##### Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 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 25, 2003, or                                               
| 
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  |  | For the transition period
    from           to                                              

Commission File 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)                              

Registrants Telephone Number, Including
Area Code: (216) 692-6000

Securities Registered Pursuant to
Section 12(b) of The Act: None

Securities Registered Pursuant to
Section 12(g) of The Act: None

Indicate by checkmark whether the registrant:
(1) has filed all reports 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 requirement for the past
90 days.     Yes þ     No o

Indicate by checkmark 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.     þ

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

As of January 15, 2004, one share of the
Registrants Common Stock, $.01 par value per share, was
outstanding. All of the outstanding capital stock of the
registrant is held by AT Holdings Corporation, the parent
company of the registrant.

Documents incorporated by reference: None



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TABLE OF CONTENTS



|                                          |                                                                       |  |  |  |  |  |  | 
|----------------------------------------- | --------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                   
|                                          | Item 1. Business.                                                    
|PART II                                  
|                                          | Item 5. Market for Our Common Equity and Related Stockholder Matters.
|                                          | Item 6. Selected Financial Data.                                     
|PART III                                 
|SIGNATURES                               
|INDEX TO FINANCIAL STATEMENTS            
|                                          | INDEPENDENT AUDITORS REPORT                                         
|                                          | CONSOLIDATED BALANCE SHEETS                                          
|                                          | CONSOLIDATED STATEMENTS OF NET INCOME                                
|                                          | CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY/(DEFICIENCY)         
|                                          | CONSOLIDATED STATEMENTS OF CASH FLOWS                                
|                                          | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                           
|EXHIBIT INDEX                            
|Exhibit 12 Computation of Ratios         
|CEO 302 CERTIFICATION        EXHIBIT 31.1
|CFO 302 CERTIFICATION     EXHIBIT 31.2   
|906 CERTIFICATIONS   EXHIBIT 32          



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PART I






Item 1.     Business.


We design, manufacture, sell and service high
performance fuel flow devices and systems for both aerospace and
general industrial applications. Argo-Tech operates in two
business segments, Aerospace and Industrial. The Aerospace
segment includes the design, manufacture, distribution, repair
and overhaul of aviation products throughout the world
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,
cryogenic pumps and nozzles for transferring liquefied natural
gas and operation of a business park in Cleveland, Ohio.
Argo-Tech is a Delaware corporation formed in 1986. Financial
information by business segment can be found in Note 13 to the
consolidated financial statements included elsewhere in this
report.

In the Aerospace segment, we are the worlds
leading supplier of main engine fuel pumps to the commercial
aircraft industry and a leading supplier of military main engine
fuel pumps and commercial and military airframe products and
systems, including airframe pumps, valves and accessories. We
are the worlds leading supplier of military aerial
refueling pumps and related equipment. Our Aerospace customers
include substantially all commercial and domestic military
engine and airframe manufacturers, airlines worldwide and the
U.S. and certain foreign militaries.

In the Industrial segment, we are the
worlds leading supplier of ground fueling components and a
fuel management system used at airports throughout the world,
and a leading supplier of cryogenic pumps and nozzles and
specialty industrial hose for aerospace, chemical transfer and
marine applications. In addition, we supply industrial and
marine gas turbine products. We also 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.

We are the sole source supplier of main engine
fuel pumps for all CFM56 series engines, one of the most popular
series of large commercial aircraft engines used today. The
CFM56 series engines power the Airbus A-318, A-319, A-320, A-321
and A-340 and the Boeing 737 aircraft. We are also the sole
source supplier of main engine fuel pumps for all engines used
on the Boeing 777 aircraft, including the new longer range
Boeing 777.

Our products also include large regional and
business jet applications, including the main engine fuel pumps
used on the BR700 series engine, which is used on the high-end
Bombardier Global Express, the Gulfstream Aerospace Corp. V
aircraft and the Boeing 717. We supply main 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 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.
(ACAC) 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.

1



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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 such capability.

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. Argo-Tech
developed the AVR2000 Aviation Refueling Management System which
is used at over 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 have been widely recognized as a leading designer and
supplier of high performance submerged motor pumps for cryogenic
gases and fluids. We recently introduced liquefied natural gas
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 (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.

Aftermarket Sales

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

Customers

Aerospace

Original Equipment Manufacturer (OEM)
customers for our aerospace products include the worlds
major aircraft engine manufacturers: General Electric,
Honeywell, Pratt and Whitney (including Pratt and 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, Raytheon
and various U.S. government agencies. Orders for military
components also come through customers such as Lockheed Martin,
Boeing, General Electric and Pratt and Whitney. Our aftermarket
customers include all major aircraft and engine repair
facilities and all major airlines worldwide. Currently, the
total number of airline and third party customers for our spare
parts, overhaul and repair exceeds 200. Upsilon International
Corporation, in its capacity as distributor of certain of our
products to foreign customers, accounted for approximately 12%
of our net revenues for the fiscal year ended October 25,
2003. No other customer accounted for more than 10% of our
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

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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 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, 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
Power Engineering, Rolls Royce Energy Systems, Siemens
Westinghouse Power Systems and Pratt and Whitney Power Systems.

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, which operates a distribution facility in
Torrance, California.

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 600
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 who
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 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 five manufacturing and 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    
|
| |  | 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, Ohio facility. The
remaining Aerospace segment

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products are manufactured, repaired and
overhauled in our Costa Mesa facility. The Inglewood, California
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:
first, industrial hose products which are manufactured in our
Tucson facility; second, the airport fuel management system
which is produced at our Henley-on-Thames, England facility;
and, third, 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
meet our integrated operating plan and to ensure timely design
and production of our products.

In contrast to our substantial reliance on
internal manufacturing of products in Cleveland, we outsource
most of the machining and pre-assembly production of products in
Costa Mesa 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 ground fueling airport fuel management system is
written internally at our Henley-on-Thames facility, while the
hardware relating to the system is sourced from a third party.

In addition to our manufacturing facilities, we
maintain sophisticated testing facilities at our Ohio and
California 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.

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 FAA and U.S. government supply
organizations.

Patents and Trademarks

We have a number of patents and trademarks and
pending patent applications related to our products. While in
the aggregate our patents and trademarks are of material
importance to our business, we believe no single patent or
trademark or group of patents or trademarks is of material
importance to our business as a whole.

Government Regulations

The commercial aerospace industry is highly
regulated by the Federal Aviation Administration
(FAA) 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 FAA
regulations, and provide these customers with products that
comply with the government regulations applicable to commercial
flight operations. In addition, the FAA requires that various
maintenance routines be performed on aircraft components. We
currently satisfy or

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exceed these maintenance standards in our repair
and overhaul activities. We maintain FAA-approved repair
stations at our Cleveland, Ohio, Costa Mesa, California and
Inglewood, California 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 (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.
To our knowledge, no other company manufactures and sells a
broader line of fuel related aerospace components.

In the Industrial segment, competition varies by
product, but is typically based on engineered solutions, price,
product quality and on-time delivery.

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 thirty to sixty 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.

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 expense was $9.5 million,
$11.7 million and $10.3 million for the fiscal years
ended October 25, 2003, October 26, 2002 and
October 27, 2001, respectively.

Employees

As of October 25, 2003, we had 654 full-time
employees of which 406 are salaried and 248 are hourly. The 159
hourly employees located at our Cleveland facility are
represented by the UAW under a collective bargaining agreement
expiring on March 31, 2004.

Environmental Matters

Our operations are subject to federal, state and
local environmental laws 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 govern 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 believe that our operations and
facilities are currently in compliance in all material respects
with applicable environmental laws, there can be no assurance
that future changes in such laws, regulations or interpretations
of such laws or the nature of our operations will not require us
to make significant additional

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expenditures to ensure compliance in the future.
Currently, we do not believe that we will have to make material
capital expenditures for environmental remediation for the 2004
fiscal year.


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. We have not paid for any
material portion of the cost of the remediation and do not
expect to do so in the 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 TRW purchase agreement also requires TRW, for
a period of 20 years from the date of the 1986 purchase
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.         

To date, there have been no third party
environmental claims relating to us or to the Cleveland facility.

In March 1986, a two thousand gallon spent
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. (which we 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, we have assumed responsibility for
satisfying the cleanup order. However, we have obtained
indemnification from Carters selling stockholders for,
among other things, all costs and expenses related to
satisfaction of the order. However, there can be no assurance
that such indemnification obligations with respect to the
cleanup order will be satisfied by the selling stockholders. See
Risk Factors  Potential Exposure to Environmental
Liabilities.



|        |            
|------- | -----------
|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.

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 airframe and aerial
refueling products and accessories, and Industrial 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
aerospace, chemical transfer and marine applications at this
facility. We believe this facility has sufficient capital and
capacity to permit further growth in those product lines without
significant additional capital expenditures.

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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.

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.



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

While we are not presently involved in any
material legal proceedings, 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 during the fourth quarter
of the fiscal year covered by this report to a vote of our
security holders.

7



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PART II






|        |                                                                  
|------- | -----------------------------------------------------------------
|Item 5. | Market for Our Common Equity and Related
    Stockholder Matters.

We are a wholly owned subsidiary of AT Holdings
Corporation. Neither AT Holdings nor Argo-Tech have any equity
securities that trade, and there is no trading market for any of
these equity securities.






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

Selected Historical Financial and Other Data
of Argo-Tech Corporation

The following table sets forth selected
historical financial and other data of Argo-Tech for the fiscal
years 1999 through 2003, which have been derived from our
audited consolidated financial statements for those years. Our
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 25, 2003 is referred to
as fiscal 2003. All of the fiscal years presented
consisted of 52 weeks. The information presented below
should be read together with Managements Discussion
and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and
related notes included elsewhere herein.

|                                           |                                                     |                   |   |             |   |             |   |             |   |             |   |         |   |  |   |         |   |  |   |         |  
|------------------------------------------ | --------------------------------------------------- | ----------------- | - | ----------- | - | ----------- | - | ----------- | - | ----------- | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                           |                                                     |                  
|                                           |                                                     | Fiscal Year Ended
|                                           |                                                     |                  
|                                           |                                                     | October 25,       |   | October 26, |   | October 27, |   | October 28, |   | October 30,
|                                           |                                                     | 2003              |   | 2002        |   | 2001        |   | 2000        |   | 1999       
|                                           |                                                     |                   |   |             |   |             |   |             |   |            
|Statement of Operations Data:              |                                                     |                   |   |             |   |             |   |             |   |             |   |         |   |  |   |         |   |  |   |        
|                                           | Net revenues                                        |                   | $ | 160,726     |   |             | $ | 155,303     |   |             | $ | 173,208 |   |  | $ | 159,353 |   |  | $ | 176,178 |  
|                                           |                                                     |                   |   |             |   |             |   |             |   |             |   |         |   |  |   |         |   |  |   |        
|                                           | Gross profit                                        |                   |   | 66,191      |   |             |   | 66,634      |   |             |   | 79,033  |   |  |   | 66,870  |   |  |   | 79,396  |  
|                                           | Operating Expenses                                  |                   |   | 39,356      |   |             |   | 38,802      |   |             |   | 40,874  |   |  |   | 41,518  |   |  |   | 45,550  |  
|                                           |                                                     |                   |   |             |   |             |   |             |   |             |   |         |   |  |   |         |   |  |   |        
|                                           | Income from operations                              |                   |   | 26,835      |   |             |   | 27,832      |   |             |   | 38,159  |   |  |   | 25,352  |   |  |   | 33,846  |  
|                                           | Interest expense                                    |                   |   | 21,257      |   |             |   | 21,434      |   |             |   | 24,534  |   |  |   | 25,644  |   |  |   | 25,003  |  
|                                           | Other, net                                          |                   |   | (529        | ) |             |   | (97         | ) |             |   | (51     | ) |  |   | (402    | ) |  |   | (516    | )
|                                           | Income tax provision (benefit)                      |                   |   | 1,579       |   |             |   | 569         |   |             |   | 2,876   |   |  |   | (642    | ) |  |   | 4,021   |  
|                                           |                                                     |                   |   |             |   |             |   |             |   |             |   |         |   |  |   |         |   |  |   |        
|                                           | Net income                                          |                   | $ | 4,528       |   |             | $ | 5,926       |   |             | $ | 10,800  |   |  | $ | 752     |   |  | $ | 5,338   |  
|                                           |                                                     |                   |   |             |   |             |   |             |   |             |   |         |   |  |   |         |   |  |   |        
|Balance Sheet Data
    (at end of period): |                                                     |                   |   |             |   |             |   |             |   |             |   |         |   |  |   |         |   |  |   |        
|                                           | Total assets                                        |                   | $ | 255,797     |   |             | $ | 260,333     |   |             | $ | 273,574 |   |  | $ | 277,334 |   |  | $ | 294,745 |  
|                                           | Working capital                                     |                   |   | 34,934      |   |             |   | 33,352      |   |             |   | 35,904  |   |  |   | 33,277  |   |  |   | 35,378  |  
|                                           | Long-term debt (including current maturities)       |                   |   | 219,349     |   |             |   | 235,045     |   |             |   | 253,380 |   |  |   | 264,762 |   |  |   | 276,987 |  
|                                           | Redeemable ESOP stock, net                          |                   |   | 14,612      |   |             |   | 8,835       |   |             |   | 13,994  |   |  |   | 20,983  |   |  |   | 43,212  |  
|                                           | Shareholders equity/(deficiency)(a)                |                   |   | (29,928     | ) |             |   | (31,633     | ) |             |   | (42,119 | ) |  |   | (58,842 | ) |  |   | (78,955 | )
|Other Data:                                |                                                     |                   |   |             |   |             |   |             |   |             |   |         |   |  |   |         |   |  |   |        
|                                           | Gross margin                                        |                   |   | 41.2        | % |             |   | 42.9        | % |             |   | 45.6    | % |  |   | 42.0    | % |  |   | 45.1    | %
|                                           | Adjusted EBITDA(b)                                  |                   | $ | 36,310      |   |             | $ | 37,505      |   |             | $ | 53,324  |   |  | $ | 41,973  |   |  | $ | 52,284  |  
|                                           | Adjusted EBITDA margin(c)                           |                   |   | 22.6        | % |             |   | 24.1        | % |             |   | 30.8    | % |  |   | 26.3    | % |  |   | 29.7    | %
|                                           | Net cash flows provided by
    operating activities |                   | $ | 15,673      |   |             | $ | 30,724      |   |             | $ | 18,063  |   |  | $ | 22,427  |   |  | $ | 15,298  |  
|                                           | Net cash flows used in investing activities         |                   |   | (1,939      | ) |             |   | (1,785      | ) |             |   | (1,885  | ) |  |   | (3,025  | ) |  |   | (8,637  | )
|                                           | Net cash flows used in financing activities         |                   |   | (17,446     | ) |             |   | (19,227     | ) |             |   | (13,295 | ) |  |   | (18,101 | ) |  |   | (14,366 | )

8



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##### Table of Contents



|                                                                                            |  |                   |        |             |  |             |        |             |  |             |        |   |  |  |        |   |  |  |        |  
|------------------------------------------------------------------------------------------- |  | ----------------- | ------ | ----------- |  | ----------- | ------ | ----------- |  | ----------- | ------ | - |  |  | ------ | - |  |  | ------ | -
|                                                                                            |  |                  
|                                                                                            |  | Fiscal Year Ended
|                                                                                            |  |                  
|                                                                                            |  | October 25,       |        | October 26, |  | October 27, |        | October 28, |  | October 30,
|                                                                                            |  | 2003              |        | 2002        |  | 2001        |        | 2000        |  | 1999       
|                                                                                            |  |                   |        |             |  |             |        |             |  |            
|Depreciation, goodwill, identified intangibles,
    and deferred financing fee amortization |  |                   | 10,053 |             |  |             | 10,387 |             |  |             | 15,214 |   |  |  | 15,635 |   |  |  | 15,973 |  
|Capital expenditures                                                                        |  |                   | 1,939  |             |  |             | 1,785  |             |  |             | 1,885  |   |  |  | 3,025  |   |  |  | 6,050  |  
|Cash interest expense(d)                                                                    |  |                   | 18,805 |             |  |             | 19,376 |             |  |             | 22,394 |   |  |  | 23,503 |   |  |  | 23,069 |  
|Ratio of Adjusted EBITDA to cash
    interest expense                                       |  |                   | 1.9    | x           |  |             | 1.9    | x           |  |             | 2.4    | x |  |  | 1.8    | x |  |  | 2.3    | x
|Ratio of earnings to fixed charges(e)                                                       |  |                   | 1.3    | x           |  |             | 1.3    | x           |  |             | 1.6    | x |  |  | 1.0    | x |  |  | 1.4    | x



---



|    |  |                                                                                                                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes a dividend of $50.0 million to AT
    Holdings in fiscal 1999. These funds came from the issuance of
    $55.0 million in principal amount of 8 5/8% senior
    subordinate notes, issued at a 5% discount, due 2007.
|   
|(b) |  | Adjusted EBITDA represents income from operations
    plus non-cash charges as follows:                                                                                                                                       

|                                                       |  |                   |        |             |  |             |        |             |  |             |        |  |  |   |        |  |  |   |        | 
|------------------------------------------------------ |  | ----------------- | ------ | ----------- |  | ----------- | ------ | ----------- |  | ----------- | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                                       |  |                  
|                                                       |  | Fiscal Year Ended
|                                                       |  |                  
|                                                       |  | October 25,       |        | October 26, |  | October 27, |        | October 28, |  | October 30,
|                                                       |  | 2003              |        | 2002        |  | 2001        |        | 2000        |  | 1999       
|                                                       |  |                   |        |             |  |             |        |             |  |            
|Income from operations                                 |  | $                 | 26,835 |             |  | $           | 27,832 |             |  | $           | 38,159 |  |  | $ | 25,352 |  |  | $ | 33,846 | 
|Depreciation, goodwill and
    intangible amortization |  |                   | 7,601  |             |  |             | 8,329  |             |  |             | 13,074 |  |  |   | 13,494 |  |  |   | 14,039 | 
|Compensation expense  ESOP                            |  |                   | 1,874  |             |  |             | 1,344  |             |  |             | 2,091  |  |  |   | 2,972  |  |  |   | 4,322  | 
|Write-off of inventory acquisition step-up             |  |                   |       |             |  |             |       |             |  |             |       |  |  |   | 155    |  |  |   | 77     | 
|                                                       |  |                   |        |             |  |             |        |             |  |             |        |  |  |   |        |  |  |   |        | 
|Adjusted EBITDA                                        |  | $                 | 36,310 |             |  | $           | 37,505 |             |  | $           | 53,324 |  |  | $ | 41,973 |  |  | $ | 52,284 | 
|                                                       |  |                   |        |             |  |             |        |             |  |             |        |  |  |   |        |  |  |   |        | 



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  | Our Adjusted EBITDA is not intended to represent
    cash flow from operations as defined by generally accepted
    accounting principles and should not be considered as an
    alternative to net income as an indicator of operating
    performance or to cash flow as a measure of liquidity. We have
    included information concerning Adjusted EBITDA because we
    understand that it is used by certain investors as one measure
    of a borrowers historical ability to service its debt.
    Adjusted EBITDA, as presented, may not be comparable to
    similarly titled measures reported by other companies, since not
    all companies necessarily calculate Adjusted EBITDA in an
    identical manner, and therefore is not necessarily an accurate
    means of comparison between companies.
|   
|(c) |  | Adjusted EBITDA margin is computed as Adjusted
    EBITDA as a percentage of net revenues.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(d) |  | Cash interest expense represents interest expense
    less amortization of deferred financing fees of $2,452,000,
    $2,058,000, $2,140,000, $2,141,000 and $1,934,000, in the fiscal
    years ended October 25, 2003, October 26, 2002,
    October 27, 2001, October 28, 2000 and
    October 30, 1999, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(e) |  | 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 deferred
    financing fees and fixed loan guarantee fees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



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

Overview

We design, manufacture, sell and service high
performance fuel flow devices and systems for both aerospace and
general industrial applications. Argo-Tech operates in two
business segments, Aerospace and Industrial. The Aerospace
segment includes the design, manufacture, distribution, repair
and overhaul of aviation products throughout the world
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,
cryogenic pumps and nozzles for transferring liquefied natural
gas and operation of a business park in Cleveland, Ohio

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where we maintain our headquarters and one of our
production facilities. Financial information by business segment
can be found in Note 13 to the consolidated financial statements
included elsewhere in this report.


In fiscal 2003, the Aerospace segment generated
approximately 76% of our net revenues and the Industrial segment
generated approximately 24% 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 64% of the industrial revenues were
derived from sales to commercial customers, while military
customers represented approximately 36% of our industrial
revenues.

In fiscal 2003, 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.

General

The following should be read together with
Selected Historical Financial and Other Data of Argo-Tech
Corporation and our Financial Statements and the related
notes included elsewhere in this report. Our fiscal year ends on
the last Saturday of October and is identified according to the
calendar year in which it ends. For example, the fiscal year
ended October 25, 2003 is referred to as fiscal
2003. The fiscal years ended October 25, 2003,
October 26, 2002 and October 27, 2001 consisted of
52 weeks.

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 Corporation, with the
proceeds of a $16.8 million ten-year loan funded through a
credit facility that was refinanced on July 18, 1997. The
ESOP, which includes approximately 228 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 $1.9 million, $1.3 million
and $2.1 million for the fiscal years ended
October 25, 2003, October 26, 2002 and
October 27, 2001, respectively.

Export Sales

Substantially all of our export sales are
denominated in U.S. dollars. Export sales for fiscal years 2003,
2002 and 2001 were $66.7 million, $68.6 million and
$80.8 million, respectively. Sales to Europe were
$30.4 million, $28.0 million and $35.0 million.
Export sales to all other regions, individually less than 10%,
were $36.3 million, $40.6 million and
$45.8 million for fiscal years 2003, 2002 and 2001,
respectively.

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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
original equipment manufacturers. These agreements require us to
supply all the amounts ordered by the customers during the term
(generally three to five years) of the agreements at specified
prices. In certain of these agreements, we expect to incur
losses. Provisions for estimating loss 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 a bankruptcy filing, 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 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 the Companys 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

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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.


Recent Developments

Following the September 11, 2001 terrorist
attacks, the aerospace industry experienced a significant
downturn in both the OEM and aftermarket sectors. The major
commercial airlines have reduced their flying capacity by
retiring older aircraft in their fleet, parking underutilized
aircraft and canceling or delaying the delivery of new aircraft.
The OEM build rates of new commercial aircraft have been reduced
due to the airlines cancellation or delay of delivery of
new aircraft. The reduction of flying capacity, the retirement
of older aircraft and the deferral of maintenance has reduced
the need for aftermarket services. It is anticipated that OEM
build rates will stabilize with modest increases estimated to
occur in 2005. We anticipate aftermarket activities will begin
to recover in the latter part of 2004. Military revenues have
increased primarily as a result of the military activity in the
Middle East. We anticipate aftermarket military revenues for
repair and overhaul services to remain steady in 2004 and OEM
military revenue to increase as a result of increased production
on several programs. We anticipate increased Industrial revenues
in 2004 primarily due to increased demand for our ground
fueling, cryogenic and industrial gas turbine products.

Our fiscal year 2004 revenues and cash flows are
forecasted to be higher than fiscal year 2003 and Management
believes that we will be able to maintain our liquidity and
remain in compliance with our debt covenants.

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.

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 25, 2003  |       | October 26, 2002 |  | October 27, 2001
|                           |  |                   |       |                  |  |                 
|Net revenues               |  |                   | 100.0 | %                |  |                  | 100.0 | % |  |  | 100.0 | %
|Gross profit               |  |                   | 41.2  | %                |  |                  | 42.9  | % |  |  | 45.6  | %
|Operating expenses         |  |                   | 24.5  | %                |  |                  | 25.0  | % |  |  | 23.6  | %
|Income from operations     |  |                   | 16.7  | %                |  |                  | 17.9  | % |  |  | 22.0  | %
|Interest expense           |  |                   | 13.2  | %                |  |                  | 13.7  | % |  |  | 14.1  | %
|Other, net                 |  |                   | (0.3  | )%               |  |                  | 0.0   | % |  |  | 0.0   | %
|Income before income taxes |  |                   | 3.8   | %                |  |                  | 4.2   | % |  |  | 7.9   | %
|Income tax provision       |  |                   | 1.0   | %                |  |                  | 0.4   | % |  |  | 1.7   | %
|Net income                 |  |                   | 2.8   | %                |  |                  | 3.8   | % |  |  | 6.2   | %

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

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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 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,
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 loan and increased amortization of
deferred financing fees resulting from the amendment of our
credit agreement.

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 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.

Fiscal 2002 Compared with Fiscal
2001

Net revenues for fiscal 2002 decreased
$17.9 million, or 10.3%, to $155.3 million from
$173.2 million for fiscal 2001. This change was due to a
decrease in aerospace revenues of $21.1 million and a
$3.2 million increase

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in industrial and other revenues. The decrease in
aerospace revenues was attributable to a decrease of
$29.9 million in commercial revenues and an increase of
$8.8 million in military revenues. Commercial OEM revenues
decreased $10.0 million, or 32.6%, to $20.8 million
and commercial aftermarket revenues decreased
$19.9 million, or 23.3%, to $65.2 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 33.8% primarily due to revenue related to
increased sales of KC-135 aerial refueling pumps, F-16 and F-22
airframe components, F-18E/ F 480 gallon fuel tank components
and higher sales of aftermarket parts and overhaul activities on
a variety of aerial refueling and airframe programs. Industrial
revenues increased $3.2 million, primarily due to an
increase in ground fueling and cryogenic pump and nozzle
revenues offset by a decrease in industrial gas turbine
revenues. Approximately 44.2% of fiscal 2002 net revenues were
attributable to export sales to foreign customers compared to
46.6% in fiscal 2001. Substantially all such sales were
denominated in U.S. dollars.


Aerospace gross profit for fiscal 2002 decreased
$14.4 million, or 20.8%, to $54.9 million from
$69.3 million for fiscal 2001. Gross margin decreased to
45.4% for fiscal 2002 from 48.8% for fiscal 2001. The decrease
in gross profit and gross margin is primarily attributable to
the decreased sales of higher margin commercial aerospace
aftermarket revenues, a $0.6 million provision for
potential losses for inventory on hand and termination claims
relating to the bankruptcy of a former airframe customer, and
lower absorption of fixed manufacturing overhead. Industrial
gross profit for fiscal 2002 increased $2.8 million, or 29.2%,
to $12.4 million from $9.6 million for fiscal 2001.
Gross margin increased to 36.1% from 30.9% for fiscal 2001. The
increase in gross profit and gross margin is primarily
attributable to the favorable mix of higher margin ground
fueling revenues.

Operating expenses for fiscal 2002 decreased
$2.1 million, or 5.1% to $38.8 million from
$40.9 million in fiscal 2001. This decrease is primarily
attributable to the cessation of goodwill and workforce in place
amortization of $3.8 million as a result of adopting SFAS
No. 142 on October 28, 2001, offset by an increase in
research and development expenses of $1.4 million and
selling, general and administrative expenses of $0.3, which
includes a non-cash expense of $0.6 million related to a
salaried employee early retirement program. Operating expenses
as a percent of revenues increased to 25.0% for fiscal 2002 from
23.6% in fiscal 2001.

Income from operations for fiscal 2002 decreased
$10.3 million, or 27.0%, to $27.8 million from
$38.1 million for fiscal 2001 and decreased as a percentage
of net revenues to 17.9% in fiscal 2002 from 22.0% in fiscal
2001. These decreases were due to the decrease in higher margin
commercial aerospace aftermarket revenues, a $0.6 million
provision for potential losses for inventory on hand and
termination claims relating to the bankruptcy of a former
airframe customer, and lower absorption of fixed manufacturing
overhead offset by an increase in industrial revenues and lower
operating expenses discussed above.

Interest expense for fiscal 2002 decreased
$3.1 million, or 12.7%, to $21.4 million from
$24.5 million for fiscal 2001 due to lower outstanding
borrowings and lower interest rates on the term loans.

The income tax provision for fiscal 2002
decreased $2.3 million, or 79.3%, to $0.6 million from
$2.9 million in fiscal 2001. This decrease is primarily due
to a lower pre-tax income of $6.5 million for fiscal 2002
as compared to $13.7 million for fiscal 2001. A
reconciliation of the income tax provision can be found in Note
11 to the consolidated financial statements included elsewhere
in this report.

Net income for fiscal 2002 decreased
$4.9 million to $5.9 million from $10.8 million
for fiscal 2001 primarily due to the revenue and expense factors
discussed above.

Liquidity and Capital Resources

We are a holding company and receive 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.

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In September 1997, we amended our credit
facility to allow for the acquisition of Argo-Tech Corporation
Costa Mesa and the issuance of $140.0 million of 8 5/8%
senior subordinated notes. The amended credit facility consists
of a seven-year $115.0 million term loan and a seven-year
$20.0 million revolving credit facility. As of October 25,
2003, we have $25.8 million principal amount of term loans
outstanding under this amended credit facility. We also have
available, after $2.2 million of letters of credit,
$17.8 million of the seven-year $20.0 million
revolving credit facility. The unused balance of the revolving
credit facility is subject to a .75% commitment fee. Our credit
facility contains a number of covenants that, among other
things, limit our ability to incur additional indebtedness, pay
dividends, prepay subordinate indebtedness, dispose of certain
assets, create liens, make capital expenditures, make certain
investments or acquisitions and otherwise restrict corporate
activities. It also requires us to comply with certain financial
ratios and tests, under which we will be required to achieve
certain financial and operating results. The credit facility
contains no restrictions on the ability of our subsidiaries to
make distributions to us. Interest is calculated, at our choice,
using an Alternate Base Rate (ABR) or LIBOR, plus a
supplemental percentage determined by the ratio of total debt to
EBITDA. The interest rate for fiscal year 2003 ranged from 1.75%
to 2.50% plus ABR or 2.75% to 3.50% plus LIBOR. On
January 24, 2003 we amended and restated our Credit
Facility to allow for the re-amortization of the outstanding
balance of the Term Loans, amending the Consolidated Interest
Coverage Ratio for the remainder of the agreement, adjusting the
supplemental percentage of interest applied to ABR or LIBOR,
changing the commitment fee rate, increasing the Letter of
Credit sublimit in the revolving credit facility to an amount
not to exceed $5,000,000 and establishing a borrowing base
covenant on revolving credit borrowings in excess of
$10.0 million and a fixed charge coverage ratio. The
maturity of the Term Loans was extended one year and is now as
follows: $16.0 million, $12.0 million and
$13.8 million for fiscal years 2003, 2004 and 2005,
respectively.

In September 1997, we issued
$140 million of senior subordinated notes, together with a
portion of the borrowings under our credit facility, to finance
the acquisition of Argo-Tech Corporation Costa Mesa, repay in
full $46.1 million in notes payable and subordinated notes, and
to pay related fees and expenses. The senior subordinated notes
bear interest at a rate of 8 5/8% per year, payable on each
April 1 and October 1. Interest payments commenced on
April 1, 1998. These notes have been jointly, severally,
fully and unconditionally guaranteed by all of our wholly owned
subsidiaries. The indenture under which these senior
subordinated notes were issued contains certain optional and
mandatory redemption features and other customary financial
covenants and restrictions.

On December 17, 1998, we issued
$55.0 million in principal amount of 8 5/8% senior
subordinated notes, issued at a 5% discount, due 2007, $50.0
million of which was dividended to AT Holdings. The proceeds
from the offering, along with the proceeds of the issuance by AT
Holdings of 30,000 shares of its preferred stock to J.P. Morgan
Partners, LLC and cash on hand, were used to repurchase 639,510
shares of stock from AT Holdings, LLC, the Companys
largest shareholder, for $79.4 million plus transaction
expenses. At October 25, 2003 the accreted value of this
offering was $53.5 million.

Argo-Tech does not enter into derivative
contracts for trading or speculative purposes. We have no other
derivative financial instruments.

Cash Flows from Operating
Activities.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 Flows from Investing
Activities.Net cash used in investing
activities was $1.9 million, $1.8 million and
$1.9 million for fiscal years 2003, 2002 and 2001,
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 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. Cash used in financing activities for fiscal 2001

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was $13.3 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 2003 totaled $1.9 million, which were related to
maintaining existing facilities and equipment and systems to
support current operating activities. For fiscal 2004, we
estimate that capital expenditures will total $3.0 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.

Our expected future contractual cash obligations
and other commercial commitments for the next five years are as
follows:

|                                   |  |      |      |      |  |      |      |      |  |      |     |  |  |   |       |  |  |   |     | 
|---------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | --- |  |  | - | ----- |  |  | - | --- | 
|                                   |  | 2004 |      | 2005 |  | 2006 |      | 2007 |  | 2008
|                                   |  |      |      |      |  |      |      |      |  |     
|Contractual Obligations:           |  |      |      |      |  |      |      |      |  |      |     |  |  |   |       |  |  |   |     | 
|Long Term Debt                     |  | $    | 12.0 |      |  | $    | 13.8 |      |  | $    |     |  |  | $ | 195.0 |  |  | $ |     | 
|Operating Leases                   |  |      | 0.9  |      |  |      | 0.7  |      |  |      | 0.4 |  |  |   | 0.1   |  |  |   | 0.1 | 
|                                   |  |      |      |      |  |      |      |      |  |      |     |  |  |   |       |  |  |   |     | 
|Total Contractual Cash Obligations |  | $    | 12.9 |      |  | $    | 14.5 |      |  | $    | 0.4 |  |  | $ | 195.1 |  |  | $ | 0.1 | 
|                                   |  |      |      |      |  |      |      |      |  |      |     |  |  |   |       |  |  |   |     | 

We believe that cash flow from operations will
provide adequate funds for our working capital needs, planned
capital expenditures and debt service obligations. Our ability
to fund our operations, make planned capital expenditures, and
to make scheduled payments on our indebtedness depends on our
future operating performance and cash flow. 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 June 2002, the FASB issued Statement of
Financial Accounting Standard (SFAS) No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. This statement requires that a liability for a
cost associated with an exit or disposal activity be recognized
when the liability is incurred. The provisions of this statement
are effective for exit or disposal activities that are initiated
after December 31, 2002. Management determined the adoption
of this statement had no effect on Argo-Techs consolidated
financial statements.

In November 2002, the FASB issued FASB
Interpretation No. (FIN) 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45
requires that a liability be recorded in the guarantors
balance sheet upon issuance of a guarantee. In addition, FIN 45
requires disclosures about the guarantees that an entity has
issued, including a rollforward of the entitys product
warranty liabilities. See Note 9 for this disclosure. Argo-Tech
will apply the recognition provisions of FIN 45 prospectively to
guarantees issued after December 31, 2002. Argo-Tech has
not guaranteed any other obligation before or after
December 31, 2002 that would require disclosure under FIN
45.

In January 2003, the FASB issued FIN 46,
Consolidation of Variable Interest Entities. FIN 46
provides guidance on how to identify a variable interest entity
(VIE) and determine when the assets, liabilities,
noncontrolling interests, and results of operations of a VIE
need to be included in a companys consolidated financial
statements. FIN 46 also requires additional disclosures by
primary beneficiaries and other significant variable interest
holders. The provisions of this interpretation became effective
upon issuance. Management believes the adoption of this
interpretation is not likely to have a material impact on
Argo-Techs consolidated financial statements.

In May 2003, the FASB issued SFAS
No. 150, Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity. This
statement establishes how an issuer classifies and measures
certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify
certain financial instruments (as identified in the scope of the
statement), as a liability (or an asset in some

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circumstances), that were previously classified
as equity. Management determined the adoption of this statement
had no effect 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:

Risks Associated with the Aerospace Industry
Generally.



| |   |                                    
| | - | -----------------------------------
| |  | The aerospace industry is cyclical.

The majority of our fiscal 2003 gross profit and
operating income was derived from sales of products to the
aerospace industry. The commercial aerospace industry is
cyclical and has historically been subject to fluctuations due
to general economic conditions and incidents. On
September 11, 2001, the United States was subjected to
terrorist attacks which involved the hijacking of four U.S.
commercial aircraft. In the aftermath of the terrorist attacks,
passenger traffic on commercial flights has been significantly
lower than prior to the attacks. Most commercial airlines
reduced their operating schedules and lowered fares.
Consequently, fewer people are flying and those who are flying
are paying less to do so. The overall result has been large and
continuing financial losses in the airline industry. Major
carriers around the world have filed for bankruptcy.

The future impact of these events is impossible
to fully evaluate. Continuing losses in the airline industry
have resulted, and will continue to result, in reduced orders
and delivery delays of new commercial aircraft, 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 as
maintenance is deferred. This could continue to result in
decreases in our Aerospace segment sales of OEM and aftermarket
components and negatively affect our income and cash flow.



| |   |                                                                              
| | - | -----------------------------------------------------------------------------
| |  | The aerospace industry is subject to
    government regulation and oversight.

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 U.S.
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 were revoked or
suspended, our operations would be adversely affected. In the
future, new and more demanding government regulations may be
adopted or industry oversight may be increased, which may have
an adverse effect on our profitability.



| |   |                                                  
| | - | -------------------------------------------------
| |  | The aerospace industry is highly
    competitive.

The aerospace industry is a highly competitive
global industry which has experienced significant consolidation
in recent years. Our competitors are typically divisions of
large corporations that have significantly greater financial
resources than we do.



| |   |                                                                  
| | - | -----------------------------------------------------------------
| |  | There are a limited number of customers for
    certain products.

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. This influence can have a
material adverse effect on our profitability, as would the loss
of one or more of these significant customers.



| |   |                                                                        
| | - | -----------------------------------------------------------------------
| |  | Government Contracts are subject to reductions
    in defense spending.

Approximately 37% of our sales in fiscal 2003
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 sales as a result of military actions in
Afghanistan and Iraq, there

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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. In
addition, the terms of defense contracts with the U.S.
government generally permit the government to terminate
contracts, with or without cause, at any time. Any unexpected
termination of a significant government contract could have an
adverse effect on our business and profitability.


Risks Associated with our
Operations.



| |   |                                                                              
| | - | -----------------------------------------------------------------------------
| |  | Our substantial indebtedness could adversely
    affect our financial health.

We have a significant amount of indebtedness. Our
ability to generate cash in the future, is, to a certain extent,
subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our
control. The balance between our ability to generate cash and
our substantial indebtedness could have important consequences.
For example, it could:



| |   |                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | increase our vulnerability to general adverse
    economic and industry conditions,                                                                                                                                                                                                    
|
| |  | limit our ability to fund future working capital,
    capital expenditures, research and development costs and other
    general corporate requirements,                                                                                                                               
|
| |  | require us to dedicate a substantial portion of
    our cash flow to payments on our indebtedness, thereby reducing
    the availability of our cash flow to fund working capital,
    capital expenditures, research and development efforts and other
    general corporate purposes,
|
| |  | limit our flexibility in planning for, or
    reacting to, changes in our business and the industry in which
    we operate,                                                                                                                                                           
|
| |  | place us at a competitive disadvantage compared
    to our competitors that have less debt, and                                                                                                                                                                                        
|
| |  | limit, along with the financial and other
    restrictive covenants in our indebtedness, among other things,
    our ability to borrow additional funds.                                                                                                                               

Based upon the current level of operations and
absent any unanticipated disruptive events, we believe our cash
flow from operations and available cash, together with available
borrowings under our $20.0 million revolving credit
facility, will be fully adequate to meet our future liquidity
needs. This cannot be assured, however.



| |   |                                                                    
| | - | -------------------------------------------------------------------
| |  | 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. The loss of services of those individuals and
or other key employees could have a material adverse effect on
our company.



| |   |                                                              
| | - | -------------------------------------------------------------
| |  | Our operations depend on maintaining a skilled
    workforce.

Our operations are highly dependent on an
educated and trained workforce. All of our hourly employees at
the Cleveland facility are represented by the United Auto
Workers union under a collective bargaining agreement that
expires March 31, 2004. Because we maintain a relatively
small inventory of finished goods, and because the aerospace
industry operates on relatively long production lead times, any
interruption of the work force due to strikes, work stoppages,
shortages of appropriately skilled production and professional
workers or other interruption could have a material adverse
effect on our business and results of operations.



| |   |                                                                         
| | - | ------------------------------------------------------------------------
| |  | We depend on suppliers for essential materials
    used in our products.

Our profitability is affected by the price and
continuity of supply of raw materials and component parts. Like
all other aerospace fuel pump manufacturers, we rely on one
supplier for CPM-10V, a powdered metal used in the manufacture
of certain pump components. If that supply ceased to exist, our
ability to operate would be adversely affected. We could also be
adversely affected by factors affecting our suppliers, or by
increased costs associated with supplied materials or components
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 could be adversely affected by
a reduction of supply from vendors. Although we believe that
alternative suppliers, or

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alternate materials or components, could be
identified, the lengthy and expensive FAA and OEM certification
process associated with aerospace products could prevent
efficient replacement of a material or supplier and could have a
material adverse effect on our business and profitability.




| |   |                                                                            
| | - | ---------------------------------------------------------------------------
| |  | 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. The
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 affecting either of these facilities could disable
these functions which are critical to our business. Any such
damage to, or other condition interfering with the operation of,
these facilities would have a material adverse effect on our
business, financial position and results of operations.



| |   |                                                             
| | - | ------------------------------------------------------------
| |  | We have potential exposure to environmental
    liabilities.

Our business operations and facilities are
subject to a number of federal, state and local laws and
regulations, which govern the discharge of pollutants and
hazardous substances into the air and water as well as the
handling, storage and disposal of such materials. Under certain
environmental laws, as a current or previous owner or operator
of real property, we could be held liable for the costs of
removal or remediation of hazardous substances found on the
property. Environmental laws typically impose liability whether
or not the owner or operator knew of, or was responsible for,
the presence of such hazardous substances.

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
costs of remediation at each site. There can be no assurance,
however, that those parties will continue to satisfy their
indemnification obligations or that we would not be ultimately
responsible as owner and/or operator of either or both of these
sites for potentially significant remediation costs. Moreover,
there can be no assurance that future changes in environmental
laws or the nature of our operations will not require us to make
significant additional expenditures to ensure future
environmental compliance.



| |   |                                                          
| | - | ---------------------------------------------------------
| |  | We have a potential risk of product liability
    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 of metal products we have
processed or distributed. We believe that our liability
insurance is adequate to protect us from future product
liability claims. However, there can be no assurance that our
insurance coverage will be adequate if claims were to arise.



|         |                                                                
|-------- | ---------------------------------------------------------------
|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 25, 2003, Argo-Tech had fixed rate debt totaling
$195 million, including $2.9 million of accretion, at
8.625% and variable rate debt under its existing credit facility
of $25.8 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
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.

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##### 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. | Disclosure Controls and Procedures.



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Evaluation of 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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PART III



|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of
    Argo-Tech.

Directors and Executive
Officers.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  |  |     | 57 |          |  | Chairman, President & CEO, Director                                
|Paul R. Keen         |  |     | 54 |          |  | Executive Vice President, General Counsel &
    Secretary, Director
|Frances S. St. Clair |  |     | 48 |          |  | Executive Vice President and CFO, 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 in 1994. Mr. Lipscomb has also served as a
director of Argo-Tech and AT Holdings Corporation 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 and the Board of Directors of AT
Holdings in September 2003.

Frances S. St. Clairis Executive Vice President and Chief
Financial Officer. Ms. St. Clair joined the Company 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
and served as a director of AT Holdings from September 2001
to September 2003.



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

The following table sets forth, for the fiscal
years 2003, 2002 and 2001, 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         |                                       |                       | 2003 |           |      | $     | 461,112 |                    |         | $ | 225,023 |         |         | $ | 50,475 |       
|                            | Chairman, President and CEO           |                       |      | 2002      |      |       | $       | 419,193            |         |   | $       | 222,172 |         |   | $      | 46,458 |       
|                            |                                       |                       |      |           | 2001 |       |         | $                  | 419,193 |   |         | $       | 272,475 |   |        | $      | 46,414 | 
|                           
|Paul R. Keen                |                                       |                       | 2003 |           |      | $     | 246,480 |                    |         | $ | 83,310  |         |         | $ | 12,806 |       
|                            | Executive Vice
    President, General |                       |      | 2002      |      |       | $       | 232,530            |         |   | $       | 85,339  |         |   | $      | 5,759  |       
|                            |                                       | Counsel and Secretary |      |           | 2001 |       |         | $                  | 232,530 |   |         | $       | 104,639 |   |        | $      | 6,013  | 
|                           
|Frances S. St. Clair        |                                       |                       | 2003 |           |      | $     | 225,000 |                    |         | $ | 76,050  |         |         | $ | 23,582 |       
|                            | Executive Vice President
    and CFO  |                       |      | 2002      |      |       | $       | 200,016            |         |   | $       | 73,504  |         |   | $      | 25,630 |       
|                            |                                       |                       |      |           | 2001 |       |         | $                  | 200,016 |   |         | $       | 90,007  |   |        | $      | 9,277  | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 2001, 2002 or 2003.                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(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 $27,000 for fiscal year 2003 and
    $22,000 for each of the fiscal years 2002 and 2001,
    respectively, paid as AT Holdings Corporation directors
    fees. For Mr. Keen, the amounts listed also include $7,000
    for fiscal year 2003 paid as AT Holdings Corporation

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| |                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | directors fees. For Ms. St. Clair, the
    amounts listed also include $20,000, $22,000 and $5,500 for
    fiscal years 2003, 2002 and 2001, respectively, paid as AT
    Holdings Corporation directors fees.

Management Retention Agreements

Stay Pay and Severance
Agreements.We have entered into Stay
Pay and Severance Agreements with each of the Named Executives.
Our Board of Directors believes that these severance 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 severance 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 severance 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 severance 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
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 severance 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
upon any payment made to the executive under the severance
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 severance 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. This 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 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.

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##### Table of Contents



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.

This agreement also provides for the payment of
attorneys expenses if enforcement of the contract becomes
necessary, and contains certain restrictions on certain types of
competitive activity by Mr. Lipscomb. The benefits provided
by the trust and this stay pay agreement and the Trust Agreement
are in addition to the benefits provided under the severance
agreements described above and Mr. Lipscombs
employment contract which is described below.

Employment
Agreements.We have entered into
employment contracts with Mr. Lipscomb and Mr. Keen. These
contracts provide for the payment of severance benefits upon
termination of employment without cause (as defined in the
contracts). 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.
Mr. Keen will receive, in the event of such a termination,
a single lump sum payment equal to 24 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. Both Mr. Lipscomb and Mr. Keen will receive
life, health, medical/hospital, dental and vision insurance
benefits for a period of twelve months following termination.
Mr. Keens contract also provides for the payment of
attorneys expenses if enforcement of the contract becomes
necessary, and contains restrictions on certain competitive
activities by Mr. Keen. The benefits provided by these
additional contracts are provided in addition to the benefits
provided under the severance agreements, and
Mr. Lipscombs trust agreement.

Compensation Committee Interlocks and Insider
Participation

Argo-Tech Corporation does not have a
compensation committee or similar board committee. Decisions
regarding executive officer compensation are made by the
compensation committee of the Board of Directors of AT Holdings
Corporation, the parent company of the registrant. This
compensation committee is comprised solely of non-employee
directors.

Compensation Pursuant to Employee Benefit
Plans of the Company



| |                
| | ---------------
| | Retirement Plan

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 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 monthly normal 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
Argo-Tech Employee Savings Plan) 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.

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The Internal Revenue Code of 1986, 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 Summary Compensation Table
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 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 were
allowed to make catch-up contributions of up to $2,000. 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 excess of
3% of compensation. A participants benefit under the plan
is the balance of the participants accounts attributable
to 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
non-vested, 100% vested. Benefits are payable in the form of a
single lump sum payment.

The Internal Revenue 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 Internal Revenue 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.

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

The Employee Stock Ownership Plan was established
in 1994 with the participation of Argo-Techs salaried
employees. 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 Corporation with
the proceeds of a $16.8 million loan from us to the
Employee Stock Ownership Plan. The term of the loan, unless it
is prepaid or accelerated, ends on April 28, 2004. The
interest rate for the loan is 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 Employee Stock Ownership Plan 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 Holdings common stock released
from the suspense account.

For each of the Plan Years ended October 31,
2001, October 31, 2002 and October 31, 2003, 42,000
shares of AT Holdings common stock were released from the
suspense account. Based on the loan payment schedule, the number
of shares of AT Holdings common stock released from the
suspense account each future plan year during the loan period
would be:

|                 |  |           |        | 
|---------------- |  | --------- | ------ | 
|                 |  | Number of
|                 |  | Shares   
|Plan Year Ending |  | Released 
|                 |  |          
|October 31, 2004 |  |           | 21,000 | 

If we make additional contributions to the
Employee Stock Ownership Plan, the plan would use the
contribution to prepay the loan, and shares would be
released from the suspense account more rapidly than shown
above. If, however, for any reason we do not make contributions
to the plan to pay the principal on the loan as described above,
the shares would not be released from the suspense account as
rapidly as shown above.

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 Employee Stock Ownership Plan 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.

Participants may elect to receive the shares of
qualifying employer securities credited to their accounts after
their termination of employment, and in specified instances,
after attaining age 55 with 10 or more years of participation in
the Employee Stock Ownership Plan. 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 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 Employee Stock Ownership Plan at the value
the stock then has, as determined for purposes of the plan. The
put option and right of first refusal will no longer apply if
the qualifying employer securities become tradeable on an
established securities market.

Voting rights on and decisions whether to tender
or exchange shares of qualifying employer securities held in the
Employee Stock Ownership Plan 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

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##### Table of Contents



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
Employee Stock Ownership Plan are not fixed, benefits payable
under the plan cannot be estimated.

For the plan year ended October 31, 2003,
the number of shares of AT Holdings common stock allocated
under the Employee Stock Ownership Plan to the accounts of the
individuals named in the Summary Compensation Table were:

|                     |  |                  |          |               |  |  |            | 
|-------------------- |  | ---------------- | -------- | ------------- |  |  | ---------- | 
|                     |  |                 
|                     |  | Shares Allocated
|                     |  |                 
|                     |  | Year Ended       |          | Cumulative to
|Name                 |  | Oct. 31, 2003    |          | Oct. 31, 2003
|                     |  |                  |          |              
|Michael S. Lipscomb  |  |                  | 517.4476 |               |  |  | 4,041.3309 | 
|Paul R. Keen         |  |                  | 517.4476 |               |  |  | 4,041.3309 | 
|Frances S. St. Clair |  |                  | 517.4476 |               |  |  | 3,992.3665 | 

Generally accepted accounting principles require
that any third party borrowing by the Employee Stock Ownership
Plan be reflected as a liability on our statement of financial
condition. Since the plan is borrowing from us, the obligation
is not treated as an asset of ours, but will be deducted from
shares of stock held by the Employee Stock Ownership Plan. 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 Internal Revenue 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 Internal Revenue Code.
The plan is subject to the requirements of the Employee
Retirement Income Security Act of 1974, as amended, and the
regulations thereunder.



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

We maintain the Employee Stock Ownership Plan
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 Employee Stock Ownership Plan in
respect of reduction to allocations to their accounts because of
limitations under the Internal Revenue Code applicable to
tax-qualified plans. Benefits under this plan vest in the same
manner as benefits under the Employee Stock Ownership Plan 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 Employee Stock Ownership Plan are distributable, or in
the case of benefits with respect to qualifying employer
securities subject to the put option under the Employee Stock
Ownership Plan at the time the plan participant exercises (or is
deemed to have exercised) a hypothetical put option
under the plan.

We maintain a bookkeeping account for amounts
credited to the accounts of plan participants. For the plan year
ended October 31, 2003, the amounts credited to the
accounts of the individuals named in the Summary Compensation
Table were:

|                     |  |                             |            |               |  |  |            | 
|-------------------- |  | --------------------------- | ---------- | ------------- |  |  | ---------- | 
|                     |  |                            
|                     |  | Equivalent Shares Allocated
|                     |  |                            
|                     |  | Year Ended                  |            | Cumulative to
|Name                 |  | Oct. 31, 2003               |            | Oct. 31, 2003
|                     |  |                             |            |              
|Michael S. Lipscomb  |  |                             | 1,161.0895 |               |  |  | 8,256.0075 | 
|Paul R. Keen         |  |                             | 299.7795   |               |  |  | 2,153.7718 | 
|Frances S. St. Clair |  |                             | 217.7290   |               |  |  | 1,404.0268 | 



| |                             
| | ----------------------------
| | Incentive Stock Option 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

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##### Table of Contents



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. These
options expire on November 9, 2011. All of the options
under this plan became fully vested in January 1999.


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/SARs 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  |             |  |             | 0 |                  |  | $             | 0 |  |  |  | 8,670/      |  |  | $ | 300,150/ $ | 
|                     |  |          | 40.00  |             |  |             | 0 |                  |  |               | 0 |  |  |  | 6,125/      |  |  |   | 28,298/    | 
|                     |  |          | 100.00 |             |  |             | 0 |                  |  |               | 0 |  |  |  | 4,000/      |  |  |   | /         | 
|                     |  |          | 49.79  |             |  |             | 0 |                  |  |               | 0 |  |  |  | 12,617/6,309 |  |  |   | /         | 
|Paul R. Keen         |  |          | 10.00  |             |  |             | 0 |                  |  |               | 0 |  |  |  | 1,990/      |  |  |   | 68,894/    | 
|                     |  |          | 40.00  |             |  |             | 0 |                  |  |               | 0 |  |  |  | 2,760/      |  |  |   | 12,751/    | 
|                     |  |          | 100.00 |             |  |             | 0 |                  |  |               | 0 |  |  |  | 1,400/      |  |  |   | /         | 
|                     |  |          | 49.79  |             |  |             | 0 |                  |  |               | 0 |  |  |  | 4,462/2,231  |  |  |   | /         | 
|Frances S. St. Clair |  |          | 10.00  |             |  |             | 0 |                  |  |               | 0 |  |  |  | 2,990/      |  |  |   | 103,514/   | 
|                     |  |          | 40.00  |             |  |             | 0 |                  |  |               | 0 |  |  |  | 2,760/      |  |  |   | 12,751/    | 
|                     |  |          | 100.00 |             |  |             | 0 |                  |  |               | 0 |  |  |  | 1,400/      |  |  |   | /         | 
|                     |  |          | 49.79  |             |  |             | 0 |                  |  |               | 0 |  |  |  | 4,462/2,231  |  |  |   | /         | 

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. These options expire on November 9, 2011.
All of the options 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 each
such participant under the Stock Appreciation Rights Plan (See
Benefits Restructuring). These options, which were granted by
the Compensation Committee of AT Holdings upon the
recommendation of our compensation committee, expire on
January 2, 2005. All of the options 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. 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

27



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##### Table of Contents



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.




| |                              
| | -----------------------------
| | 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 3 times the individuals salary.



| |           
| | ----------
| | Bonus 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 AT Holdings Compensation Committee.



| |                          
| | -------------------------
| | Compensation of Directors

Since 1999, Argo-Tech has not compensated its
directors. AT Holdings Corporation 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 Summary
Compensation table. See Executive Compensation.



| |                       
| | ----------------------
| | Benefits Restructuring

On January 4, 1999, AT Holdings repurchased
639,510 shares of its common stock that were held by its
majority stockholder, AT Holdings, LLC. AT Holdings also issued
30,000 shares of its preferred stock on December 17, 1998.
In connection with these transactions, we amended our Employee
Stock Ownership Plan Excess Benefit Plan and the Stock
Appreciation Rights (SAR) Plan. The amendment to the
Employee Stock Ownership Plan Excess Benefit Plan allowed for
the transfer of approximately 4,500 shares of AT Holdings common
stock in place of cash payments to members of management who
have been credited with Employee Stock Ownerships Plan excess
benefits as of October 31, 1998. The SAR plan provided for
grants of up to 34,450 SARs, 17,225 of which were granted in
fiscal years 1997 and 1998. The remaining SARs were granted in
the first quarter of fiscal 1999. Pursuant to the amendment of
the SAR plan, all SARs became fully vested and were then
converted into fully vested stock options under the 1998 Equity
Replacement Stock Option Plan. In addition, all granted options
under the 1991 Performance Stock Option Plan and 1991 Management
Incentive Stock Option Plan, to the extent not vested, became
fully vested upon completion of AT Holdings repurchase of
AT Holdings, LLCs common shares.



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

Principal Stockholders

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 $.01 per share, as of October 25,
2003 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, and                                                                

28



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##### Table of Contents





| |   |                                                                                   
| | - | ----------------------------------------------------------------------------------
| |  | all of Argo-Tech and AT Holdings directors
    and executive officers as a group.

On October 25, 2003, there were 638,602
shares of AT Holdings common stock outstanding, exclusive
of treasury shares. AT Holdings also has 30,000 shares of its
preferred stock outstanding. All of these shares are held by
J.P. Morgan Partners, LLC. These preferred shares have no voting
rights.

|                                                            |                                                                    |                                        |         |             |  |                 |        |       |  |                  |        |  |  |  |         |     |  |  |      |  | 
|----------------------------------------------------------- | ------------------------------------------------------------------ | -------------------------------------- | ------- | ----------- |  | --------------- | ------ | ----- |  | ---------------- | ------ |  |  |  | ------- | --- |  |  | ---- |  | 
|                                                            |                                                                    |                                       
|                                                            |                                                                    | Ownership of AT Holdings common stock
|                                                            |                                                                    |                                       
|                                                            |                                                                    |                                        |         | Shares      |  |                
|                                                            |                                                                    |                                        |         | Number of   |  | Attributable to |        |      
|                                                            |                                                                    | Number                                 |         | Immediately |  | Employee Stock  |        |      
|Name of                                                     |                                                                    | Beneficially                           |         | Exercisable |  | Ownership       |        |      
|Beneficial Owner                                            |                                                                    | Owned                                  |         | Options     |  | Plan Account    |        | Total |  | Percent of Class
|                                                            |                                                                    |                                        |         |             |  |                 |        |       |  |                 
|State Street Bank and Trust Company (1)                     |                                                                    |                                        | 346,308 |             |  |                 | 0      |       |  |                  | 0      |  |  |  | 346,308 |     |  |  | 54.2 | 
|                                                            | 200 Newport Avenue
    Quincy, MA 02171                            |                                        |         |             |  |                 |        |       |  |                  |        |  |  |  |         |     |  |  |      |  | 
|YC International, Inc.                                      |                                                                    |                                        | 39,000  |             |  |                 | 0      |       |  |                  | 0      |  |  |  | 39,000  | (2) |  |  | 6.1  | 
|                                                            | 725 South Figueroa Street
    Suite 3870
    Los Angeles, CA 90117 |                                        |         |             |  |                 |        |       |  |                  |        |  |  |  |         |     |  |  |      |  | 
|AT Holdings, LLC                                            |                                                                    |                                        | 187,452 |             |  |                 | 39,000 | (2)   |  |                  | 0      |  |  |  | 226,452 |     |  |  | 35.5 | 
|                                                            | 1390 Highway 50 East
    Suite 4
    Carson City, NV 89701         |                                        |         |             |  |                 |        |       |  |                  |        |  |  |  |         |     |  |  |      |  | 
|J.P. Morgan Partners, LLC                                   |                                                                    |                                        | 0       |             |  |                 | 46,025 |       |  |                  | 0      |  |  |  | 46,025  |     |  |  | 6.7  | 
|                                                            | 1221 Avenue of the Americas
    New York, NY 10020                 |                                        |         |             |  |                 |        |       |  |                  |        |  |  |  |         |     |  |  |      |  | 
|Confar, Thomas*                                             |                                                                    |                                        | 0       |             |  |                 | 0      |       |  |                  | 0      |  |  |  | 0       |     |  |  | **   | 
|de Chastenet, Remi*                                         |                                                                    |                                        | 0       |             |  |                 | 500    |       |  |                  | 0      |  |  |  | 500     |     |  |  | **   | 
|Dougherty, Thomas*                                          |                                                                    |                                        | 2,094   |             |  |                 | 0      |       |  |                  | 0      |  |  |  | 2,094   |     |  |  | **   | 
|Keen, Paul*                                                |                                                                    |                                        | 14,181  |             |  |                 | 10,612 |       |  |                  | 4,041  |  |  |  | 28,834  |     |  |  | 4.4  | 
|Lipscomb, Michael*                                         |                                                                    |                                        | 30,279  |             |  |                 | 31,412 |       |  |                  | 4,041  |  |  |  | 65,732  |     |  |  | 9.8  | 
|Nagata, Robert*                                             |                                                                    |                                        | 0       |             |  |                 | 500    |       |  |                  | 0      |  |  |  | 500     |     |  |  | **   | 
|St. Clair, Frances                                         |                                                                    |                                        | 7,216   |             |  |                 | 11,612 |       |  |                  | 3,992  |  |  |  | 22,820  |     |  |  | 3.5  | 
|Storrie, Karl*                                              |                                                                    |                                        | 1,204   |             |  |                 | 450    |       |  |                  | 0      |  |  |  | 1,654   |     |  |  | **   | 
|Directors and Executive Officers as a
    Group (8 persons) |                                                                    |                                        | 54,974  |             |  |                 | 55,086 |       |  |                  | 12,074 |  |  |  | 122,134 |     |  |  | 17.3 | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | Director of AT Holdings Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|**  | Less than 1%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|   | Director of Argo-Tech                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(1) | GreatBanc Trust Company replaced State Street
    Bank and Trust Company as the trustee of the Employee Stock
    Ownership Plan in December 2003. The Plan trustee holds
    shares of AT Holdings common stock in trust for the
    benefit of the plan. Under normal circumstances, the trustee
    votes all of the shares held by the plan in proportion to the
    actual voting directions of the plan participants. Under certain
    limited circumstances, the plan trustee may, in the exercise of
    its fiduciary duty, vote the shares held by the plan as a block.
    The share ownership numbers for officers do not include shares
    held through the plan, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                



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



| |                                                             
| | ------------------------------------------------------------
| | Upsilon International Corporation
    Distribution Agreement

Upsilon International Corporation
(UIC) was appointed the exclusive distributor of
Argo-Tech engine fuel pump and certain air frame products
manufactured at our Cleveland, Ohio 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
Corporation, the parent company of

29



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##### Table of Contents



Argo-Tech, 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
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 Argo-Tech
products by UIC and a sales commission of 5% on international
overhaul and repair business obtained by Argo-Tech after
December 15, 2000. For fiscal 2003, sales by Upsilon
International accounted for approximately 12% of our net
revenues.




| |              
| | -------------
| | Officer Loans

Certain of the Named Executives have entered into
presently outstanding recourse loan agreements with AT Holdings.
The largest amount of indebtedness outstanding since the
beginning of fiscal 2003 for each such Named Executive was:
$553,542 (Mr. Lipscomb) and $295,002 (Mr. Keen). Each
loan is due October 30, 2005 and accrues interest at 6.75%
annually. These loans, secured by a pledge of AT Holdings
common stock, were extended for the purchase of AT
Holdings common stock, or for the personal use of the
Named Executive. Each of the Named Executives having an
outstanding loan has entered into a pledge agreement and
promissory note with AT Holdings in connection with such 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.

PART IV



|         |                                                                      
|-------- | ---------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules, and
    Reports on Form 8-K.

(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:



| |                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------
| | Consolidated Balance Sheets 
    October 26, 2002 and October 25, 2003                                                                   
|
| | Consolidated Statements of Net Income 
    Years ended October 27, 2001, October 26, 2002 and
    October 25, 2003                       
|
| | Consolidated Statements of Cash Flows 
    Years ended October 27, 2001, October 26, 2002 and
    October 25, 2003                       
|
| | Consolidated Statements of Shareholders
    Equity/(Deficiency)  Years ended October 27, 2001,
    October 26, 2002 and October 25, 2003
|
| | Notes to Consolidated Financial
    Statements  October 25, 2003                                                                         
|
| | Report of Independent Auditors                                                                                                            

(a)(2) Financial Statement Schedules

No schedule or schedules for which provision is
made in the applicable accounting regulations of the Securities
and Exchange Commission are required, or such schedules are not
applicable, and therefore, have been omitted.

30



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##### Table of Contents



(a)(3) Exhibits

|        |       |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | ----- | ----------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Document
|        |       |                        
|        | 3.1   |                         |  | Restated Certificate of Incorporation of the
    Company, dated April 16, 1999 (incorporated herein by reference
    to Exhibit 3.1 of the Companys registration statement on
    form S-4/A filed April 22, 1999, SEC File No. 333-73179).                                                                                                                                                                                                  
|        | 3.2   |                         |  | Restated By-Laws of the Company dated April 16,
    1999 (incorporated herein by reference to Exhibit 3.2 of the
    Companys registration statement on form S-4/A filed April
    22, 1999, SEC File No. 333-73179).                                                                                                                                                                                                                        
|        | 4.1   |                         |  | Indenture dated September 26, 1997, between the
    Company, the Subsidiary Guarantors signatory thereto and Harris
    Trust and Savings Bank, as Trustee, relating to the 8 5/8%
    Senior Subordinated Notes due 2007 (the form of which is
    included in such Indenture) (incorporated herein by reference to
    Exhibit 4.1 of the Companys Registration Statement on form
    S-1, filed October 17, 1997, SEC File No. 333-38223).
|        | 4.2   |                         |  | First Supplemental Indenture, dated December 17,
    1998 between the Company, the Subsidiary Guarantors signatory
    thereto and Harris Trust and Savings Bank, related to the
    Indenture dated September 26, 1997 (incorporated by reference to
    Exhibit 4.4 of the Companys Current Report on Form 8-K,
    filed January 14, 1999).                                                                                               
|        | 4.3   |                         |  | Indenture dated December 17, 1998 between the
    Company, the Subsidiary Guarantors signatory thereto and Harris
    Trust and Savings Bank, as Trustee, related to the 8 5/8%
    Senior Subordinated Notes due 2007 (a form of which is included
    in such Indenture) (incorporated by reference to Exhibit 4.5 of
    the Companys Current Report on Form 8-K, filed January 14,
    1999).                                            
|        | 10.1* |                         |  | Form of Stay Pay and Severance Agreement dated
    June 6, 1996, between the Company and certain Executive Officers
    of the Company (Michael S. Lipscomb, Frances S. St. Clair, and
    Paul R. Keen) (incorporated herein by reference to Exhibit 10.1
    of the Company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 the Company and Paul R. Keen (incorporated herein by
    reference to Exhibit 10.2 of the Company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 the Company and Michael S. Lipscomb (incorporated herein
    by reference to Exhibit 10.3 of the Company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 the Company and Society National Bank,
    as Trustee, relating to the Employment Agreement dated October
    15, 1986 between the Company and Michael S. Lipscomb
    (incorporated herein by reference to Exhibit 10.4 of the
    Company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 the Company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 the Company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 the Company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
    the Company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 the
    Companys Registration Statement on form S-1, filed October
    17, 1997, SEC File No. 333-38223).                                                                                                                                                    

31



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|        |       |                         |  |                                                                                                                                                                                                                                                                                                                                                                                   
|------- | ----- | ----------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Document
|        |       |                        
|        | 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
    the Company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 the Company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 the Company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 the
    Company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 the Company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 the Company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 the Company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 the
    Company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 the Company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 the Company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 the Companys Registration
    Statement on form S-1, filed October 17, 1997, SEC File No.
    333-38223).                                                    
|        | 10.21 |                         |  | Credit Facility, dated July 18, 1997, as amended
    and restated on September 26, 1997, between Argo-Tech, AT
    Holdings, the lenders party thereto and the Chase Manhattan
    Bank, as Administrative Agent (incorporated herein by reference
    to Exhibit 10.24 of the Companys Registration Statement on
    form S-1, filed October 17, 1997, SEC File No. 333-38223). 
|        | 10.22 |                         |  | 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 the Companys Registration Statement on form S-1,
    filed October 17, 1997, SEC File No. 333-38223).                                                                              
|        | 10.23 |                         |  | 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 the Companys Registration Statement on
    form S-1, filed October 17, 1997, SEC File No. 333-38223).

32



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|        |       |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | ----- | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Document
|        |       |                        
|        | 10.24 |                         |  | 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 the Companys
    Registration Statement on form S-1, filed October 17, 1997,
    SEC File No. 333-38223).
|        | 10.25 |                         |  | 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 the
    Companys Registration Statement on form S-1, filed October
    17, 1997, SEC File No. 333-38223).                                                                                                                                                                                                                                                                
|        | 10.26 |                         |  | Prism Prototype Retirement Plan and Trust
    (incorporated herein by reference to Exhibit 10.29 of the
    Companys Registration Statement on form S-1, filed October
    17, 1997, SEC File No. 333-38223).                                                                                                                                                                                                                                                                                                                                          
|        | 10.27 |                         |  | 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 the
    Companys Registration Statement on form S-1, filed October
    17, 1997, SEC File No. 333-38223).                                                                                                                                                                                                                                                                            
|        | 10.28 | *                       |  | 1997 Stock Appreciation Rights Plan (incorporated
    herein by reference to Exhibit 10.31 of the Companys
    Annual Report on form 10-K, for the year ended October 31, 1998).                                                                                                                                                                                                                                                                                                                                                                       
|        | 10.29 | *                       |  | AT Holdings Corporation/Argo-Tech Corporation
    1998 Equity Replacement Stock Option Plan (incorporated herein
    by reference to Exhibit 10.32 of the Companys registration
    statement on form S-4 filed March 1, 1999, SEC File No.
    333-73179).                                                                                                                                                                                                                                                                                            
|        | 10.30 | *                       |  | 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 the Companys Quarterly Report
    on form 10-Q for the quarter ended July 28, 2001).                                                                                                                                                                                                                                                                     
|        | 10.31 | *                       |  | 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 the Companys registration statement on
    form S-4 filed March 1, 1999, SEC File No. 333- 73179).                                                                                                                                                                                                                                     
|        | 10.32 | *                       |  | First Amendment to the Argo-Tech Corporation
    Employee Stock Ownership Plan Excess Benefit Plan (incorporated
    herein by reference to Exhibit 10.34 of the Companys
    registration statement on form S-4 filed March 1, 1999, SEC File
    No. 333-73179).                                                                                                                                                                                                                                                                                     
|        | 10.33 |                         |  | Amendment, dated December 4, 1998 to the Amended
    and Restated Credit Facility, dated July 18, 1997, as amended
    and restated on September 26, 1997, between Argo-Tech, AT
    Holdings Corporation, the Lenders party thereto and Chase
    Manhattan Bank, as Administrative Agent (incorporated herein by
    reference to Exhibit 10.32 of the Companys registration
    statement on form S-4/A filed April 22, 1999, SEC File No.
    333-73179).                                                                                          
|        | 10.34 |                         |  | Amendment, dated June 9, 2000 to the Amended and
    Restated Credit Facility, dated July 18, 1997, as amended and
    restated on September 26, 1997, between Argo-Tech, AT Holdings
    Corporation, the Lenders party thereto and Chase Manhattan Bank,
    as Administrative Agent (incorporated herein by reference to
    Exhibit 10.31 of the Companys Annual Report on
    Form 10-K, for the year ended October 28, 2000).                                                                                                                    
|        | 10.35 |                         |  | Amendment, dated October 26, 2002 to the Amended
    and Restated Credit Facility, dated July 18, 1997, as amended
    and restated on September 26, 1997, between Argo-Tech, AT
    Holdings Corporation, the Lenders party thereto and JPMorgan
    Chase Bank, as Administrative Agent.                                                                                                                                                                                                                                                              
|        | 10.36 |                         |  | Amendment, dated January 24, 2003 to the Amended
    and Restated Credit Facility, dated July 18, 1997, as amended
    and restated on January 24, 2003, between Argo-Tech, AT Holdings
    Corporation, the Lenders party thereto and JPMorgan Chase Bank,
    as Administrative Agent (incorporated herein by reference to
    Exhibit 10.1 of the Companys Quarterly Report on
    form 10-Q for the quarter ended January 25, 2003).                                                                                                               
|        | 10.37 | *                       |  | Amendment, dated November 22, 2002, to Argo-Tech
    Corporation Trust Agreement, dated October 28, 1994.                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 12**  |                         |  | Statement regarding computation of ratios.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

33



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##### Table of Contents



|        |      |                         |  |                                                                                                                                                                                       
|------- | ---- | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |                        
|Number  |      | Description of Document
|        |      |                        
|        | 21   |                         |  | List of Subsidiaries (incorporated herein by
    reference to Exhibit 21 of the Companys Registration
    Statement on form S-1, filed October 17, 1997, SEC File No.
    333-38223).
|        | 31** |                         |  | Certification 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.                                                       



---



|    |                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------
|*   | Reflects management contract or other
    compensatory arrangement required to be filed as an exhibit
    pursuant to Item 14(c) of this Report.
|   
|**  | Filed herewith                                                                                                                                  
|   
|(b) | We did not file any reports on Form 8-K
    during the fourth quarter of 2003.                                                                  



|    |                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------
|(c) | The exhibits which are listed under
    Item 15(a)(3) are filed or incorporated by reference herein.



|    |                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------
|(d) | No financial statement schedules are required to
    be filed herein, therefore, none are listed under
    Item 15(a)(2).

Supplemental Information to be furnished with
reports filed pursuant to Section 15(d) of the Act by
Registrants which have not registered securities pursuant to
Section 12 of the Act

No annual report or proxy statement covering our
last fiscal year has been or will be circulated to security
holders.

34



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of
Section 13 of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.



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



| |     |                         
| | --- | ------------------------
| | By: | /s/ FRANCES S. ST. CLAIR

| |                                                                                
| | -------------------------------------------------------------------------------
| | Frances S. St. Clair 
     Executive Vice President and Chief Financial Officer
|
| | Date: January 22, 2004                                                         

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

|                                             |  |                                                                                                     |  |                 
|-------------------------------------------- |  | --------------------------------------------------------------------------------------------------- |  | ----------------
|SIGNATURE                                    |  | TITLE                                                                                               |  | DATE            
|                                             |  |                                                                                                     |  |                 
|                                            
|/s/ MICHAEL S. LIPSCOMBMichael S. Lipscomb   |  | Chairman, President and Chief Executive Officer
    and Director (Principal Executive Officer)      |  | January 22, 2004
|                                            
|/s/ FRANCES S. ST. CLAIRFrances S. St. Clair |  | Executive Vice President and Chief Financial
    Officer and Director (Principal Financial Officer) |  | January 22, 2004
|                                            
|/s/ PAUL R. KEENPaul R. Keen                 |  | Executive Vice President, General Counsel,
    Secretary and Director                               |  | January 22, 2004
|                                            
|/s/ PAUL A. SKLADPaul A. Sklad               |  | Controller (Principal Accounting Officer)                                                           |  | January 22, 2004

35



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##### Table of Contents



ARGO-TECH CORPORATION AND SUBSIDIARIES

ANNUAL REPORT ON FORM 10-K:

FISCAL YEAR ENDED OCTOBER 25, 2003


ITEM 8 AND ITEM 15(a)(1)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES

(A Wholly-Owned Subsidiary of AT Holdings
Corporation)







INDEX TO FINANCIAL STATEMENTS

|                                                                                                                                                            |  |      |          | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | 
|                                                                                                                                                            |  | Page
|                                                                                                                                                            |  |     
|INDEPENDENT AUDITORS REPORT                                                                                                                                |  |      | F-1      | 
|CONSOLIDATED BALANCE SHEETS AS OF
    OCTOBER 25, 2003 AND OCTOBER 26, 2002                                                                                 |  |      | F-2      | 
|CONSOLIDATED STATEMENTS OF NET INCOME FOR THE
    FISCAL YEARS ENDED OCTOBER 25, 2003, OCTOBER 26, 2002
    AND OCTOBER 27, 2001                            |  |      | F-3      | 
|CONSOLIDATED STATEMENTS OF SHAREHOLDERS
    EQUITY/(DEFICIENCY) FOR THE FISCAL YEARS ENDED
    OCTOBER 25, 2003, OCTOBER 26, 2002 AND
    OCTOBER 27, 2001 |  |      | F-4      | 
|CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
    FISCAL YEARS ENDED OCTOBER 25, 2003, OCTOBER 26, 2002
    AND OCTOBER 27, 2001                            |  |      | F-5      | 
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR
    THE FISCAL YEARS ENDED OCTOBER 25, 2003, OCTOBER 26,
    2002 AND OCTOBER 27, 2001                       |  |      | F-6F-21 | 



---



##### Table of Contents






INDEPENDENT AUDITORS REPORT

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 25, 2003 and
October 26, 2002, and the related consolidated statements
of net income, shareholders equity/(deficiency) and cash
flows for each of the three years in the period ended
October 25, 2003. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. 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
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
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 25, 2003
and October 26, 2002, and the results of its operations and
its cash flows for each of the three years in the period ended
October 25, 2003 in conformity with accounting principles
generally accepted in the United States of America.

As discussed in Note 7 to the consolidated
financial statements, effective October 28, 2001, the
Company changed its method of accounting for goodwill as a
result of the adoption of Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets.

/s/ Deloitte & Touche LLP

Cleveland, Ohio

January 16, 2004


F-1



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES

(A Wholly-Owned Subsidiary of AT Holdings
Corporation)







CONSOLIDATED BALANCE SHEETS


October 25, 2003 and October 26,
2002


|                                                            |                                                                                           |                                         |                           |         |         |         |         |         |         |         | 
|----------------------------------------------------------- | ----------------------------------------------------------------------------------------- | --------------------------------------- | ------------------------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | 
|                                                            |                                                                                           | 2003                                    |                           | 2002   
|                                                            |                                                                                           |                                         |                           |        
|                                                            |                                                                                           |                                        
|                                                            |                                                                                           | (In thousands, except                  
|                                                            |                                                                                           | share data)                            
|ASSETS                                                     
|CURRENT ASSETS:                                             |                                                                                           |                                         |                           |         |         |         |         |        
|                                                            | Cash and cash equivalents                                                                 |                                         | $                         | 14,057  |         |         | $       | 17,769  |        
|                                                            | Receivables, net                                                                          |                                         |                           | 28,335  |         |         |         | 24,550  |        
|                                                            | Income tax receivable                                                                     |                                         |                           | 3,500   |         |         |         | 3,274   |        
|                                                            | Inventories                                                                               |                                         |                           | 25,701  |         |         |         | 25,123  |        
|                                                            | Deferred income taxes and prepaid expenses                                                |                                         |                           | 5,352   |         |         |         | 5,002   |        
|                                                            |                                                                                           |                                         |                           |         |         |         |         |        
|                                                            |                                                                                           |                                         | Total current assets      |         |         | 76,945  |         |         |         | 75,718  | 
|                                                            |                                                                                           |                                         |                           |         |         |         |         |        
|PROPERTY AND EQUIPMENT, net of
    accumulated depreciation |                                                                                           |                                         | 23,956                    |         |         |         | 26,204  |        
|GOODWILL, net of accumulated amortization                   |                                                                                           |                                         | 110,059                   |         |         |         | 110,059 |        
|INTANGIBLE ASSETS, net of
    accumulated amortization      |                                                                                           |                                         | 34,916                    |         |         |         | 38,331  |        
|OTHER ASSETS                                                |                                                                                           |                                         | 9,921                     |         |         |         | 10,021  |        
|                                                            |                                                                                           |                                         |                           |         |         |         |         |        
|Total Assets                                                |                                                                                           | $                                       | 255,797                   |         |         | $       | 260,333 |        
|                                                            |                                                                                           |                                         |                           |         |         |         |         |        
|LIABILITIES AND SHAREHOLDERS
    EQUITY/(DEFICIENCY)      
|CURRENT LIABILITIES:                                        |                                                                                           |                                         |                           |         |         |         |         |        
|                                                            | Current portion of long-term debt                                                         |                                         | $                         | 12,000  |         |         | $       | 16,000  |        
|                                                            | Accounts payable                                                                          |                                         |                           | 7,254   |         |         |         | 5,252   |        
|                                                            | Accrued liabilities                                                                       |                                         |                           | 22,757  |         |         |         | 21,114  |        
|                                                            |                                                                                           |                                         |                           |         |         |         |         |        
|                                                            |                                                                                           |                                         | Total current liabilities |         |         | 42,011  |         |         |         | 42,366  | 
|                                                            |                                                                                           |                                         |                           |         |         |         |         |        
|LONG-TERM DEBT, net of current maturities                   |                                                                                           |                                         | 207,349                   |         |         |         | 219,045 |        
|OTHER NONCURRENT LIABILITIES                                |                                                                                           |                                         | 21,753                    |         |         |         | 21,720  |        
|                                                            |                                                                                           |                                         |                           |         |         |         |         |        
|                                                            |                                                                                           |                                         | Total Liabilities         |         |         | 271,113 |         |         |         | 283,131 | 
|                                                            |                                                                                           |                                         |                           |         |         |         |         |        
|REDEEMABLE ESOP STOCK                                       |                                                                                           |                                         | 15,452                    |         |         |         | 11,355  |        
|                                                            | Unearned ESOP stock                                                                       |                                         |                           | (840    | )       |         |         | (2,520  | )      
|                                                            |                                                                                           |                                         |                           |         |         |         |         |        
|                                                            |                                                                                           |                                         | 14,612                    |         |         |         | 8,835   |        
|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                                                      |                                         |                           | (2,143  | )       |         |         | (3,235  | )      
|                                                            | Accumulated deficit                                                                       |                                         |                           | (27,785 | )       |         |         | (28,398 | )      
|                                                            |                                                                                           |                                         |                           |         |         |         |         |        
|                                                            |                                                                                           | Total shareholders equity/(deficiency) |                           |         | (29,928 | )       |         |         | (31,633 | )      
|                                                            |                                                                                           |                                         |                           |         |         |         |         |        
|Total Liabilities and Shareholders
    Equity/(Deficiency) |                                                                                           | $                                       | 255,797                   |         |         | $       | 260,333 |        
|                                                            |                                                                                           |                                         |                           |         |         |         |         |        



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


For the Fiscal Years Ended October 25, 2003,
October 26, 2002 and October 27, 2001


|                                    |                    |                |         |        |  |      |         |        |  |   |         |        | 
|----------------------------------- | ------------------ | -------------- | ------- | ------ |  | ---- | ------- | ------ |  | - | ------- | ------ | 
|                                    |                    | 2003           |         | 2002   |  | 2001
|                                    |                    |                |         |        |  |     
|                                    |                    |               
|                                    |                    | (In thousands)
|Net revenues                        |                    | $              | 160,726 |        |  | $    | 155,303 |        |  | $ | 173,208 |       
|Cost of revenues                    |                    |                | 94,535  |        |  |      | 88,669  |        |  |   | 94,175  |       
|                                    |                    |                |         |        |  |      |         |        |  |   |         |       
|                                    | Gross profit       |                |         | 66,191 |  |      |         | 66,634 |  |   |         | 79,033 | 
|                                    |                    |                |         |        |  |      |         |        |  |   |         |       
|Selling, general and administrative |                    |                | 26,417  |        |  |      | 23,359  |        |  |   | 23,094  |       
|Research and development            |                    |                | 9,525   |        |  |      | 11,722  |        |  |   | 10,265  |       
|Amortization of intangible assets   |                    |                | 3,414   |        |  |      | 3,721   |        |  |   | 7,515   |       
|                                    |                    |                |         |        |  |      |         |        |  |   |         |       
|                                    | Operating expenses |                |         | 39,356 |  |      |         | 38,802 |  |   |         | 40,874 | 
|                                    |                    |                |         |        |  |      |         |        |  |   |         |       
|Income from operations              |                    |                | 26,835  |        |  |      | 27,832  |        |  |   | 38,159  |       
|Interest expense                    |                    |                | 21,257  |        |  |      | 21,434  |        |  |   | 24,534  |       
|Other, net                          |                    |                | (529    | )      |  |      | (97     | )      |  |   | (51     | )     
|                                    |                    |                |         |        |  |      |         |        |  |   |         |       
|Income before income taxes          |                    |                | 6,107   |        |  |      | 6,495   |        |  |   | 13,676  |       
|Income tax provision                |                    |                | 1,579   |        |  |      | 569     |        |  |   | 2,876   |       
|                                    |                    |                |         |        |  |      |         |        |  |   |         |       
|Net income                          |                    | $              | 4,528   |        |  | $    | 5,926   |        |  | $ | 10,800  |       
|                                    |                    |                |         |        |  |      |         |        |  |   |         |       



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 25, 2003,
October 26, 2002 and October 27,2001


|                                        |  |                |   |         |  |                 |   |             |  |       |        |   |  |   |         |   |  |   |         |  
|--------------------------------------- |  | -------------- | - | ------- |  | --------------- | - | ----------- |  | ----- | ------ | - |  | - | ------- | - |  | - | ------- | -
|                                        |  |                |   |         |  | Accumulated     |   |             |  |      
|                                        |  | Common         |   | Paid-In |  | Comprehensive   |   | Accumulated |  |      
|                                        |  | Stock          |   | Capital |  | Income / (Loss) |   | Deficit     |  | Total
|                                        |  |                |   |         |  |                 |   |             |  |      
|                                        |  |               
|                                        |  | (In thousands)
|BALANCE, OCTOBER 28, 2000               |  | $              |  |         |  | $               |  |             |  | $     | 31     |   |  | $ | (58,873 | ) |  | $ | (58,842 | )
|Net income                              |  |                |   |         |  |                 |   |             |  |       |        |   |  |   | 10,800  |   |  |   | 10,800  |  
|Additional minimum pension liability    |  |                |   |         |  |                 |   |             |  |       | (1,828 | ) |  |   |         |   |  |   | (1,828  | )
|Reduction of redeemable ESOP stock      |  |                |   |         |  |                 |   |             |  |       |        |   |  |   | 9,081   |   |  |   | 9,081   |  
|Dividend                                |  |                |   |         |  |                 |   |             |  |       |        |   |  |   | (1,661  | ) |  |   | (1,661  | )
|Foreign currency translation adjustment |  |                |   |         |  |                 |   |             |  |       | (151   | ) |  |   |         |   |  |   | (151    | )
|Activity related to stock options       |  |                |   |         |  |                 |   |             |  |       |        |   |  |   | 526     |   |  |   | 526     |  
|Other, net                              |  |                |   |         |  |                 |   |             |  |       |        |   |  |   | (44     | ) |  |   | (44     | )
|                                        |  |                |   |         |  |                 |   |             |  |       |        |   |  |   |         |   |  |   |         |  
|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 | )
|                                        |  |                |   |         |  |                 |   |             |  |       |        |   |  |   |         |   |  |   |         |  

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 25, 2003,
October 26, 2002 and October 27, 2001


|                                       |                                                                                       |                                                                                      |                               |         |       |        |        |         |        |       |       |         |        |        |  
|-------------------------------------- | ------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | ----------------------------- | ------- | ----- | ------ | ------ | ------- | ------ | ----- | ----- | ------- | ------ | ------ | -
|                                       |                                                                                       | 2003                                                                                 |                               | 2002    |       | 2001  
|                                       |                                                                                       |                                                                                      |                               |         |       |       
|                                       |                                                                                       |                                                                                     
|                                       |                                                                                       | (In thousands)                                                                      
|CASH FLOWS FROM OPERATING ACTIVITIES:  |                                                                                       |                                                                                      |                               |         |       |        |        |         |        |       |       |        
|                                       | Net income                                                                            |                                                                                      | $                             | 4,528   |       |        | $      | 5,926   |        |       | $     | 10,800  |       
|                                       | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                                      |                               |         |       |        |        |         |        |       |       |         |       
|                                       |                                                                                       | Depreciation                                                                         |                               |         | 4,187 |        |        |         | 4,608  |       |       |         | 5,559  |       
|                                       |                                                                                       | Amortization of intangible assets and deferred
    financing costs                   |                               |         | 5,866 |        |        |         | 5,779  |       |       |         | 9,655  |       
|                                       |                                                                                       | Accretion of bond discount                                                           |                               |         | 304   |        |        |         | 277    |       |       |         | 252    |       
|                                       |                                                                                       | Compensation expense recognized in connection
    with employee stock ownership plan |                               |         | 1,874 |        |        |         | 1,344  |       |       |         | 2,091  |       
|                                       |                                                                                       | Compensation expense recognized in connection
    with stock options                 |                               |         |       |        |        |         |        |       |       |         | 526    |       
|                                       |                                                                                       | Deferred pension cost                                                                |                               |         | 731   |        |        |         | (1,375 | )     |       |         | (2,299 | )     
|                                       |                                                                                       | Deferred income taxes                                                                |                               |         | (578  | )      |        |         | (1,658 | )     |       |         | (1,962 | )     
|                                       |                                                                                       | Changes in operating assets and liabilities:                                         |                               |         |       |        |        |         |        |       |       |         |        |       
|                                       |                                                                                       |                                                                                      | Receivables                   |         |       | (4,010 | )      |         |        | 8,112 |       |         |        | (8,928 | )
|                                       |                                                                                       |                                                                                      | Inventories                   |         |       | (578   | )      |         |        | 3,738 |       |         |        | 1,254  |  
|                                       |                                                                                       |                                                                                      | Prepaid expenses              |         |       | (348   | )      |         |        | 307   |       |         |        | 301    |  
|                                       |                                                                                       |                                                                                      | Accounts payable              |         |       | 2,002  |        |         |        | 412   |       |         |        | (150   | )
|                                       |                                                                                       |                                                                                      | Accrued and other liabilities |         |       | 1,571  |        |         |        | 3,284 |       |         |        | 1,161  |  
|                                       |                                                                                       | Other, net                                                                           |                               |         | 124   |        |        |         | (30    | )     |       |         | (197   | )     
|                                       |                                                                                       |                                                                                      |                               |         |       |        |        |         |        |       |       |        
|                                       | Net cash provided by operating activities                                             |                                                                                      |                               | 15,673  |       |        |        | 30,724  |        |       |       | 18,063  |       
|                                       |                                                                                       |                                                                                      |                               |         |       |        |        |         |        |       |       |        
|CASH FLOWS FROM INVESTING ACTIVITIES:  |                                                                                       |                                                                                      |                               |         |       |        |        |         |        |       |       |        
|                                       | Capital expenditures                                                                  |                                                                                      |                               | (1,939  | )     |        |        | (1,785  | )      |       |       | (1,885  | )     
|                                       |                                                                                       |                                                                                      |                               |         |       |        |        |         |        |       |       |        
|                                       | Net cash used in investing activities                                                 |                                                                                      |                               | (1,939  | )     |        |        | (1,785  | )      |       |       | (1,885  | )     
|                                       |                                                                                       |                                                                                      |                               |         |       |        |        |         |        |       |       |        
|CASH FLOWS FROM FINANCING ACTIVITIES:  |                                                                                       |                                                                                      |                               |         |       |        |        |         |        |       |       |        
|                                       | Repayment of long-term debt                                                           |                                                                                      |                               | (16,000 | )     |        |        | (18,612 | )      |       |       | (11,634 | )     
|                                       | Payment of financing related fees                                                     |                                                                                      |                               | (1,224  | )     |        |        | (37     | )      |       |       |         |       
|                                       | Purchase of AT Holdings stock from former
    ESOP participants                       |                                                                                      |                               | (273    | )     |        |        | (526    | )      |       |       | (1,584  | )     
|                                       | Other, net                                                                            |                                                                                      |                               | 51      |       |        |        | (52     | )      |       |       | (77     | )     
|                                       |                                                                                       |                                                                                      |                               |         |       |        |        |         |        |       |       |        
|                                       | Net cash used in financing activities                                                 |                                                                                      |                               | (17,446 | )     |        |        | (19,227 | )      |       |       | (13,295 | )     
|                                       |                                                                                       |                                                                                      |                               |         |       |        |        |         |        |       |       |        
|CASH AND CASH EQUIVALENTS:             |                                                                                       |                                                                                      |                               |         |       |        |        |         |        |       |       |        
|Net increase (decrease) for the period |                                                                                       |                                                                                      | (3,712                        | )       |       |        | 9,712  |         |        |       | 2,883 |        
|Balance, Beginning of period           |                                                                                       |                                                                                      | 17,769                        |         |       |        | 8,057  |         |        |       | 5,174 |        
|                                       |                                                                                       |                                                                                      |                               |         |       |        |        |         |        |       |       |        
|Balance, End of period                 |                                                                                       | $                                                                                    | 14,057                        |         |       | $      | 17,769 |         |        | $     | 8,057 |        
|                                       |                                                                                       |                                                                                      |                               |         |       |        |        |         |        |       |       |        

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

F-5



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##### 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 25, 2003,
October 26, 2002 and October 27, 2001




|   |                      
|-- | ---------------------
|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, throughout the world. In addition, the
Company 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 years ended
October 25, 2003, October 26, 2002 and
October 27, 2001 consisted of 52 weeks. Argo-Tech is
obligated to fulfill certain obligations of AT Holdings
Corporation. As a result, those obligations have been reflected
in the Companys 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 with four wholly-owned operating subsidiaries that
guarantee Argo-Techs senior subordinated notes. Argo-Tech
has no outside assets, liabilities or operations apart from its
wholly-owned subsidiaries. The senior subordinated 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 does not generally
require collateral or other security to guarantee trade
receivables.

Inventories Inventories are stated at standard
cost which approximates the costs which would be determined
using the first-in, first-out (FIFO) method. The recorded value
of inventories is not in excess of market value.

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 Goodwill represents the excess of
the cost of companies acquired over the fair value of their net
assets at the dates of acquisition.

Intangible Assets 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 Sheet
and are amortized over the terms of the financing. The amortized
cost is included in

F-6



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##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

interest expense in the consolidated statements
of net income. Accumulated amortization at October 25, 2003
and October 26, 2002 was $11,856,000, and $9,404,000
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 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 25, 2003 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-price purchase orders received
from customers. We have executed long-term supply agreements
with certain of our original equipment manufacturers. These
agreements require us to supply all the amounts ordered by the
customers during the term (generally three to five years) of the
agreements at specified prices. In certain of these agreements,
we expect to incur losses. Provisions for estimating loss
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.

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-7



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##### 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 25, |   | October 26,
|                              |                                   | 2003        |   | 2002       
|                              |                                   |             |   |            
|Accrued liabilities:          |                                   |             |   |             |        |  |   |       
|                              | Salaries and accrued compensation |             | $ | 6,889       |        |  | $ | 8,086  |       
|                              | Accrued interest                  |             |   | 1,319       |        |  |   | 1,315  |       
|                              | Accrued warranty                  |             |   | 2,130       |        |  |   | 2,064  |       
|                              | Accrued income taxes              |             |   | 5,787       |        |  |   | 4,833  |       
|                              | Other                             |             |   | 6,632       |        |  |   | 4,816  |       
|                              |                                   |             |   |             |        |  |   |       
|                              |                                   | Total       |   | $           | 22,757 |  |   | $      | 21,114 | 
|                              |                                   |             |   |             |        |  |   |       
|Other noncurrent liabilities: |                                   |             |   |             |        |  |   |       
|                              | Deferred income taxes             |             | $ | 9,821       |        |  | $ | 10,154 |       
|                              | Accrued post retirement benefits  |             |   | 10,611      |        |  |   | 9,987  |       
|                              | Other                             |             |   | 1,321       |        |  |   | 1,579  |       
|                              |                                   |             |   |             |        |  |   |       
|                              |                                   | Total       |   | $           | 21,753 |  |   | $      | 21,720 | 
|                              |                                   |             |   |             |        |  |   |       



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

Receivables consist of the following (in
thousands):

|                                                                                 |                                                              |                      |        |             |      |   |        |        |      |  
|-------------------------------------------------------------------------------- | ------------------------------------------------------------ | -------------------- | ------ | ----------- | ---- | - | ------ | ------ | ---- | -
|                                                                                 |                                                              | October 25,          |        | October 26,
|                                                                                 |                                                              | 2003                 |        | 2002       
|                                                                                 |                                                              |                      |        |            
|Amounts billed  net of allowance for
    uncollectible amounts of $266 and $310 |                                                              | $                    | 28,572 |             |      | $ | 25,000 |       
|Amounts unbilled (principally commercial
    customers):                         |                                                              |                      |        |             |      |   |        |       
|                                                                                 | Net reimbursable costs incurred on
    uncompleted contracts |                      |        | 1,556       |      |   |        | 847    |     
|                                                                                 | Billings to date                                             |                      |        | (1,793      | )    |   |        | (1,297 | )   
|                                                                                 |                                                              |                      |        |             |      |   |        |       
|                                                                                 |                                                              | Total unbilled  net |        |             | (237 | ) |        |        | (450 | )
|                                                                                 |                                                              |                      |        |             |      |   |        |       
|Net receivables                                                                  |                                                              | $                    | 28,335 |             |      | $ | 24,550 |       
|                                                                                 |                                                              |                      |        |             |      |   |        |       



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

Inventories consist of the following (in
thousands):

|                                          |       |             |        |             |  |   |        |        | 
|----------------------------------------- | ----- | ----------- | ------ | ----------- |  | - | ------ | ------ | 
|                                          |       | October 25, |        | October 26,
|                                          |       | 2003        |        | 2002       
|                                          |       |             |        |            
|Finished goods                            |       | $           | 1,481  |             |  | $ | 1,861  |       
|Work-in-process and purchased parts       |       |             | 16,938 |             |  |   | 16,593 |       
|Raw materials and supplies                |       |             | 12,385 |             |  |   | 11,723 |       
|                                          |       |             |        |             |  |   |        |       
|                                          | Total |             |        | 30,804      |  |   |        | 30,177 | 
|Reserve for excess and obsolete inventory |       |             | (5,103 | )           |  |   | (5,054 | )     
|                                          |       |             |        |             |  |   |        |       
|Inventories  net                         |       | $           | 25,701 |             |  | $ | 25,123 |       
|                                          |       |             |        |             |  |   |        |       

F-8



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##### 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 25, 2003 |   | October 26, 2002
|                   |                     |                  |   |                 
|                   |                     | Gross            |   | Accumulated      |        | Gross  |   | Accumulated 
|                   |                     | Amount           |   | Amortization     |        | Amount |   | Amortization
|                   |                     |                  |   |                  |        |        |   |             
|Intangible Assets: |                     |                  |   |                  |        |        |   |              |        |  |   |        |        |  |   |      
|                   | Contracts           |                  | $ | 17,100           |        |        | $ | 10,404       |        |  | $ | 17,100 |        |  | $ | 8,693 |       
|                   | Spare parts annuity |                  |   | 38,200           |        |        |   | 10,217       |        |  |   | 38,200 |        |  |   | 8,537 |       
|                   | Patents             |                  |   | 387              |        |        |   | 150          |        |  |   | 387    |        |  |   | 126   |       
|                   |                     |                  |   |                  |        |        |   |              |        |  |   |        |        |  |   |      
|                   |                     | Total            |   | $                | 55,687 |        |   | $            | 20,771 |  |   | $      | 55,687 |  |   | $     | 17,356 | 
|                   |                     |                  |   |                  |        |        |   |              |        |  |   |        |        |  |   |      

Amortization expense recorded on the intangible
assets for each of the fiscal years ended October 25, 2003 and
October 26, 2002 was $3.4 million. The estimated
amortization expense for each of the three succeeding fiscal
years 2004 through 2006 is $3.4 million, fiscal year 2007
is $3.2 million and fiscal year 2008 is $1.7 million.



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

Argo-Tech adopted Statement of Financial
Accounting Standard (SFAS) No. 142,
Goodwill and Other Intangible Assets as of
October 28, 2001. Under this statement, goodwill and other
intangibles determined to have an indefinite 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.

Upon adoption of SFAS No. 142,
$2.4 million related to the unamortized portion of the
intangible asset, workforce in place, was reclassified from
intangible assets to goodwill along with the related long-term
deferred tax liability of $1.0 million. The following pro
forma information shows what income would have been had SFAS
No. 142 been in effect as of October 29, 2000 for the
fiscal years ended 2003, 2002 and 2001 (in thousands):

|                          |                                        |      |       |      |  |      |       |  |  |   |        |       | 
|------------------------- | -------------------------------------- | ---- | ----- | ---- |  | ---- | ----- |  |  | - | ------ | ----- | 
|                          |                                        | 2003 |       | 2002 |  | 2001
|                          |                                        |      |       |      |  |     
|Net income as reported    |                                        | $    | 4,528 |      |  | $    | 5,926 |  |  | $ | 10,800 |      
|Add amortization expense: |                                        |      |       |      |  |      |       |  |  |   |        |      
|                          | Goodwill                               |      |       |      |  |      |       |  |  |   |        | 3,489 | 
|                          | Workforce in place, net of tax of $245 |      |       |      |  |      |       |  |  |   |        | 367   | 
|                          |                                        |      |       |      |  |      |       |  |  |   |        |      
|Adjusted net income       |                                        | $    | 4,528 |      |  | $    | 5,926 |  |  | $ | 14,656 |      
|                          |                                        |      |       |      |  |      |       |  |  |   |        |      

F-9



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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

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

|                                 |       |             |         |             |  |   |         |        | 
|-------------------------------- | ----- | ----------- | ------- | ----------- |  | - | ------- | ------ | 
|                                 |       | October 25, |         | October 26,
|                                 |       | 2003        |         | 2002       
|                                 |       |             |         |            
|Land and land improvements       |       | $           | 7,663   |             |  | $ | 7,663   |       
|Buildings and building equipment |       |             | 34,448  |             |  |   | 34,199  |       
|Machinery and equipment          |       |             | 40,360  |             |  |   | 39,045  |       
|Office and automotive equipment  |       |             | 8,128   |             |  |   | 7,409   |       
|Construction-in-progress         |       |             | 333     |             |  |   | 979     |       
|                                 |       |             |         |             |  |   |         |       
|                                 | Total |             |         | 90,932      |  |   |         | 89,295 | 
|Accumulated depreciation         |       |             | (66,976 | )           |  |   | (63,091 | )     
|                                 |       |             |         |             |  |   |         |       
|Total  net                      |       | $           | 23,956  |             |  | $ | 26,204  |       
|                                 |       |             |         |             |  |   |         |       

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 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 2003, 2002 and
2001 (in thousands):

|                                                      |       |      |       |       |  |      |       |       |  |   |       |       | 
|----------------------------------------------------- | ----- | ---- | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- | 
|                                                      |       | 2003 |       | 2002  |  | 2001
|                                                      |       |      |       |       |  |     
|Minimum contractual amounts under
    property leases |       | $    | 4,498 |       |  | $    | 4,526 |       |  | $ | 4,368 |      
|Service contracts revenue based on usage              |       |      | 774   |       |  |      | 792   |       |  |   | 862   |      
|                                                      |       |      |       |       |  |      |       |       |  |   |       |      
|                                                      | Total |      | $     | 5,272 |  |      | $     | 5,318 |  |   | $     | 5,230 | 
|                                                      |       |      |       |       |  |      |       |       |  |   |       |      

Future minimum rentals under the noncancelable
property leases and service contracts at October 25, 2003
are (in thousands): $3,285 in 2004, $956 in 2005, $280 in 2006,
$6 in 2007, and $0 in 2008.



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

Argo-Tech Corporation adopted Financial
Accounting Standards Board (FASB) Interpretation
No. 45 (FIN 45), Guarantors
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, effective
as of its first quarter of fiscal 2003. FIN 45 requires
disclosures to be made by a guarantor about its obligations
under certain guarantees that it has issued.

Argo-Tech 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

F-10



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 25, |       | October 26,
|                                                                         |  | 2003        |       | 2002       
|                                                                         |  |             |       |            
|Beginning balance                                                        |  | $           | 2,064 |             |  | $ | 2,100 |  
|Accruals for warranties issued                                           |  |             | 325   |             |  |   | 80    |  
|Accruals for pre-existing warranties (including
    changes in estimate) |  |             | 448   |             |  |   | 620   |  
|Warranty claims settled                                                  |  |             | (707  | )           |  |   | (736  | )
|                                                                         |  |             |       |             |  |   |       |  
|Ending balance                                                           |  | $           | 2,130 |             |  | $ | 2,064 |  
|                                                                         |  |             |       |             |  |   |       |  



|    |                       
|--- | ----------------------
|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 $1,874,000, $1,344,000 and
$2,091,000 for the fiscal years ended 2003, 2002 and 2001,
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.

Summary information regarding ESOP activity
consists of the following:

|                                             |  |             |         |             |  |   |           |  
|-------------------------------------------- |  | ----------- | ------- | ----------- |  | - | --------- | -
|                                             |  | October 25, |         | October 26,
|                                             |  | 2003        |         | 2002       
|                                             |  |             |         |            
|Allocated shares                             |  |             | 357,000 |             |  |   | 315,000   |  
|Shares released for allocation               |  |             | 42,000  |             |  |   | 42,000    |  
|Unearned ESOP shares                         |  |             | 21,000  |             |  |   | 63,000    |  
|                                             |  |             |         |             |  |   |           |  
|Total ESOP shares                            |  |             | 420,000 |             |  |   | 420,000   |  
|Repurchased shares received as distributions |  |             | (73,692 | )           |  |   | (65,151   | )
|                                             |  |             |         |             |  |   |           |  
|Total available ESOP shares                  |  |             | 346,308 |             |  |   | 354,849   |  
|                                             |  |             |         |             |  |   |           |  
|Fair market value of unearned ESOP shares    |  | $           | 937,020 |             |  | $ | 2,016,000 |  
|                                             |  |             |         |             |  |   |           |  

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 shareholders through its purchase of their
common shares. Participants in the Companys ESOP have the
right to require the Company, within a specified period, to
repurchase shares received as distributions under the ESOP at
their fair market value.

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

F-11



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##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 $488,000, $408,000 and $373,000 in
fiscal years 2003, 2002 and 2001 respectively.

A summary of the components of net periodic
pension cost for the pension plans for the fiscal years ended
2003, 2002 and 2001 is as follows (in thousands):

|                                                          |  |      |        |      |  |      |        |   |  |   |        |  
|--------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                          |  | 2003 |        | 2002 |  | 2001
|                                                          |  |      |        |      |  |     
|Service cost  benefits earned during
    the period      |  | $    | 277    |      |  | $    | 255    |   |  | $ | 196    |  
|Interest cost on projected benefit obligation             |  |      | 1,299  |      |  |      | 1,279  |   |  |   | 1,191  |  
|Expected return on plan assets                            |  |      | (1,491 | )    |  |      | (1,628 | ) |  |   | (1,666 | )
|Net amortization and deferral                             |  |      | 384    |      |  |      | 218    |   |  |   | (99    | )
|                                                          |  |      |        |      |  |      |        |   |  |   |        |  
|Net periodic pension cost/(benefit)                       |  |      | 469    |      |  |      | 124    |   |  |   | (378   | )
|                                                          |  |      |        |      |  |      |        |   |  |   |        |  
|Settlement (gain)/loss                                    |  |      |        |      |  |      | (184   | ) |  |   |        |  
|Special termination benefits                              |  |      |        |      |  |      | 770    |   |  |   |        |  
|                                                          |  |      |        |      |  |      |        |   |  |   |        |  
|Net periodic pension cost/(benefit)
    after settlements |  | $    | 469    |      |  | $    | 710    |   |  | $ | (378   | )
|                                                          |  |      |        |      |  |      |        |   |  |   |        |  

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

|                                        |                                   |             |        |             |   |   |        |        |  
|--------------------------------------- | --------------------------------- | ----------- | ------ | ----------- | - | - | ------ | ------ | -
|                                        |                                   | October 25, |        | October 26,
|                                        |                                   | 2003        |        | 2002       
|                                        |                                   |             |        |            
|Benefit obligation at beginning of year |                                   | $           | 19,180 |             |   | $ | 17,875 |       
|                                        | Service cost                      |             |        | 277         |   |   |        | 255    |  
|                                        | Interest cost                     |             |        | 1,299       |   |   |        | 1,279  |  
|                                        | Benefits paid                     |             |        | (914        | ) |   |        | (918   | )
|                                        | Actuarial (gain) loss             |             |        | (127        | ) |   |        | (547   | )
|                                        | Change due to amendments          |             |        |            |   |   |        | 401    |  
|                                        | Change due to assumptions         |             |        | (201        | ) |   |        |       |  
|                                        | Curtailments                      |             |        |            |   |   |        | 118    |  
|                                        | Settlements                       |             |        |            |   |   |        | (1,222 | )
|                                        | Special termination benefits      |             |        |            |   |   |        | 770    |  
|                                        | Change in discount rate           |             |        | 1,295       |   |   |        | 1,169  |  
|                                        |                                   |             |        |             |   |   |        |       
|                                        | Benefit obligation at end of year |             | $      | 20,809      |   |   | $      | 19,180 |  
|                                        |                                   |             |        |             |   |   |        |       

F-12



---



##### 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 plan
assets (in thousands):

|                                                   |  |             |        |             |  |   |        |  
|-------------------------------------------------- |  | ----------- | ------ | ----------- |  | - | ------ | -
|                                                   |  | October 25, |        | October 26,
|                                                   |  | 2003        |        | 2002       
|                                                   |  |             |        |            
|Fair value of plan assets at beginning
    of year |  | $           | 16,684 |             |  | $ | 18,789 |  
|Actual return on plan assets                       |  |             | 2,914  |             |  |   | (965   | )
|Employer contributions                             |  |             | 1,290  |             |  |   | 1,000  |  
|Benefits paid                                      |  |             | (914   | )           |  |   | (918   | )
|Settlements                                        |  |             |       |             |  |   | (1,222 | )
|                                                   |  |             |        |             |  |   |        |  
|Fair value of plan assets at end of year           |  | $           | 19,974 |             |  | $ | 16,684 |  
|                                                   |  |             |        |             |  |   |        |  

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

|                                |  |             |       |             |  |   |        |  
|------------------------------- |  | ----------- | ----- | ----------- |  | - | ------ | -
|                                |  | October 25, |       | October 26,
|                                |  | 2003        |       | 2002       
|                                |  |             |       |            
|Funded status                   |  | $           | (835  | )           |  | $ | (2,496 | )
|Unrecognized net loss           |  |             | 4,410 |             |  |   | 5,169  |  
|Unrecognized prior service cost |  |             | 463   |             |  |   | 543    |  
|                                |  |             |       |             |  |   |        |  
|Prepaid benefit cost            |  | $           | 4,038 |             |  | $ | 3,216  |  
|                                |  |             |       |             |  |   |        |  

Amounts recognized in the statements of financial
position consist of (in thousands):

|                                     |  |             |       |             |  |   |        |  
|------------------------------------ |  | ----------- | ----- | ----------- |  | - | ------ | -
|                                     |  | October 25, |       | October 26,
|                                     |  | 2003        |       | 2002       
|                                     |  |             |       |            
|Prepaid benefit cost                 |  | $           | 972   |             |  | $ |       |  
|Accrued benefit liability            |  |             | (943  | )           |  |   | (2,496 | )
|Intangible asset                     |  |             | 462   |             |  |   | 543    |  
|Accumulated other comprehensive loss |  |             | 3,547 |             |  |   | 5,169  |  
|                                     |  |             |       |             |  |   |        |  
|Net amount recognized                |  | $           | 4,038 |             |  | $ | 3,216  |  
|                                     |  |             |       |             |  |   |        |  

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

|                                                     |  |      |      |      |  |      |      |   |  |  |      |  
|---------------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                                                     |  | 2003 |      | 2002 |  | 2001
|                                                     |  |      |      |      |  |     
|Discount rate                                        |  |      | 6.50 | %    |  |      | 7.00 | % |  |  | 7.50 | %
|Expected long-term rate of return on
    plan assets |  |      | 9.00 | %    |  |      | 9.00 | % |  |  | 9.00 | %

A decrease in the discount rate of 0.25%, to
6.25%, would result in a $0.6 million increase in the benefit
obligation at October 25, 2003. This increase in the
benefit obligation would cause both of the plans for the fiscal
year ended October 25, 2003 to be underfunded, with the
recognition of an additional accrued benefit liability and
charge to accumulated other comprehensive income, net of tax, of
$0.9 million.

F-13



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

The net postretirement benefit cost for the
fiscal years ended 2003, 2002 and 2001 includes the following
components (in thousands):

|                                |  |      |       |      |  |      |     |   |  |   |     |  
|------------------------------- |  | ---- | ----- | ---- |  | ---- | --- | - |  | - | --- | -
|                                |  | 2003 |       | 2002 |  | 2001
|                                |  |      |       |      |  |     
|Service cost                    |  | $    | 187   |      |  | $    | 136 |   |  | $ | 124 |  
|Interest cost                   |  |      | 804   |      |  |      | 650 |   |  |   | 634 |  
|Net amortization and deferral   |  |      | 23    |      |  |      | (7  | ) |  |   | (32 | )
|                                |  |      |       |      |  |      |     |   |  |   |     |  
|Net postretirement benefit cost |  | $    | 1,014 |      |  | $    | 779 |   |  | $ | 726 |  
|                                |  |      |       |      |  |      |     |   |  |   |     |  

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

|                                          |  |             |        |             |  |   |       |  
|----------------------------------------- |  | ----------- | ------ | ----------- |  | - | ----- | -
|                                          |  | October 25, |        | October 26,
|                                          |  | 2003        |        | 2002       
|                                          |  |             |        |            
|Benefit obligation at beginning of year   |  | $           | 9,954  |             |  | $ | 9,167 |  
|Service cost                              |  |             | 187    |             |  |   | 136   |  
|Interest cost                             |  |             | 804    |             |  |   | 650   |  
|Benefits paid                             |  |             | (340   | )           |  |   | (335  | )
|Actuarial (gain) loss                     |  |             | 1,662  |             |  |   | (330  | )
|Change in discount rate/other assumptions |  |             | 2,252  |             |  |   | 666   |  
|                                          |  |             |        |             |  |   |       |  
|Benefit obligation at end of year         |  | $           | 14,519 |             |  | $ | 9,954 |  
|                                          |  |             |        |             |  |   |       |  

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

|                             |  |             |         |             |  |   |         |  
|---------------------------- |  | ----------- | ------- | ----------- |  | - | ------- | -
|                             |  | October 25, |         | October 26,
|                             |  | 2003        |         | 2002       
|                             |  |             |         |            
|Benefit obligation           |  | $           | (14,519 | )           |  | $ | (9,954  | )
|Unrecognized net (gain) loss |  |             | 3,558   |             |  |   | (333    | )
|                             |  |             |         |             |  |   |         |  
|Accrued benefit cost         |  | $           | (10,961 | )           |  | $ | (10,287 | )
|                             |  |             |         |             |  |   |         |  

Benefit costs were generally estimated assuming
retiree health care costs would initially increase at an 11%
annual rate, decreasing gradually to a 5% annual growth rate
after 12 years and remain at a 5% annual growth rate
thereafter. For the plan year beginning November 1, 2003,
the annual increase in retiree health care costs was adjusted
from 7.00% to a 9.00% annual rate, decreasing gradually to a 5%
annual growth rate after seven years and remain at a 5% annual
growth rate thereafter. A 1% increase in this annual trend rate
would have increased the accumulated postretirement benefit
obligation at October 25, 2003 by $2.5 million with a
corresponding effect on the 2003 postretirement benefit expense
of $0.2 million. The discount rate used to estimate the
accumulated postretirement benefit obligation was 6.50% and
7.00% for fiscal years 2003 and 2002, respectively.

F-14



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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

The income tax provision consists of the
following for the fiscal years ended 2003, 2002 and 2001 (in
thousands):

|                       |                 |       |       |       |       |      |        |       |       |   |        |       |       | 
|---------------------- | --------------- | ----- | ----- | ----- | ----- | ---- | ------ | ----- | ----- | - | ------ | ----- | ----- | 
|                       |                 | 2003  |       | 2002  |       | 2001
|                       |                 |       |       |       |       |     
|Current tax provision: |                 |       |       |       |       |      |        |       |       |   |        |      
|                       | Federal         |       | $     | 1,485 |       |      | $      | 1,647 |       |   | $      | 4,143 |      
|                       | State and local |       |       | 672   |       |      |        | 580   |       |   |        | 695   |      
|                       |                 |       |       |       |       |      |        |       |       |   |        |      
|                       |                 | Total |       |       | 2,157 |      |        |       | 2,227 |   |        |       | 4,838 | 
|Deferred tax benefit   |                 |       | (578  | )     |       |      | (1,658 | )     |       |   | (1,962 | )    
|                       |                 |       |       |       |       |      |        |       |       |   |        |      
|Income tax provision   |                 | $     | 1,579 |       |       | $    | 569    |       |       | $ | 2,876  |      
|                       |                 |       |       |       |       |      |        |       |       |   |        |      

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

|                                                  |  |      |       |      |  |      |       |   |  |   |        |  
|------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | ------ | -
|                                                  |  | 2003 |       | 2002 |  | 2001
|                                                  |  |      |       |      |  |     
|Income tax provision at statutory rate            |  | $    | 2,137 |      |  | $    | 2,273 |   |  | $ | 4,787  |  
|State tax provision  net of
    federal benefits |  |      | 391   |      |  |      | 366   |   |  |   | 451    |  
|Extraterritorial income                           |  |      | (829  | )    |  |      | (996  | ) |  |   | (1,458 | )
|R & D credit                                      |  |      | (252  | )    |  |      | (584  | ) |  |   | (2,714 | )
|Goodwill                                          |  |      |       |      |  |      |       |   |  |   | 1,195  |  
|ESOP                                              |  |      | 66    |      |  |      | (114  | ) |  |   | 291    |  
|Other  net                                       |  |      | 66    |      |  |      | (376  | ) |  |   | 324    |  
|                                                  |  |      |       |      |  |      |       |   |  |   |        |  
|Income tax provision                              |  | $    | 1,579 |      |  | $    | 569   |   |  | $ | 2,876  |  
|                                                  |  |      |       |      |  |      |       |   |  |   |        |  

During the fiscal years ended 2003 and 2001, the
Company paid (net of refunds received) approximately $1.7
million and $6.6 million in income taxes, respectively. In
fiscal year 2002 the Company received a net refund of income
taxes of approximately $0.8 million.

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

|                           |                         |             |        |             |   |   |         |         |  
|-------------------------- | ----------------------- | ----------- | ------ | ----------- | - | - | ------- | ------- | -
|                           |                         | October 25, |        | October 26,
|                           |                         | 2003        |        | 2002       
|                           |                         |             |        |            
|Current:                   |                         |             |        |             |   |   |         |        
|                           | Inventory               |             | $      | 1,273       |   |   | $       | 1,312   |  
|                           | Employee benefits       |             |        | 1,288       |   |   |         | 1,273   |  
|                           | Warranty                |             |        | 844         |   |   |         | 851     |  
|                           | Engineering reserves    |             |        | 599         |   |   |         | 516     |  
|                           | Other reserves          |             |        | 707         |   |   |         | 514     |  
|                           |                         |             |        |             |   |   |         |        
|Total current              |                         |             | 4,711  |             |   |   | 4,466   |        
|                           |                         |             |        |             |   |   |         |        
|Long-term:                 |                         |             |        |             |   |   |         |        
|                           | Hourly retiree medical  |             |        | 4,259       |   |   |         | 4,254   |  
|                           | Prepaid pension benefit |             |        | (323        | ) |   |         | 531     |  
|                           | Property and equipment  |             |        | 835         |   |   |         | 1,137   |  
|                           | Intangible assets       |             |        | (14,324     | ) |   |         | (15,719 | )
|                           | Other  net             |             |        | (268        | ) |   |         | (357    | )
|                           |                         |             |        |             |   |   |         |        
|Total long-term            |                         |             | (9,821 | )           |   |   | (10,154 | )      
|                           |                         |             |        |             |   |   |         |        
|Net deferred tax liability |                         | $           | (5,110 | )           |   | $ | (5,688  | )      
|                           |                         |             |        |             |   |   |         |        

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.



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

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

|                          |                  |             |         |             |  |   |         |         | 
|------------------------- | ---------------- | ----------- | ------- | ----------- |  | - | ------- | ------- | 
|                          |                  | October 25, |         | October 26,
|                          |                  | 2003        |         | 2002       
|                          |                  |             |         |            
|Term Loans                |                  | $           | 25,850  |             |  | $ | 41,850  |        
|Revolving Credit Facility |                  |             |         |             |  |   |         |        
|Senior Subordinated Notes |                  |             | 193,499 |             |  |   | 193,195 |        
|                          |                  |             |         |             |  |   |         |        
|                          | Total borrowings |             |         | 219,349     |  |   |         | 235,045 | 
|Current maturities        |                  |             | (12,000 | )           |  |   | (16,000 | )      
|                          |                  |             |         |             |  |   |         |        
|Long-term portion         |                  | $           | 207,349 |             |  | $ | 219,045 |        
|                          |                  |             |         |             |  |   |         |        

Credit Facility and Term Loans The Company has available
$115.0 million principal amount of Term Loans, and a
seven-year $20.0 million Revolving Credit Facility. The
unused balance of the Revolving Credit Facility
($17.8 million at October 25, 2003 after reduction of
$2.2 million for letters of credit) is subject to a .75%
commitment fee. 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,

F-16



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

dispose of certain assets, create liens, make
capital expenditures, make certain investments or acquisitions
and otherwise restrict corporate activities. 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. On January 24,
2003 the Company amended and restated its Credit Facility to
allow for the re-amortization of the outstanding balance of the
Term Loans, amending the Consolidated Interest Coverage Ratio
for the remainder of the agreement, adjusting the supplemental
percentage of interest applied to an Alternate Base Rate
(ABR) or LIBOR, changing the commitment fee rate,
increasing the Letter of Credit sublimit in the revolving credit
facility to an amount not to exceed $5,000,000 and establishing
a borrowing base covenant on revolving credit borrowings in
excess of $10.0 million and a fixed charge coverage ratio.
The maturities of the Companys Term Loans are now as
follows: $16.0 million, $12.0 million and $13.8
million for fiscal years 2003, 2004 and 2005, respectively. The
Company was in compliance with the covenants at October 25,
2003. 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
EBITDA. The interest rate for fiscal year 2003 ranged from 1.75%
to 2.50% plus ABR or 2.75% to 3.50% plus LIBOR.

Senior Subordinated Notes The Company has outstanding
$195.0 million 8 5/8% Senior Subordinated Notes due
2007 (the Notes). At October 25, 2003, 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. The Notes will mature on October 1, 2007. After
October 1, 2002, the Company may redeem the Notes, in whole
or in part, at the redemption prices at the time, together with
accrued and unpaid interest, if any, to the date of redemption.

The Notes are unsecured and are subordinated in
right of payment to all existing and future Senior Indebtedness
of the Company and are subject to certain limitations and
restrictions which the Company has not exceeded at
October 25, 2003.

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

|            |  |        |         | 
|----------- |  | ------ | ------- | 
|Fiscal Year |  | Amount
|            |  |       
|2004        |  | $      | 12,000  | 
|2005        |  |        | 13,850  | 
|2006        |  |        |         | 
|2007        |  |        | 193,499 | 
|2008        |  |        |         | 
|            |  |        |         | 
|Total       |  | $      | 219,349 | 
|            |  |        |         | 

Total interest paid during the fiscal years ended
2003, 2002 and 2001 was $18.5 million, $19.0 million
and $22.1 million, respectively.



|    |                    
|--- | -------------------
|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 throughout the world 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, 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.

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 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.

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

2003

|                                                                                     |  |           |         |            |  |           |        |              |  |   |      |   |  |   |         |  
|------------------------------------------------------------------------------------ |  | --------- | ------- | ---------- |  | --------- | ------ | ------------ |  | - | ---- | - |  | - | ------- | -
|                                                                                     |  | Aerospace |         | Industrial |  | Corporate |        | Consolidated
|                                                                                     |  |           |         |            |  |           |        |             
|Customer revenues                                                                    |  | $         | 121,278 |            |  | $         | 39,448 |              |  | $ |     |   |  | $ | 160,726 |  
|Intersegment revenues                                                                |  |           |        |            |  |           |       |              |  |   |     |   |  |   |        |  
|Eliminations                                                                         |  |           |         |            |  |           |        |              |  |   |      |   |  |   |        |  
|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                                                                 |  |           | 933     |            |  |           | 1,006  |              |  |   |      |   |  |   | 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   |  

2002

|                                                                                     |  |           |         |            |  |           |        |              |  |   |        |   |  |   |         |  
|------------------------------------------------------------------------------------ |  | --------- | ------- | ---------- |  | --------- | ------ | ------------ |  | - | ------ | - |  | - | ------- | -
|                                                                                     |  | Aerospace |         | Industrial |  | Corporate |        | Consolidated
|                                                                                     |  |           |         |            |  |           |        |             
|Customer revenues                                                                    |  | $         | 120,891 |            |  | $         | 34,412 |              |  | $ |       |   |  | $ | 155,303 |  
|Intersegment revenues                                                                |  |           |        |            |  |           |       |              |  |   |       |   |  |   |        |  
|Eliminations                                                                         |  |           |         |            |  |           |        |              |  |   |        |   |  |   |        |  
|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   |  

F-18



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

2001

|                                                                                     |  |           |         |            |  |           |        |              |  |   |        |   |  |   |         |  
|------------------------------------------------------------------------------------ |  | --------- | ------- | ---------- |  | --------- | ------ | ------------ |  | - | ------ | - |  | - | ------- | -
|                                                                                     |  | Aerospace |         | Industrial |  | Corporate |        | Consolidated
|                                                                                     |  |           |         |            |  |           |        |             
|Customer revenues                                                                    |  | $         | 142,000 |            |  | $         | 31,208 |              |  | $ |       |   |  | $ | 173,208 |  
|Intersegment revenues                                                                |  |           |         |            |  |           | 10     |              |  |   |       |   |  |   | 10      |  
|Eliminations                                                                         |  |           |         |            |  |           |        |              |  |   |        |   |  |   | (10     | )
|Operating profit (loss)                                                              |  |           | 47,548  |            |  |           | (252   | )            |  |   | (1,622 | ) |  |   | 45,674  |  
|Amortization of goodwill and
    intangible assets                                   |  |           |         |            |  |           |        |              |  |   |        |   |  |   | 7,515   |  
|                                                                                     |  |           |         |            |  |           |        |              |  |   |        |   |  |   |         |  
|Income from operations                                                               |  |           |         |            |  |           |        |              |  |   |        |   |  |   | 38,159  |  
|Interest expense                                                                     |  |           |         |            |  |           |        |              |  |   |        |   |  |   | 24,534  |  
|Other, net                                                                           |  |           |         |            |  |           |        |              |  |   |        |   |  |   | (51     | )
|                                                                                     |  |           |         |            |  |           |        |              |  |   |        |   |  |   |         |  
|Income before tax                                                                    |  |           |         |            |  |           |        |              |  |   |        |   |  | $ | 13,676  |  
|                                                                                     |  |           |         |            |  |           |        |              |  |   |        |   |  |   |         |  
|Capital expenditures                                                                 |  |           | 1,453   |            |  |           | 432    |              |  |   |        |   |  |   | 1,885   |  
|Depreciation                                                                         |  |           | 3,124   |            |  |           | 1,165  |              |  |   | 1,270  |   |  |   | 5,559   |  
|Compensation expense recognized in connection
    with employee stock ownership plan |  |           | 1,791   |            |  |           | 300    |              |  |   |        |   |  |   | 2,091   |  
|Compensation expense recognized in connection
    with stock options                 |  |           |         |            |  |           |        |              |  |   | 526    |   |  |   | 526     |  



|    |                                 
|--- | --------------------------------
|14. | Major Customers and Export Sales

During the fiscal years ended 2003, 2002 and
2001, the Company had revenues in excess of 10% from only one
customer (in thousands):

|                           |  |      |        |      |  |      |        |  |  |   |        | 
|-------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                           |  | 2003 |        | 2002 |  | 2001
|                           |  |      |        |      |  |     
|Customer A (Related Party) |  | $    | 19,321 |      |  | $    | 21,231 |  |  | $ | 26,792 | 

During the fiscal years ended 2003, 2002 and
2001, export sales to foreign customers were comprised of the
following (in thousands):

|                                        |       |      |        |        |  |      |        |        |  |   |        |        | 
|--------------------------------------- | ----- | ---- | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                        |       | 2003 |        | 2002   |  | 2001
|                                        |       |      |        |        |  |     
|Europe                                  |       | $    | 30,371 |        |  | $    | 28,002 |        |  | $ | 34,954 |       
|All others (individually less than 10%) |       |      | 36,320 |        |  |      | 40,576 |        |  |   | 45,841 |       
|                                        |       |      |        |        |  |      |        |        |  |   |        |       
|                                        | Total |      | $      | 66,691 |  |      | $      | 68,578 |  |   | $      | 80,795 | 
|                                        |       |      |        |        |  |      |        |        |  |   |        |       



|    |                                    
|--- | -----------------------------------
|15. | 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 market information
and utilizing appropriate valuation methodologies, which require
judgment. The Company believes that the carrying values of the
short-term investments and term loans 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.

F-19



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |              
|--- | -------------
|16. | 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 respect to these
additional matters is not expected to materially affect the
Companys financial condition, results of operations or
liquidity.



|    |                         
|--- | ------------------------
|17. | New Accounting Standards

In June 2002, the FASB issued SFAS
No. 146, Accounting for Costs Associated with Exit or
Disposal Activities. This statement requires that a
liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. The
provisions of this statement are effective for exit or disposal
activities that are initiated after December 31, 2002.
Management determined the adoption of this statement had no
effect on Argo-Techs consolidated financial statements.

In November 2002, the FASB issued FIN 45,
Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. FIN 45 requires that a liability be recorded in
the guarantors balance sheet upon issuance of a guarantee.
In addition, FIN 45 requires disclosures about the guarantees
that an entity has issued, including a rollforward of the
entitys product warranty liabilities. See Note 9 for this
disclosure. Argo-Tech will apply the recognition provisions of
FIN 45 prospectively to guarantees issued after
December 31, 2002. Argo-Tech has not guaranteed any other
obligation before or after December 31, 2002 that would
require disclosure under FIN 45.

In January 2003, the FASB issued FIN 46,
Consolidation of Variable Interest Entities. FIN 46
provides guidance on how to identify a variable interest entity
(VIE) and determine when the assets, liabilities,
noncontrolling interests, and results of operations of a VIE
need to be included in a companys consolidated financial
statements. FIN 46 also requires additional disclosures by
primary beneficiaries and other significant variable interest
holders. The provisions of this interpretation became effective
upon issuance. Management believes the adoption of this
interpretation is not likely to have a material impact on
Argo-Techs consolidated financial statements.

In May 2003, the FASB issued SFAS
No. 150, Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity. This
statement establishes how an issuer classifies and measures
certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify
certain financial instruments (as identified in the scope of the
statement), as a liability (or an asset in some circumstances),
that were previously classified as equity. Management determined
the adoption of this statement had no effect on Argo-Techs
consolidated financial statements.



|    |                                  
|--- | ---------------------------------
|18. | Other Comprehensive Income (Loss)

Other comprehensive income (loss) includes
foreign currency translation adjustments and deferred pension
income (expense) for the fiscal years ended 2003, 2002 and 2001
(in thousands).

F-20



---



##### Table of Contents



ARGO-TECH CORPORATION AND
SUBSIDIARIES


(A Wholly-Owned Subsidiary of AT Holdings
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                                                |  |      |       |      |  |      |        |   |  |   |        |  
|------------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                                                |  | 2003 |       | 2002 |  | 2001
|                                                                                |  |      |       |      |  |     
|Net income                                                                      |  | $    | 4,528 |      |  | $    | 5,926  |   |  | $ | 10,800 |  
|Other comprehensive income (loss):                                              |  |      |       |      |  |      |        |   |  |   |        |  
|Foreign currency translation adjustment                                         |  |      | 119   |      |  |      | (14    | ) |  |   | (151   | )
|Deferred pension income (expense)                                               |  |      | 1,622 |      |  |      | (2,123 | ) |  |   | (3,046 | )
|                                                                                |  |      |       |      |  |      |        |   |  |   |        |  
|Other comprehensive income
    (loss) before tax                                |  |      | 1,741 |      |  |      | (2,137 | ) |  |   | (3,197 | )
|Income tax (provision) benefit related to
    other comprehensive income (loss) |  |      | (649  | )    |  |      | 850    |   |  |   | 1,218  |  
|                                                                                |  |      |       |      |  |      |        |   |  |   |        |  
|Other comprehensive income (loss) net
    of tax                                |  |      | 1,092 |      |  |      | (1,287 | ) |  |   | (1,979 | )
|                                                                                |  |      |       |      |  |      |        |   |  |   |        |  
|Comprehensive income                                                            |  | $    | 5,620 |      |  | $    | 4,639  |   |  | $ | 8,821  |  
|                                                                                |  |      |       |      |  |      |        |   |  |   |        |  

* * * * *

F-21



---



##### Table of Contents






EXHIBIT INDEX

|        |    |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | -- | ----------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Document
|        |    |                        
|        | 3  | .1                      |  | Restated Certificate of Incorporation of the
    Company, dated April 16, 1999 (incorporated herein by reference
    to Exhibit 3.1 of the Companys registration statement on
    form S-4/A filed April 22, 1999, SEC File No. 333-73179).                                                                                                                                                                                                  
|        | 3  | .2                      |  | Restated By-Laws of the Company dated April 16,
    1999 (incorporated herein by reference to Exhibit 3.2 of the
    Companys registration statement on form S-4/A filed April
    22, 1999, SEC File No. 333-73179).                                                                                                                                                                                                                        
|        | 4  | .1                      |  | Indenture dated September 26, 1997, between the
    Company, the Subsidiary Guarantors signatory thereto and Harris
    Trust and Savings Bank, as Trustee, relating to the 8 5/8%
    Senior Subordinated Notes due 2007 (the form of which is
    included in such Indenture) (incorporated herein by reference to
    Exhibit 4.1 of the Companys Registration Statement on form
    S-1, filed October 17, 1997, SEC File No. 333-38223).
|        | 4  | .2                      |  | First Supplemental Indenture, dated December 17,
    1998 between the Company, the Subsidiary Guarantors signatory
    thereto and Harris Trust and Savings Bank, related to the
    Indenture dated September 26, 1997 (incorporated by reference to
    Exhibit 4.4 of the Companys Current Report on Form 8-K,
    filed January 14, 1999).                                                                                               
|        | 4  | .3                      |  | Indenture dated December 17, 1998 between the
    Company, the Subsidiary Guarantors signatory thereto and Harris
    Trust and Savings Bank, as Trustee, related to the 8 5/8% Senior
    Subordinated Notes due 2007 (a form of which is included in such
    Indenture) (incorporated by reference to Exhibit 4.5 of the
    Companys Current Report on Form 8-K, filed January 14,
    1999).                                            
|        | 10 | .1*                     |  | Form of Stay Pay and Severance Agreement dated
    June 6, 1996, between the Company and certain Executive Officers
    of the Company (Michael S. Lipscomb, Frances S. St. Clair, and
    Paul R. Keen) (incorporated herein by reference to Exhibit 10.1
    of the Company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 the Company and Paul R. Keen (incorporated herein by
    reference to Exhibit 10.2 of the Company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 the Company and Michael S. Lipscomb (incorporated herein
    by reference to Exhibit 10.3 of the Company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 the Company and Society National Bank,
    as Trustee, relating to the Employment Agreement dated October
    15, 1986 between the Company and Michael S. Lipscomb
    (incorporated herein by reference to Exhibit 10.4 of the
    Company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 the Company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 the Company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 the Company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
    the Company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 the
    Companys Registration Statement on form S-1, filed October
    17, 1997, SEC File No. 333-38223).                                                                                                                                                    

X-1



---



##### Table of Contents



EXHIBIT INDEX  Continued


|        |    |                         |  |                                                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ----------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Document
|        |    |                        
|        | 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
    the Company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 the Company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 the Company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 the
    Company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 the Company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 the Company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 the Company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 the
    Company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 the Company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 the Company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 the Companys Registration
    Statement on form S-1, filed October 17, 1997, SEC File No.
    333-38223).                                                    
|        | 10 | .21                     |  | Credit Facility, dated July 18, 1997, as amended
    and restated on September 26, 1997, between Argo-Tech, AT
    Holdings, the lenders party thereto and the Chase Manhattan
    Bank, as Administrative Agent (incorporated herein by reference
    to Exhibit 10.24 of the Companys Registration Statement on
    form S-1, filed October 17, 1997, SEC File No. 333-38223). 
|        | 10 | .22                     |  | 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 the Companys Registration Statement on form S-1,
    filed October 17, 1997, SEC File No. 333-38223).                                                                              
|        | 10 | .23                     |  | 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 the Companys Registration Statement on
    form S-1, filed October 17, 1997, SEC File No. 333-38223).

X-2



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##### Table of Contents



EXHIBIT INDEX  Continued


|        |    |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | -- | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Document
|        |    |                        
|        | 10 | .24                     |  | 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 the Companys
    Registration Statement on form S-1, filed October 17, 1997, SEC
    File No. 333-38223).
|        | 10 | .25                     |  | 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 the
    Companys Registration Statement on form S-1, filed October
    17, 1997, SEC File No. 333-38223).                                                                                                                                                                                                                                                                
|        | 10 | .26                     |  | Prism Prototype Retirement Plan and Trust
    (incorporated herein by reference to Exhibit 10.29 of the
    Companys Registration Statement on form S-1, filed October
    17, 1997, SEC File No. 333-38223).                                                                                                                                                                                                                                                                                                                                          
|        | 10 | .27                     |  | 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 the
    Companys Registration Statement on form S-1, filed October
    17, 1997, SEC File No. 333-38223).                                                                                                                                                                                                                                                                            
|        | 10 | .28*                    |  | 1997 Stock Appreciation Rights Plan (incorporated
    herein by reference to Exhibit 10.31 of the Companys
    Annual Report on form 10-K, for the year ended October 31, 1998).                                                                                                                                                                                                                                                                                                                                                                       
|        | 10 | .29*                    |  | AT Holdings Corporation/Argo-Tech Corporation
    1998 Equity Replacement Stock Option Plan (incorporated herein
    by reference to Exhibit 10.32 of the Companys registration
    statement on form S-4 filed March 1, 1999, SEC File No.
    333-73179).                                                                                                                                                                                                                                                                                            
|        | 10 | .30*                    |  | 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 the Companys Quarterly Report
    on form 10-Q for the quarter ended July 28, 2001).                                                                                                                                                                                                                                                                     
|        | 10 | .31*                    |  | 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 the Companys registration statement on
    form S-4 filed March 1, 1999, SEC File No. 333- 73179).                                                                                                                                                                                                                                     
|        | 10 | .32*                    |  | First Amendment to the Argo-Tech Corporation
    Employee Stock Ownership Plan Excess Benefit Plan (incorporated
    herein by reference to Exhibit 10.34 of the Companys
    registration statement on form S-4 filed March 1, 1999, SEC File
    No. 333-73179).                                                                                                                                                                                                                                                                                     
|        | 10 | .33                     |  | Amendment, dated December 4, 1998 to the Amended
    and Restated Credit Facility, dated July 18, 1997, as amended
    and restated on September 26, 1997, between Argo-Tech, AT
    Holdings Corporation, the Lenders party thereto and Chase
    Manhattan Bank, as Administrative Agent (incorporated herein by
    reference to Exhibit 10.32 of the Companys registration
    statement on form S-4/A filed April 22, 1999, SEC File No.
    333-73179).                                                                                          
|        | 10 | .34                     |  | Amendment, dated June 9, 2000 to the Amended and
    Restated Credit Facility, dated July 18, 1997, as amended and
    restated on September 26, 1997, between Argo-Tech, AT Holdings
    Corporation, the Lenders party thereto and Chase Manhattan Bank,
    as Administrative Agent (incorporated herein by reference to
    Exhibit 10.31 of the Companys Annual Report on Form 10-K,
    for the year ended October 28, 2000).                                                                                                                    
|        | 10 | .35                     |  | Amendment, dated October 26, 2002 to the Amended
    and Restated Credit Facility, dated July 18, 1997, as amended
    and restated on September 26, 1997, between Argo-Tech, AT
    Holdings Corporation, the Lenders party thereto and JPMorgan
    Chase Bank, as Administrative Agent.                                                                                                                                                                                                                                                              
|        | 10 | .36                     |  | Amendment, dated January 24, 2003 to the Amended
    and Restated Credit Facility, dated July 18, 1997, as amended
    and restated on January 24, 2003, between Argo-Tech, AT Holdings
    Corporation, the Lenders party thereto and JPMorgan Chase Bank,
    as Administrative Agent (incorporated herein by reference to
    Exhibit 10.1 of the Companys Quarterly Report on
    form 10-Q for the quarter ended January 25, 2003).                                                                                                               

X-3



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##### Table of Contents



EXHIBIT INDEX  Continued


|        |  |                         |  |                                                                                                                                                                                       
|------- |  | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                        
|Number  |  | Description of Document
|        |  |                        
|        |  | 10.37*                  |  | Amendment, dated November 22, 2002, to Argo-Tech
    Corporation Trust Agreement, dated October 28, 1994.                                                                             
|        |  | 12**                    |  | Statement regarding computation of ratios.                                                                                                                                            
|        |  | 21                      |  | List of Subsidiaries (incorporated herein by
    reference to Exhibit 21 of the Companys Registration
    Statement on form S-1, filed October 17, 1997, SEC File No.
    333-38223).
|        |  | 31**                    |  | Certification 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.                                                       



---



|  |                                                                                                                                                 
|- | ------------------------------------------------------------------------------------------------------------------------------------------------
|* | Reflects management contract or other
    compensatory arrangement required to be filed as an exhibit
    pursuant to Item 14(c) of this Report.



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

X-4