirement benefit cost for the
fiscal years ended 2004, 2003 and 2002 includes the following
components (in thousands):

|                                |  |      |       |  |      |   |       |      |  |   |     |  
|------------------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- |  | - | --- | -
|                                |  | 2004 |       |  | 2003 |   |       | 2002 | 
|                                |  |      |       |  |      |   |       |      | 
|Service cost                    |  | $    | 179   |  |      | $ | 187   |      |  | $ | 136 |  
|Interest cost                   |  |      | 881   |  |      |   | 804   |      |  |   | 650 |  
|Net amortization and deferral   |  |      | 135   |  |      |   | 23    |      |  |   | (7  | )
|                                |  |      |       |  |      |   |       |      | 
|Net postretirement benefit cost |  | $    | 1,195 |  |      | $ | 1,014 |      |  | $ | 779 |  
|                                |  |      |       |  |      |   |       |      | 

F-15



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table sets forth the change in
projected benefit obligation (in thousands):

|                                        |  |             |        |   |             |   |        |  
|--------------------------------------- |  | ----------- | ------ | - | ----------- | - | ------ | -
|                                        |  | October 30, |        |   | October 25, |  
|                                        |  | 2004        |        |   | 2003        |  
|                                        |  |             |        |   |             |  
|Benefit obligation at beginning of year |  | $           | 14,519 |   |             | $ | 9,954  |  
|Service cost                            |  |             | 179    |   |             |   | 187    |  
|Interest cost                           |  |             | 881    |   |             |   | 804    |  
|Benefits paid                           |  |             | (492   | ) |             |   | (458   | )
|Plan participant contributions          |  |             | 133    |   |             |   | 118    |  
|Actuarial (gain)/loss                   |  |             | (1,315 | ) |             |   | 1,662  |  
|Change in plan provisions               |  |             | (472   | ) |             |   |       |  
|Change in discount rate                 |  |             | 1,043  |   |             |   | 2,252  |  
|                                        |  |             |        |   |             |  
|Benefit obligation at end of year       |  | $           | 14,476 |   |             | $ | 14,519 |  
|                                        |  |             |        |   |             |  

The actuarial (gain)/loss includes an actuarial
gain of $1,824 due to the Medicare Rx subsidy.

The following table sets forth the change in plan
assets (in thousands):

|                                               |  |             |      |   |             |   |      |  
|---------------------------------------------- |  | ----------- | ---- | - | ----------- | - | ---- | -
|                                               |  | October 30, |      |   | October 25, |  
|                                               |  | 2004        |      |   | 2003        |  
|                                               |  |             |      |   |             |  
|Fair value of plan assets at beginning of year |  | $           |     |   |             | $ |     |  
|Benefits paid                                  |  |             | (492 | ) |             |   | (458 | )
|Employer contributions                         |  |             | 359  |   |             |   | 340  |  
|Plan participant contributions                 |  |             | 133  |   |             |   | 118  |  
|                                               |  |             |      |   |             |  
|Fair value of plan assets at end of year       |  | $           |     |   |             | $ |     |  
|                                               |  |             |      |   |             |  

The following table sets forth the funded status
of the plans (in thousands):

|                                |  |             |         |   |             |   |         |  
|------------------------------- |  | ----------- | ------- | - | ----------- | - | ------- | -
|                                |  | October 30, |         |   | October 25, |  
|                                |  | 2004        |         |   | 2003        |  
|                                |  |             |         |   |             |  
|Benefit obligation              |  | $           | (14,476 | ) |             | $ | (14,519 | )
|Unrecognized prior service cost |  |             | (472    | ) |             |   |        |  
|Unrecognized net (gain) loss    |  |             | 3,151   |   |             |   | 3,558   |  
|                                |  |             |         |   |             |  
|Accrued benefit cost            |  | $           | (11,797 | ) |             | $ | (10,961 | )
|                                |  |             |         |   |             |  



| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | The following table shows the development of the
    accrued postretirement benefit cost (in thousands):

|                                                                     |  |             |         |   |             |   |         |  
|-------------------------------------------------------------------- |  | ----------- | ------- | - | ----------- | - | ------- | -
|                                                                     |  | October 30, |         |   | October 25, |  
|                                                                     |  | 2004        |         |   | 2003        |  
|                                                                     |  |             |         |   |             |  
|Accrued postretirement benefit cost at the
    beginning of the year |  | $           | (10,961 | ) |             | $ | (10,287 | )
|Net periodic postretirement benefit cost                             |  |             | (1,195  | ) |             |   | (1,014  | )
|Claim payments                                                       |  |             | 359     |   |             |   | 340     |  
|                                                                     |  |             |         |   |             |  
|Accrued postretirement benefit cost at the end of
    the year       |  | $           | (11,797 | ) |             | $ | (10,961 | )
|                                                                     |  |             |         |   |             |  

F-16



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The weighted-average assumption used to determine
net periodic postretirement benefit cost and benefit obligations
is:

|              |  |      |      |   |      |  |      |  
|------------- |  | ---- | ---- | - | ---- |  | ---- | -
|              |  | 2004 |      |   | 2003 | 
|              |  |      |      |   |      | 
|Discount rate |  |      | 6.00 | % |      |  | 6.50 | %

The assumed health care cost trend rates are as
follows:

|                                                  |  |      |      |   |      |  |      |  
|------------------------------------------------- |  | ---- | ---- | - | ---- |  | ---- | -
|                                                  |  | 2004 |      |   | 2003 | 
|                                                  |  |      |      |   |      | 
|Health care cost trend rate assumed for next year |  |      | 8.00 | % |      |  | 8.50 | %
|Ultimate rate                                     |  |      | 5.00 | % |      |  | 5.00 | %
|Year ultimate rate is valued                      |  |      | 2011 |   |      |  | 2011 |  

The company expects the following contributions
to be made to the plan for the fiscal year ending
October 31, 2005 (in thousands):

|                                        |  |   |     | 
|--------------------------------------- |  | - | --- | 
|Expected employer contributions         |  | $ | 510 | 
|Expected plan participant contributions |  | $ | 170 | 

The following benefit payments (employer portion
only), which reflect expected future service, are expected to be
paid for the fiscal years ending (in thousands):

|                                     |  |   |       | 
|------------------------------------ |  | - | ----- | 
|October 31, 2005                     |  | $ | 510   | 
|October 31, 2006                     |  |   | 519   | 
|October 31, 2007                     |  |   | 577   | 
|October 31, 2008                     |  |   | 638   | 
|October 31, 2009                     |  |   | 701   | 
|October 31, 2010 to October 31, 2014 |  |   | 4,057 | 

Assumed health care cost trend rates have a
significant effect on the amounts reported for the health care
plan. A one-percentage-point change in assumed health care cost
trend rates would have the following effects (in thousands):

|                                            |  |          |       |  |          |   |        |  
|------------------------------------------- |  | -------- | ----- |  | -------- | - | ------ | -
|                                            |  | 1% point |       |  | 1% point |  
|                                            |  | Increase |       |  | Decrease |  
|                                            |  |          |       |  |          |  
|Effect on service and interest cost         |  | $        | 182   |  |          | $ | (147   | )
|Effect on postretirement benefit obligation |  | $        | 2,437 |  |          | $ | (1,998 | )



|    |             
|--- | ------------
|11. | Income Taxes

The income tax provision/(benefit) consists of
the following for the fiscal years ended 2004, 2003 and 2002 (in
thousands):

|                                 |                 |       |        |        |        |   |        |       |       |   |      |     |       | 
|-------------------------------- | --------------- | ----- | ------ | ------ | ------ | - | ------ | ----- | ----- | - | ---- | --- | ----- | 
|                                 |                 | 2004  |        |        | 2003   |   |        | 2002  |      
|                                 |                 |       |        |        |        |   |        |       |      
|Current tax provision/(benefit): |                 |       |        |        |        |   |        |       |       |   |      |    
|                                 | Federal         |       | $      | (1,273 | )      |   | $      | 2,134 |       |   | $    | 797 |      
|                                 | State and local |       |        | (76    | )      |   |        | 672   |       |   |      | 580 |      
|                                 |                 |       |        |        |        |   |        |       |      
|                                 |                 | Total |        |        | (1,349 | ) |        |       | 2,806 |   |      |     | 1,377 | 
|Deferred tax benefit             |                 |       | (2,150 | )      |        |   | (1,227 | )     |       |   | (808 | )  
|                                 |                 |       |        |        |        |   |        |       |      
|Income tax provision/(benefit)   |                 | $     | (3,499 | )      |        | $ | 1,579  |       |       | $ | 569  |    
|                                 |                 |       |        |        |        |   |        |       |      

F-17



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The difference between the recorded income tax
provision/(benefit) and the amounts computed using the statutory
U.S. Federal income tax rates are as follows (in thousands):

|                                                         |  |      |        |   |      |   |       |      |  |   |       |  
|-------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                                         |  | 2004 |        |   | 2003 |   |       | 2002 | 
|                                                         |  |      |        |   |      |   |       |      | 
|Income tax provision at statutory rate                   |  | $    | (1,346 | ) |      | $ | 2,137 |      |  | $ | 2,273 |  
|State tax provision  net of federal
    benefits        |  |      | 80     |   |      |   | 391   |      |  |   | 366   |  
|Extraterritorial income                                  |  |      | (1,403 | ) |      |   | (829  | )    |  |   | (996  | )
|R & D credit                                             |  |      | (590   | ) |      |   | (252  | )    |  |   | (584  | )
|ESOP                                                     |  |      | 539    |   |      |   | 66    |      |  |   | (114  | )
|Settlement of tax examination and reserve
    adjustment |  |      | (720   | ) |      |   |       |      |  |   |       |  
|Other  net                                              |  |      | (59    | ) |      |   | 66    |      |  |   | (376  | )
|                                                         |  |      |        |   |      |   |       |      | 
|Income tax provision/(benefit)                           |  | $    | (3,499 | ) |      | $ | 1,579 |      |  | $ | 569   |  
|                                                         |  |      |        |   |      |   |       |      | 

During the fiscal years ended 2004 and 2003, the
Company paid (net of refunds received) approximately $1.3 and
$1.7 million in income taxes respectively. In fiscal year
2002 the Company received a net refund of income taxes of
approximately $0.8.

The components of the Companys net deferred
tax asset/(liability) are as follows (in thousands):

|                           |                                   |             |        |         |             |   |        |         |  
|-------------------------- | --------------------------------- | ----------- | ------ | ------- | ----------- | - | ------ | ------- | -
|                           |                                   | October 30, |        |         | October 25, |  
|                           |                                   | 2004        |        |         | 2003        |  
|                           |                                   |             |        |         |             |  
|Current:                   |                                   |             |        |         |             |   |        |        
|                           | Inventory                         |             | $      | 1,374   |             |   | $      | 1,273   |  
|                           | Employee benefits                 |             |        | 1,361   |             |   |        | 1,288   |  
|                           | Warranty                          |             |        | 815     |             |   |        | 844     |  
|                           | Engineering reserves              |             |        | 1,329   |             |   |        | 599     |  
|                           | Other reserves                    |             |        | 694     |             |   |        | 707     |  
|                           |                                   |             |        |         |             |  
|Total current              |                                   |             | 5,573  |         |             |   | 4,711  |        
|                           |                                   |             |        |         |             |  
|Long-term:                 |                                   |             |        |         |             |   |        |        
|                           | Hourly retiree medical            |             |        | 4,420   |             |   |        | 4,259   |  
|                           | Accrued/(Prepaid) pension benefit |             |        | 846     |             |   |        | (323    | )
|                           | Employee benefits                 |             |        | 500     |             |   |        |         |  
|                           | Property and equipment            |             |        | (584    | )           |   |        | 835     |  
|                           | Intangible assets                 |             |        | (12,866 | )           |   |        | (14,324 | )
|                           | Other  net                       |             |        | (63     | )           |   |        | (268    | )
|                           |                                   |             |        |         |             |  
|Total long-term            |                                   |             | (7,747 | )       |             |   | (9,821 | )      
|                           |                                   |             |        |         |             |  
|Net deferred tax liability |                                   | $           | (2,174 | )       |             | $ | (5,110 | )      
|                           |                                   |             |        |         |             |  

The temporary difference described above
principally represent differences between the tax bases of
assets (principally inventory, property and equipment, and
intangible assets) or liabilities (principally related to
employee benefits and loss reserves) and their reported amounts
in the consolidated financial statements that will result in
taxable or deductible amounts in future years when the reported
amounts of the assets or liabilities are recovered or settled,
respectively. The current deferred tax asset is reflected in
Deferred income taxes and prepaid expenses and the
total long-term deferred tax liability is reflected in
Other Noncurrent Liabilities on the consolidated
balance sheets.

F-18



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |     
|--- | ----
|12. | Debt

Summary The Companys long-term debt
consists of the following (in thousands):

|                          |                  |             |         |         |             |   |         |         | 
|------------------------- | ---------------- | ----------- | ------- | ------- | ----------- | - | ------- | ------- | 
|                          |                  | October 30, |         |         | October 25, |  
|                          |                  | 2004        |         |         | 2003        |  
|                          |                  |             |         |         |             |  
|Term loans                |                  | $           | 14,813  |         |             | $ | 25,850  |        
|Revolving credit facility |                  |             |         |         |             |   |         |        
|Senior notes              |                  |             | 250,000 |         |             |   |         |        
|Senior subordinated notes |                  |             |         |         |             |   | 193,499 |        
|                          |                  |             |         |         |             |  
|                          | Total borrowings |             |         | 264,813 |             |   |         | 219,349 | 
|Current maturities        |                  |             | (750    | )       |             |   | (12,000 | )      
|                          |                  |             |         |         |             |  
|Long-term portion         |                  | $           | 264,063 |         |             | $ | 207,349 |        
|                          |                  |             |         |         |             |  

Credit Facility and Term Loans The Company has a
$15.0 million five-year Term Loan Facility and has
available a five-year $30.0 million Revolving Credit
Facility. The unused balance of the Revolving Credit Facility
($24.2 million at October 30, 2004 after reduction of
$5.8 million for letters of credit) is subject to a .50%
commitment fee. The Credit Facility and Term Loan mature on
June 23, 2009. The Credit Facility is collateralized by
substantially all of the tangible assets of the Company
(including the capital stock of AT Holdings) as well as the
unearned shares of the AT Holdings common stock held by
the ESOP. The Credit Facility contains a number of covenants
that, among other things, limit the Companys ability to
incur additional indebtedness, pay dividends, prepay
subordinated indebtedness, dispose of certain assets, create
liens, make capital expenditures, make certain investments or
acquisitions and otherwise restrict corporate activities. The
Credit Facility contains no restrictions on the ability of the
Companys subsidiaries to make distributions to the
Company. The Credit Facility also requires the Company to comply
with certain financial ratios and tests, under which the Company
is required to achieve certain financial and operating results.
The Company was in compliance with the covenants at
October 30, 2004. Interest was calculated, at the
Companys choice, using an alternate base rate
(ABR) or LIBOR, plus a supplemental percentage determined
by the ratio of debt to adjusted EBITDA. The interest rate for
fiscal year 2004 ranged from 1.00% to 2.50% plus ABR or 2.50% to
3.50% plus LIBOR.

At October 25, 2003 the Company had a
$115.0 million principal amount of Term Loans
($25.9 million remaining balance) and a seven-year
$20.0 million Revolving Credit Facility. The Credit
Facility and Term Loans were to mature on October 28, 2005.
On June 23, 2004, the Company amended and restated the
Credit Facility and Term Loans into a $15.0 million
five-year Term Loan Facility and a five-year
$30.0 million Revolving Credit Facility.

Senior Notes At October 30, 2004, the
Company had outstanding $250.0 million 9 1/4% Senior
Notes due 2011. Interest on the Notes is payable semiannually on
June 1 and December 1 of each year. The Senior Notes
will mature on June 1, 2011.

The Senior Notes are unsecured and rank equally
with all our existing and future senior debt and rank senior to
all our existing and future subordinated debt. The Senior Notes
will be effectively subordinated to all our existing and future
secured debt to the extent of the value of the assets securing
such debt. The Senior Notes are subject to certain limitations
and restrictions which the Company has not exceeded at
October 30, 2004.

Senior Subordinated Notes At October 25, 2003, the
Company had outstanding $195.0 million 8 5/8% Senior
Subordinated Notes due 2007 (the Notes). The
accreted value of the Notes was $193.5 million. Interest on
the Notes was payable semiannually on April 1 and
October 1 of each year. In June 2004, the

F-19



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Company purchased, through a tender offer and
redemption, its outstanding $195.0 million 8
5/8% Notes due 2007, together with a premium of
$5.6 million and accrued and unpaid interest of
$4.0 million.

Annual Maturities and Interest
Payments The
maturities of the Companys long-term debt (excluding the
senior notes which mature in 2011) during each of the next five
fiscal years are as follows (in thousands):

|            |  |        |        | 
|----------- |  | ------ | ------ | 
|Fiscal Year |  | Amount |       
|            |  |        |       
|2005        |  | $      | 750    | 
|2006        |  |        | 750    | 
|2007        |  |        | 750    | 
|2008        |  |        | 3,563  | 
|2009        |  |        | 9,000  | 
|            |  |        |       
|Total       |  | $      | 14,813 | 
|            |  |        |       

Total interest paid during the fiscal years ended
2004, 2003 and 2002 was $20.7 million, $18.5 million
and $19.0 million, respectively.

Debt Extinguishment Expense The Company incurred
$12.9 million of debt extinguishment expense in fiscal
2004. The expense is for the write-off of $6.1 million of
deferred financing fees associated with the refinancing of our 8
5/8% senior subordinated notes and the amendment and
restatement of our credit agreement, $5.5 million for the
tender, consent and redemption fees associated with the
refinancing of the 8 5/8% senior subordinated notes and
recognition of the remaining accretion of $1.3 million on a
portion of the 8 5/8% senior subordinated notes that were
issued at a discount.



|    |                    
|--- | -------------------
|13. | Segment Information

The Company operates in two business segments,
Aerospace and Industrial. The Aerospace segment includes the
design, manufacture, distribution, repair and overhaul of
aviation products consisting of aircraft engine fuel pumps, fuel
flow related products and systems found on a planes
airframe, and aerial refueling pumps and related equipment. The
Industrial segment includes the design, manufacture and
distribution of industrial pumps, ground fueling valves and
related components, industrial marine cryogenic pumps and
nozzles for transferring liquefied natural gas and operation of
a business park in Cleveland, Ohio where the Company maintains
its headquarters and one of its production facilities.

The Company evaluates the performance of its
segments based primarily on operating profit before amortization
of deferred financing fees and other identified intangibles,
interest expense, interest income, other miscellaneous fees and
income taxes.

F-20



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table presents revenues and other
financial information by business segment (in thousands):

2004

|                                                                                     |  |           |         |  |            |   |        |           |  |   |              |   |  |   |         |  
|------------------------------------------------------------------------------------ |  | --------- | ------- |  | ---------- | - | ------ | --------- |  | - | ------------ | - |  | - | ------- | -
|                                                                                     |  | Aerospace |         |  | Industrial |   |        | Corporate |  |   | Consolidated |  
|                                                                                     |  |           |         |  |            |   |        |           |  |   |              |  
|Customer revenues                                                                    |  | $         | 138,177 |  |            | $ | 49,151 |           |  | $ |             |   |  | $ | 187,328 |  
|Operating profit (loss)                                                              |  |           | 34,584  |  |            |   | 761    |           |  |   | (320         | ) |  |   | 35,025  |  
|Amortization of intangible assets                                                    |  |           |         |  |            |   |        |           |  |   |              |   |  |   | 3,414   |  
|                                                                                     |  |           |         |  |            |   |        |           |  |   |              |  
|Income from operations                                                               |  |           |         |  |            |   |        |           |  |   |              |   |  |   | 31,611  |  
|Interest expense                                                                     |  |           |         |  |            |   |        |           |  |   |              |   |  |   | 22,705  |  
|Debt extinguishment expense                                                          |  |           |         |  |            |   |        |           |  |   |              |   |  |   | 12,961  |  
|Other, net                                                                           |  |           |         |  |            |   |        |           |  |   |              |   |  |   | (95     | )
|                                                                                     |  |           |         |  |            |   |        |           |  |   |              |  
|Loss before tax                                                                      |  |           |         |  |            |   |        |           |  |   |              |   |  | $ | (3,960  | )
|                                                                                     |  |           |         |  |            |   |        |           |  |   |              |  
|Capital expenditures                                                                 |  |           | 1,789   |  |            |   | 1,267  |           |  |   |              |   |  |   | 3,056   |  
|Depreciation                                                                         |  |           | 2,168   |  |            |   | 1,231  |           |  |   | 400          |   |  |   | 3,799   |  
|Compensation expense recognized in connection
    with employee stock ownership plan |  |           | 4,270   |  |            |   | 581    |           |  |   |              |   |  |   | 4,851   |  

2003

|                                                                                     |  |           |         |  |            |   |        |           |  |   |              |   |  |   |         |  
|------------------------------------------------------------------------------------ |  | --------- | ------- |  | ---------- | - | ------ | --------- |  | - | ------------ | - |  | - | ------- | -
|                                                                                     |  | Aerospace |         |  | Industrial |   |        | Corporate |  |   | Consolidated |  
|                                                                                     |  |           |         |  |            |   |        |           |  |   |              |  
|Customer revenues                                                                    |  | $         | 121,278 |  |            | $ | 39,448 |           |  | $ |             |   |  | $ | 160,726 |  
|Operating profit (loss)                                                              |  |           | 28,484  |  |            |   | 2,157  |           |  |   | (392         | ) |  |   | 30,249  |  
|Amortization of intangible assets                                                    |  |           |         |  |            |   |        |           |  |   |              |   |  |   | 3,414   |  
|                                                                                     |  |           |         |  |            |   |        |           |  |   |              |  
|Income from operations                                                               |  |           |         |  |            |   |        |           |  |   |              |   |  |   | 26,835  |  
|Interest expense                                                                     |  |           |         |  |            |   |        |           |  |   |              |   |  |   | 21,257  |  
|Other, net                                                                           |  |           |         |  |            |   |        |           |  |   |              |   |  |   | (529    | )
|                                                                                     |  |           |         |  |            |   |        |           |  |   |              |  
|Income before tax                                                                    |  |           |         |  |            |   |        |           |  |   |              |   |  | $ | 6,107   |  
|                                                                                     |  |           |         |  |            |   |        |           |  |   |              |  
|Capital expenditures                                                                 |  |           | 1,194   |  |            |   | 745    |           |  |   |              |   |  |   | 1,939   |  
|Depreciation                                                                         |  |           | 2,503   |  |            |   | 1,280  |           |  |   | 404          |   |  |   | 4,187   |  
|Compensation expense recognized in connection
    with employee stock ownership plan |  |           | 1,652   |  |            |   | 222    |           |  |   |              |   |  |   | 1,874   |  

F-21



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

2002

|                                                                                     |  |           |         |  |            |   |        |           |  |   |              |   |  |   |         |  
|------------------------------------------------------------------------------------ |  | --------- | ------- |  | ---------- | - | ------ | --------- |  | - | ------------ | - |  | - | ------- | -
|                                                                                     |  | Aerospace |         |  | Industrial |   |        | Corporate |  |   | Consolidated |  
|                                                                                     |  |           |         |  |            |   |        |           |  |   |              |  
|Customer revenues                                                                    |  | $         | 120,891 |  |            | $ | 34,412 |           |  | $ |             |   |  | $ | 155,303 |  
|Operating profit (loss)                                                              |  |           | 30,978  |  |            |   | 1,843  |           |  |   | (1,268       | ) |  |   | 31,553  |  
|Amortization of intangible assets                                                    |  |           |         |  |            |   |        |           |  |   |              |   |  |   | 3,721   |  
|                                                                                     |  |           |         |  |            |   |        |           |  |   |              |  
|Income from operations                                                               |  |           |         |  |            |   |        |           |  |   |              |   |  |   | 27,832  |  
|Interest expense                                                                     |  |           |         |  |            |   |        |           |  |   |              |   |  |   | 21,434  |  
|Other, net                                                                           |  |           |         |  |            |   |        |           |  |   |              |   |  |   | (97     | )
|                                                                                     |  |           |         |  |            |   |        |           |  |   |              |  
|Income before tax                                                                    |  |           |         |  |            |   |        |           |  |   |              |   |  | $ | 6,495   |  
|                                                                                     |  |           |         |  |            |   |        |           |  |   |              |  
|Capital expenditures                                                                 |  |           | 1,240   |  |            |   | 545    |           |  |   |              |   |  |   | 1,785   |  
|Depreciation                                                                         |  |           | 2,796   |  |            |   | 1,362  |           |  |   | 450          |   |  |   | 4,608   |  
|Compensation expense recognized in connection
    with employee stock ownership plan |  |           | 1,205   |  |            |   | 139    |           |  |   |              |   |  |   | 1,344   |  



|    |                           
|--- | --------------------------
|14. | Related Party Transactions

Upsilon International Corporation
(UIC) is the exclusive distributor of Argo-Tech
engine fuel pump and certain airframe product manufactured at
our Cleveland, Ohio facility and is a non-exclusive sales agent
for engine overhaul and repair for the entire international
market under a long-term distribution agreement. UIC is owned by
YC International, Inc., a stockholder of AT Holdings
Corporation, which is also under the control of a stockholder of
AT Holdings Corporation. We believe that this distribution
agreement was entered into on terms and conditions customary for
the industry in all respects with the exception of the contract
term and termination provisions, which are more favorable to UIC
than industry norm. The dollar amount of transactions for each
of the last three fiscal years can be found in Note 15.
Amounts owed to Argo-Tech by UIC under normal terms and
conditions as of October 30, 2004, October 25, 2003
and October 26, 2002 were $2.0 million,
$3.7 million and $2.7 million, respectively.



|    |                                 
|--- | --------------------------------
|15. | Major Customers and Export Sales

During the fiscal years ended 2004, 2003 and
2002, the Company had revenues in excess of 10% from only one
customer (in thousands):

|                                  |  |      |        |  |      |   |        |      |  |   |        | 
|--------------------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                  |  | 2004 |        |  | 2003 |   |        | 2002 | 
|                                  |  |      |        |  |      |   |        |      | 
|Upsilon International Corporation |  | $    | 20,326 |  |      | $ | 19,321 |      |  | $ | 21,231 | 

During the fiscal years ended 2004, 2003 and
2002, export sales to foreign customers were comprised of the
following (in thousands):

|                                        |       |      |        |        |      |   |        |        |  |   |        |        | 
|--------------------------------------- | ----- | ---- | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                                        |       | 2004 |        |        | 2003 |   |        | 2002   | 
|                                        |       |      |        |        |      |   |        |        | 
|Europe                                  |       | $    | 32,823 |        |      | $ | 30,371 |        |  | $ | 28,002 |       
|All others (individually less than 10%) |       |      | 47,382 |        |      |   | 36,320 |        |  |   | 40,576 |       
|                                        |       |      |        |        |      |   |        |        | 
|                                        | Total |      | $      | 80,205 |      |   | $      | 66,691 |  |   | $      | 68,578 | 
|                                        |       |      |        |        |      |   |        |        | 



|    |                                    
|--- | -----------------------------------
|16. | Fair Value of Financial Instruments

The Company has various financial instruments,
including cash and short-term investments and long-term debt.
The Company has determined the estimated fair value of these
financial instruments by soliciting available

F-22



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

market information and utilizing appropriate
valuation methodologies, which require judgment. The Company
believes that the carrying values of the short-term investments,
Term Loans and Senior Notes approximates their fair value. The
fair value of the Companys Senior Subordinated Notes
approximated $189.2 million at October 25, 2003 based
upon quoted market prices. The Company does not enter into
derivative contracts for trading or speculative purposes. A 10%
fluctuation in interest rates would not materially affect
Argo-Techs financial condition, result of operations or
cash flow.



|    |              
|--- | -------------
|17. | Stock Options

The Company has four stock-based compensation
plans:

1991 Performance Stock Option
Plan The 1991
Performance Stock Option Plan provides for option grants for the
purchase of AT Holdings common stock. The exercise price
of each option is $10.00 per share. All of the options
under this plan became fully vested in January 1999. At
October 30, 2004, 18,230 options were outstanding.

1991 Management Incentive Stock Option
Plan The 1991
Management Incentive Stock Option Plan provides for option
grants for the purchase of AT Holdings common stock. The
exercise price of each option is $10.00 per share. All of
the options under this plan became fully vested in January 1999.
At October 30, 2004, 2,940 options were outstanding.

1998 Equity Replacement Stock Option
Plan The 1998 Equity
Replacement Stock Option Plan was established to provide for
option grants for the purchase of AT Holdings common
stock. The exercise price of each option is $40.00 per
share. All of the options under this plan were fully vested upon
issuance. At October 30, 2004, 19,135 options were
outstanding.

1998 Incentive Plan The 1998 Incentive Plan was
established to provide option grants for the purchase of AT
Holdings common stock, at prices that may be more than,
less than, or equal to the fair market value of the shares, as
the Board or Compensation Committee of AT Holdings may determine
at the time of grant. There have been three option grants under
the 1998 Incentive Plan, the first in 1999 with an exercise
price of $100.11, the second in 2001 with an exercise price of
$69.18 and the third in 2002 with an exercise price of $49.79.
The option agreement governing the options granted in 1999
provides that such options vest in 20% increments over five
successive years. For any year in which the EBITDA of the
company exceeds 105% of the target EBITDA, an additional 13 1/3%
of the optioned shares will vest. Effective November 2,
2000 all holders of options granted in 1999 agreed to the
cancellation of the portion of the 1999 options which were not
vested at such date. Pursuant to the plan, such cancelled
options are available for new grants. The option agreement
governing the options granted under the plan in September 2001
and March 2002 provides for vesting as follows: 33.3% at the
time of issuance and 33.3% on the anniversary date of the grant
over the next two years. All options granted under the plan
expire ten years from the date of grant. In the event that AT
Holdings common stock becomes registered or traded on a
national exchange or in the event of a change in control, all
options will become exercisable in full. At October 30,
2004, 87,610 options were vested and outstanding.

The fair value of each option grant is estimated
on the date of grant using the Black-Scholes option-pricing
model with the following assumptions used for grants in 2001 and
2002, respectively: risk-free interest rates of 5.0% and 4.875%
and expected lives of 10 years for each of the option plan
grants. AT Holdings does not pay a dividend and because it is a
nonpublic entity, expected volatility over the life of the
options is not estimated.

F-23



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

A summary of the status of the Companys
stock option plans as of October 30, 2004, October 25,
2003 and October 26, 2002, and changes during the years
ending on those dates is presented below:

|                                                                   |  |        |         |                 |                |   |       | 
|------------------------------------------------------------------ |  | ------ | ------- | --------------- | -------------- | - | ----- | 
|                                                                   |  |       
|                                                                   |  | 2004   |        
|                                                                   |  |        |        
|                                                                   |  |        |         | Weighed Average |               
|                                                                   |  | Shares |         |                 | Exercise Price |  
|                                                                   |  |        |         |                 |                |  
|Outstanding at beginning of year                                   |  |        | 133,713 |                 |                | $ | 50.20 | 
|Granted                                                            |  |        |        |                 |                |   |      | 
|Exercised                                                          |  |        | (4,000  | )               |                |   | 49.79 | 
|Cancelled                                                          |  |        | (1,790  | )               |                |   | 71.77 | 
|Outstanding at end of year                                         |  |        | 127,923 |                 |                |   | 49.91 | 
|Options exercisable at year-end                                    |  |        | 127,923 |                 |                |   |       | 
|Weighted average fair value of options granted
    during the year |  | $      |        |                 |                |   |       | 

|                                                                   |  |        |         |                 |                |   |       | 
|------------------------------------------------------------------ |  | ------ | ------- | --------------- | -------------- | - | ----- | 
|                                                                   |  |       
|                                                                   |  | 2003   |        
|                                                                   |  |        |        
|                                                                   |  |        |         | Weighed Average |               
|                                                                   |  | Shares |         |                 | Exercise Price |  
|                                                                   |  |        |         |                 |                |  
|Outstanding at beginning of year                                   |  |        | 137,027 |                 |                | $ | 50.53 | 
|Granted                                                            |  |        |        |                 |                |   |      | 
|Exercised                                                          |  |        | (390    | )               |                |   | 10.00 | 
|Cancelled                                                          |  |        | (2,924  | )               |                |   | 71.08 | 
|Outstanding at end of year                                         |  |        | 133,713 |                 |                |   | 50.20 | 
|Options exercisable at year-end                                    |  |        | 115,175 |                 |                |   |       | 
|Weighted average fair value of options granted
    during the year |  | $      |        |                 |                |   |       | 

|                                                                   |  |        |         |                 |                |   |       | 
|------------------------------------------------------------------ |  | ------ | ------- | --------------- | -------------- | - | ----- | 
|                                                                   |  |       
|                                                                   |  | 2002   |        
|                                                                   |  |        |        
|                                                                   |  |        |         | Weighed Average |               
|                                                                   |  | Shares |         |                 | Exercise Price |  
|                                                                   |  |        |         |                 |                |  
|Outstanding at beginning of year                                   |  |        | 86,120  |                 |                | $ | 51.92 | 
|Granted                                                            |  |        | 55,612  |                 |                |   | 49.79 | 
|Exercised                                                          |  |        | (1,037  | )               |                |   | 37.40 | 
|Cancelled                                                          |  |        | (3,668  | )               |                |   | 75.59 | 
|Outstanding at end of year                                         |  |        | 137,027 |                 |                |   | 50.53 | 
|Options exercisable at year-end                                    |  |        | 92,170  |                 |                |   |       | 
|Weighted average fair value of options granted
    during the year |  | $      | 19.03   |                 |                |   |       | 



|    |              
|--- | -------------
|18. | Contingencies

Environmental Matters The soil and groundwater at the
Companys Euclid, Ohio facility and the Costa Mesa,
California facility contain elevated levels of certain
contaminants which are currently in the process of being removed
and/or remediated. Because the Company has certain
indemnification rights from former owners of the facilities for
liabilities arising from these or other environmental matters,
in the opinion of the Companys management, the ultimate
outcome is not expected to materially affect the Companys
financial condition, results of operations or liquidity.

Other Matters The Company is subject to various
legal actions and other contingencies. In the opinion of the
Companys management, after reviewing the information which
is currently available with respect to such matters and
consulting with the Companys legal counsel, any liability
which may ultimately be incurred with

F-24



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

respect to these additional matters is not
expected to materially affect the Companys financial
condition, results of operations or liquidity.

Approximately 25% of the Companys workforce
is covered by a collective bargaining agreement.



|    |                         
|--- | ------------------------
|19. | New Accounting Standards

In December 2003, the Financial Accounting
Standards Board (FASB) issued a revised FASB
Interpretation No. (FIN) 46, Consolidation of
Variable Interest Entities. FIN 46 requires existing,
unconsolidated variable interest entities to be consolidated by
their primary beneficiaries if the entities do not effectively
disperse risks among the parties involved. Argo-Tech is not
associated with variable interest entities; therefore, the
adoption of this statement did not have any effect on
Argo-Techs consolidated financial position or results of
operations.

In December 2003, the Medicare Prescription Drug,
Improvement and Modernization Act was enacted, which introduced
a Medicare prescription drug benefit and a federal subsidy to
sponsors of retiree health-care plans that provide a benefit at
least actuarially equivalent to the Medicare benefit. In
accordance with FASB Staff Position (FSP)
SFAS No. 106-2, Argo-Tech adopted the provisions of
this statement effective with the period beginning
August 1, 2004. The accumulated postretirement benefit
obligation and net periodic postretirement benefit cost reflect
the provisions of the Act. The adoption of this statement did
not have a material effect on Argo-Techs consolidated
financial position or results of operations.

In December 2003, the FASB issued a revision to
SFAS No. 132, Employers Disclosures about
Pensions and Other Postretirement Benefits, which expands
the disclosure requirements regarding plan assets and benefit
obligations for Argo-Techs two noncontributory defined
benefit pension plans and its postretirement benefit plan.
Argo-Tech adopted the provisions of this statement effective
with the period beginning February 1, 2004 (see
Note 10).

In November 2004, the FASB issued
SFAS No. 151, Inventory Costs, which is an
amendment of Accounting Research Bulletin (ARB)
No. 43, Chapter 4, Inventory Pricing. This
statement clarifies that abnormal amounts of idle facility
expense, freight, handling costs, and wasted materials
(spoilage) should be recognized as current-period charges. The
provisions of this statement become effective for the
Companys fiscal year beginning October 30, 2005.
Management has not determined the impact, if any, that this
statement will have on Argo-Techs consolidated financial
statements.

In December 2004, the FASB issued
SFAS No. 123(R), Share Based Payment,
which requires all share-based payments to employees, including
grants of employee stock options, to be recognized in the
financial statements based on their fair values. The provisions
of this statement become effective for the Companys fiscal
quarter beginning July 31, 2005. Management has not
determined the impact, if any, that this statement will have on
Argo-Techs consolidated financial statements.

F-25



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                  
|--- | ---------------------------------
|20. | Other Comprehensive Income/(Loss)

Other comprehensive income/(loss) includes
foreign currency translation adjustments and deferred pension
income/(expense) (in thousands).

|                                   |                                                                                 |      |      |        |      |   |       |       |   |   |       |        |  
|---------------------------------- | ------------------------------------------------------------------------------- | ---- | ---- | ------ | ---- | - | ----- | ----- | - | - | ----- | ------ | -
|                                   |                                                                                 | 2004 |      |        | 2003 |   |       | 2002  |  
|                                   |                                                                                 |      |      |        |      |   |       |       |  
|Net income/(loss)                  |                                                                                 | $    | (461 | )      |      | $ | 4,528 |       |   | $ | 5,926 |       
|Other comprehensive income/(loss): |                                                                                 |      |      |        |      |   |       |       |   |   |       |       
|                                   | Foreign currency translation adjustment                                         |      |      | 7      |      |   |       | 119   |   |   |       | (14    | )
|                                   | Deferred pension income/(expense)                                               |      |      | (1,966 | )    |   |       | 1,622 |   |   |       | (2,123 | )
|                                   |                                                                                 |      |      |        |      |   |       |       |  
|                                   | Other comprehensive income/(loss) before tax                                    |      |      | (1,959 | )    |   |       | 1,741 |   |   |       | (2,137 | )
|                                   | Income tax (provision)/benefit related to other
    comprehensive income/(loss) |      |      | 787    |      |   |       | (649  | ) |   |       | 850    |  
|                                   |                                                                                 |      |      |        |      |   |       |       |  
|                                   | Other comprehensive income/(loss) net of tax                                    |      |      | (1,172 | )    |   |       | 1,092 |   |   |       | (1,287 | )
|                                   |                                                                                 |      |      |        |      |   |       |       |  
|                                   | Comprehensive income/(loss)                                                     |      | $    | (1,633 | )    |   | $     | 5,620 |   |   | $     | 4,639  |  
|                                   |                                                                                 |      |      |        |      |   |       |       |  

F-26



---



##### Table of Contents



ARGO-TECH CORPORATION

VALUATION AND QUALIFYING ACCOUNTS

FOR THE FISCAL YEARS ENDED OCTOBER 30,
2004, OCTOBER 25, 2003 AND


OCTOBER 26, 2002


(Amounts in thousands)


|                                 |                             |            |   |     |            |  |   |                |  |            |        |     |  |  |   |     | 
|-------------------------------- | --------------------------- | ---------- | - | --- | ---------- |  | - | -------------- |  | ---------- | ------ | --- |  |  | - | --- | 
|                                 |                             | Balance at |   |     | Charged to |  |   |                |  | Balance at |       
|                                 |                             | Beginning  |   |     | Costs and  |  |   | Deduction from |  |            | End of |    
|Description                      |                             | of Period  |   |     | Expenses   |  |   | Reserve(1)     |  |            | Period |    
|                                 |                             |            |   |     |            |  |   |                |  |            |        |    
|Allowance for doubtful accounts: |                             |            |   |     |            |  |   |                |  |            |        |     |  |  |   |    
|                                 | Year ended October 30, 2004 |            | $ | 266 |            |  | $ | 416            |  |            | $      | 372 |  |  | $ | 310 | 
|                                 | Year ended October 25, 2003 |            |   | 310 |            |  |   | 384            |  |            |        | 428 |  |  |   | 266 | 
|                                 | Year ended October 26, 2002 |            |   | 314 |            |  |   | 292            |  |            |        | 296 |  |  |   | 310 | 



---



|    |                                                                        
|--- | -----------------------------------------------------------------------
|(1) | The amounts in this column represent recoveries
    net of charge-offs.

F-27



---



##### Table of Contents






EXHIBIT INDEX

|        |    |      |                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | -- | ---- | ----------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |      |                                                                                          
|Number  |    |      | Description of Exhibit (and document from which incorporated by reference, if applicable)
|        |    |      |                                                                                          
|        | 3  | .1   |                                                                                           | Restated Certificate of Incorporation of
    Argo-Tech, dated April 16, 1999 (incorporated herein by
    reference to Exhibit 3.1 of Argo-Techs registration
    statement on form S-4/ A filed April 22, 1999, SEC
    File No. 333-73179)                                                                                                                                                                                  
|        | 3  | .2   |                                                                                           | Restated By-Laws of Argo-Tech dated
    April 16, 1999 (incorporated herein by reference to
    Exhibit 3.2 of Argo-Techs registration statement on
    form S-4/ A filed April 22, 1999, SEC File
    No. 333-73179)                                                                                                                                                                                                        
|        | 4  | .1   |                                                                                           | Indenture dated June 23, 2004, between
    Argo-Tech, the Subsidiary Guarantors signatory thereto and BNY
    Midwest Trust Company, as Trustee, relating to the 9
    1/4% Senior Notes due 2010 (the form of which is included
    in such Indenture) (incorporated herein by reference to
    Exhibit 4.1 of Argo-Techs quarterly report on
    form 10-Q for the quarter ended July 31, 2004, SEC
    File No. 333-38223)
|        | 10 | .1*  |                                                                                           | Form of Stay Pay and Severance Agreement dated
    June 6, 1996, between Argo-Tech and certain Executive
    Officers of Argo-Tech (Michael S. Lipscomb, Frances S.
    St. Clair, and Paul R. Keen) (incorporated herein by
    reference to Exhibit 10.1 of Argo-Techs Registration
    Statement on form S-1, filed October 17, 1997, SEC
    File No. 333-38223)                                                         
|        | 10 | .2*  |                                                                                           | Employment Agreement dated February 13, 1989
    between Argo-Tech and Paul R. Keen (incorporated herein by
    reference to Exhibit 10.2 of Argo-Techs Registration
    Statement on form S-1, filed October 17, 1997, SEC
    File No. 333-38223)                                                                                                                                                                          
|        | 10 | .3*  |                                                                                           | Employment Agreement dated October 15, 1986
    between Argo-Tech and Michael S. Lipscomb (incorporated
    herein by reference to Exhibit 10.3 of Argo-Techs
    Registration Statement on form S-1, filed October 17,
    1997, SEC File No. 333-38223)                                                                                                                                                                    
|        | 10 | .4*  |                                                                                           | Argo-Tech Corporation Trust Agreement dated
    October 28, 1994 between Argo-Tech and Society National
    Bank, as Trustee, relating to the Employment Agreement dated
    October  15, 1986 between Argo-Tech and Michael S.
    Lipscomb (incorporated herein by reference to Exhibit 10.4
    of Argo-Techs Registration Statement on form S-1,
    filed October 17, 1997, SEC File No. 333-38223)                     
|        | 10 | .5*  |                                                                                           | Argo-Tech Corporation Salaried Pension Plan,
    dated November 1, 1995 (incorporated herein by reference to
    Exhibit 10.5 of Argo-Techs Registration Statement on
    form S-1, filed October 17, 1997, SEC File
    No. 333-38223)                                                                                                                                                                                      
|        | 10 | .6*  |                                                                                           | First Amendment to Argo-Tech Corporation Salaried
    Pension Plan (incorporated herein by reference to
    Exhibit 10.6 of Argo-Techs Registration Statement on
    form S-1, filed October 17, 1997, SEC File
    No. 333-38223)                                                                                                                                                                                           
|        | 10 | .7*  |                                                                                           | Argo-Tech Corporation Employee Stock Ownership
    Plan and Trust Agreement, dated May 17, 1994
    (incorporated herein by reference to Exhibit 10.7 of
    Argo-Techs Registration Statement on form S-1, filed
    October 17, 1997, SEC File No. 333-38223)                                                                                                                                                              
|        | 10 | .8*  |                                                                                           | First Amendment to the Argo-Tech Corporation
    Employee Stock Ownership Plan and Trust Agreement, dated
    October 26, 1994 (incorporated herein by reference to
    Exhibit 10.8 of Argo-Techs Registration Statement on
    form S-1, filed October 17, 1997, SEC File
    No. 333-38223)                                                                                                                               
|        | 10 | .9*  |                                                                                           | Second Amendment to the Argo-Tech Corporation
    Employee Stock Ownership Plan and Trust Agreement, dated
    May 9, 1996 (incorporated herein by reference to
    Exhibit 10.9 of Argo-Techs Registration Statement on
    form S-1, filed October 17, 1997, SEC File
    No. 333-38223)                                                                                                                                   
|        | 10 | .10* |                                                                                           | Third Amendment to the Argo-Tech Corporation
    Employee Stock Ownership Plan and Trust Agreement, dated
    July 18, 1997 (incorporated herein by reference to
    Exhibit 10.10 of Argo-Techs Registration Statement on
    form S-1, filed October 17, 1997, SEC File
    No. 333-38223)                                                                                                                                 
|        | 10 | .11* |                                                                                           | Argo-Tech Corporation Employee Stock Ownership
    Plan Excess Benefit Plan, dated May 17, 1994 (incorporated
    herein by reference to Exhibit 10.11 of Argo-Techs
    Registration Statement on form S-1, filed October 17,
    1997, SEC File No. 333-38223)                                                                                                                                                             
|        | 10 | .12  |                                                                                           | AT Holdings Corporation Stockholders
    Agreement, dated December 17, 1998 (incorporated herein by
    reference to Exhibit 10.12 of Argo-Techs Annual
    Report on form 10-K for the year ended October 30,
    1999, SEC File No. 333-38223)                                                                                                                                                                            

X-1



---



##### Table of Contents



|        |    |      |                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | -- | ---- | ----------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |      |                                                                                          
|Number  |    |      | Description of Exhibit (and document from which incorporated by reference, if applicable)
|        |    |      |                                                                                          
|        | 10 | .13  |                                                                                           | AT Holdings Corporation 1998 Supplemental
    Stockholders Agreement, dated December 17, 1998
    (incorporated herein by reference to Exhibit 10.13 of
    Argo-Techs Annual Report on form 10-K for the year
    ended October 30, 1999, SEC File No. 333-38223)                                                                                                                                                                                                                                                                                                                 
|        | 10 | .14* |                                                                                           | Form of Management Incentive Compensation Plan
    for key employees of Argo-Tech (incorporated herein by reference
    to Exhibit 10.19 of Argo-Techs Registration Statement
    on form S-1, filed October 17, 1997, SEC File
    No. 333-38223)                                                                                                                                                                                                                                                                                                                                  
|        | 10 | .15* |                                                                                           | 1991 Management Incentive Stock Option Plan, as
    amended, dated May 16, 1994 (incorporated herein by
    reference to Exhibit 10.20 of Argo-Techs Registration
    Statement on form S-1, filed October 17, 1997, SEC
    File No. 333-38223)                                                                                                                                                                                                                                                                                                                                    
|        | 10 | .16* |                                                                                           | Amendment to the 1991 Management Incentive Stock
    Option Plan, as amended, dated June 12, 2001 (incorporated
    herein by reference to Exhibit 10.3 of Argo-Techs
    Quarterly Report on form 10-Q for the quarter ended
    July 28, 2001)                                                                                                                                                                                                                                                                                                                                    
|        | 10 | .17* |                                                                                           | Form of Stock Option Agreement in connection with
    the Management Incentive Stock Option Plan, as amended, between
    Argo-Tech and each member of Argo-Techs Executive Staff
    (incorporated herein by reference to Exhibit 10.21 of
    Argo-Techs Registration Statement on form S-1, filed
    October 17, 1997, SEC File No. 333-38223)                                                                                                                                                                                                                                 
|        | 10 | .18* |                                                                                           | 1991 Performance Stock Option Plan, as amended,
    dated May 16, 1997 (incorporated herein by reference to
    Exhibit 10.22 of Argo-Techs Registration Statement on
    form S-1, filed October 17, 1997, SEC File
    No. 333-38223)                                                                                                                                                                                                                                                                                                                                             
|        | 10 | .19* |                                                                                           | Amendment to the 1991 Performance Stock Option
    Plan, as amended, June 12, 2001 (incorporated herein by
    reference to Exhibit 10.1 of Argo-Techs Quarterly
    Report on form 10-Q for the quarter ended July 28,
    2001)                                                                                                                                                                                                                                                                                                                                                   
|        | 10 | .20* |                                                                                           | Form of Stock Option Agreement in connection with
    the 1991 Performance Stock Option Plan, as amended, between
    Argo-Tech and certain key employees (incorporated herein by
    reference to Exhibit 10.23 of Argo-Techs Registration
    Statement on form S-1, filed October 17, 1997, SEC
    File No. 333-38223)                                                                                                                                                                                                                                                          
|        | 10 | .21  |                                                                                           | Third Amended and Restated Credit Facility, dated
    June 23, 2004, by and among Argo-Tech Corporation, the
    Guarantors party thereto, the Lenders party thereto and National
    City Bank, as administrative agent. (incorporated herein by
    reference to Exhibit 10.1 of Argo-Techs quarterly
    report on form 10-Q for the quarter ended July 31,
    2004, SEC File No. 333-38223)                                                                                                                                                                                    
|        | 10 | .22  |                                                                                           | First Amendment, dated as of January 19,
    2005, to Third Amended and Restated Credit Agreement, dated as
    of June 23, 2004, by and among Argo-Tech Corporation, AT
    Holdings Corporation, National City Bank, as administrative
    agent and an issuing bank, JPMorgan Chase Bank, as an issuing
    bank with respect to existing letters of credit issued
    thereunder and the other lenders signatory thereto.
    (incorporated herein by reference to Exhibit 10.1 of
    Argo-Techs current report on Form 8-K filed
    January 21, 2005, SEC File No. 333-38223)
|        | 10 | .23  |                                                                                           | Distributorship Agreement, dated
    December 24, 1990, between Argo-Tech, Yamada Corporation
    and Vestar Capital Partners, Inc. (incorporated herein by
    reference to Exhibit 10.25 of Argo-Techs Registration
    Statement on form S-1, filed October 17, 1997, SEC
    File No. 333-38223)                                                                                                                                                                                                                                                                                
|        | 10 | .24  |                                                                                           | Japan Distributorship Agreement, dated
    December 24, 1990, between Argo-Tech, Aerotech World Trade
    Corporation, Yamada Corporation, Yamada International
    Corporation and Vestar Capital Partners, Inc. (incorporated
    herein by reference to Exhibit 10.26 of Argo-Techs
    Registration Statement on form S-1, filed October 17,
    1997, SEC File No. 333-38223)                                                                                                                                                                                                  
|        | 10 | .25  |                                                                                           | Stock Purchase Agreement, dated August 1,
    1997, between Argo-Tech, J.C. Carter Company, Inc., Robert
    L. Veloz, Individually and as Trustee, Marlene
    J. Veloz, Individually and as Trustee, Edith
    T. Derbyshire, Individually and as Trustee, Harry
    S. Derbyshire, Individually and as Trustee, Michael Veloz,
    Katherine Canfield and Maureen Partch, as Trustee (incorporated
    herein by reference to Exhibit 10.27 of Argo-Techs
    Registration Statement on form S-1, filed October 17,
    1997, SEC File No. 333-38223)                            
|        | 10 | .26  |                                                                                           | Prism Prototype Retirement Plan &
    Trust & 401(k) Profit Sharing Plan Adoption Agreement,
    dated November 1, 1994 (incorporated herein by reference to
    Exhibit 10.28 of Argo-Techs Registration Statement on
    form S-1, filed October 17, 1997, SEC File
    No. 333-38223)                                                                                                                                                                                                                                                                                            

X-2



---



##### Table of Contents



|        |      |      |                                                                                           |                                                                                                                                                                                                                                                                                                                     
|------- | ---- | ---- | ----------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |      |                                                                                          
|Number  |      |      | Description of Exhibit (and document from which incorporated by reference, if applicable)
|        |      |      |                                                                                          
|        | 10   | .27  |                                                                                           | Prism Prototype Retirement Plan and Trust
    (incorporated herein by reference to Exhibit 10.29 of
    Argo-Techs Registration Statement on form S-1, filed
    October 17, 1997, SEC File No. 333-38223)                                                                                                         
|        | 10   | .28  |                                                                                           | Agreement of Purchase and Sale between Agnem
    Holdings, Inc. and TRW Inc. dated as of August 5, 1986
    (incorporated herein by reference to Exhibit 10.30 of
    Argo-Techs Registration Statement on form S-1, filed
    October 17, 1997, SEC File No. 333-38223)                                           
|        | 10   | .29* |                                                                                           | 1997 Stock Appreciation Rights Plan (incorporated
    herein by reference to Exhibit 10.31 of Argo-Techs
    Annual Report on form 10-K, for the year ended
    October 31, 1998)                                                                                                                                  
|        | 10   | .30* |                                                                                           | AT Holdings Corporation/ Argo-Tech Corporation
    1998 Equity Replacement Stock Option Plan (incorporated herein
    by reference to Exhibit 10.32 of Argo-Techs
    registration statement on form S-4 filed March 1,
    1999, SEC File No. 333-73179)                                                          
|        | 10   | .31* |                                                                                           | Amendment to the AT Holdings Corporation/
    Argo-Tech Corporation 1998 Equity Replacement Stock Option Plan
    dated June 12, 2001 (incorporated herein by reference to
    Exhibit 10.2 of Argo-Techs Quarterly Report on
    form 10-Q for the quarter ended July 28, 2001)                                   
|        | 10   | .32* |                                                                                           | Form of Stock Option Agreement in connection with
    the AT Holdings Corporation/ Argo-Tech Corporation 1998 Equity
    Replacement Stock Option Plan (incorporated herein by reference
    to Exhibit 10.33 of Argo-Techs registration statement
    on form S-4 filed March 1, 1999, SEC File
    No. 333-73179)
|        | 10   | .33* |                                                                                           | First Amendment to the Argo-Tech Corporation
    Employee Stock Ownership Plan Excess Benefit Plan (incorporated
    herein by reference to Exhibit 10.34 of Argo-Techs
    registration statement on form S-4 filed March 1,
    1999, SEC File No. 333-73179)                                                    
|        | 10   | .34* |                                                                                           | Amendment, dated November 22, 2002, to
    Argo-Tech Corporation Trust Agreement, dated
    October 28, 1994 (incorporated herein by reference to
    Exhibit 10.36 of Argo-Techs annual report on
    form 10-K for the year ended October 26, 2002, SEC
    File No. 333-73179)                                  
|        | 10   | .35  |                                                                                           | Distribution Agreement, dated April 1, 2003,
    between Argo-Tech Corporation and Yamada Corporation
    (incorporated herein by reference to Exhibit 10.34 of
    Argo-Techs registration statement on form S-4 filed
    September 23, 2004, SEC File No. 333-119227)                                           
|        | 12   | .1** |                                                                                           | Statement re Computation of Ratios                                                                                                                                                                                                                                                                                  
|        | 21   | .1   |                                                                                           | List of Subsidiaries (incorporated herein by
    reference to Exhibit 21.1 of Argo-Techs registration
    statement on form S-4 filed September 23, 2004, SEC
    File No. 333-119227)                                                                                                                             
|        | 31** |      |                                                                                           | Certifications pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                        
|        | 32** |      |                                                                                           | Certification 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 other compensatory
    arrangement required to be filed as an exhibit pursuant to
    Item 14(c) of this report.



|   |                
|-- | ---------------
|** | Filed herewith.

X-3