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UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





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FORM 10-K





ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES EXCHANGE ACT OF 1934





For the Fiscal Year Ended September 30, 2002





Commission File Number 333-71397





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TransDigm Inc.

TransDigm Holding Company(Exact name of registrant as specified in its charter)

(Exact name of registrant as specified in its charter)





Delaware

Delaware(State or other Jurisdiction of incorporation or organization)

(State or other Jurisdiction of incorporation or organization)





34-1750032

13-3733378(I.R.S. Employer Identification No.)

(I.R.S. Employer Identification No.)





26380 Curtiss Wright Parkway, Richmond Heights, Ohio

44143(Address of principal executive offices)

(Zip Code)





Registrants Telephone Number, Including Area Code: (216) 289-4939





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





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





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Indicate by checkmark whether the registrant: (1) has filed all reports to be filed by Section 13
or 15(d) of the Securities and 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  x  No  ̈





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.  x





Indicate by checkmark whether the Co-Registrants are accelerated filers (as
defined in the Exchange Act Rule 12b-2).  Yes  ̈ No  x





There currently is no established publicly traded market for the common equity of
TransDigm Holding Company held by non-affiliates.





Indicate the number of shares outstanding of each of the
Co-Registrants classes of common stock, as of the latest practicable date.





Common Stock (Voting) of TransDigm Holding Company, $0.01 Par Value

119,789(Class)

(Outstanding at September 30, 2002)Class A Common Stock (Non-Voting) of TransDigm Holding Company, $.01 Par Value

-0-(Class)

(Outstanding at September 30, 2002)


All of the outstanding capital stock of TransDigm Inc. is held by TransDigm Holding Company.


Documents incorporated by reference: See Exhibit Index included elsewhere in this Form 10-K.





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SECTIONS OF THE 10K





INDEX





PagePART IITEM 1

BUSINESS

1ITEM 2

PROPERTIES

13ITEM 3

LEGAL PROCEEDINGS

13ITEM 4

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

13PART IIITEM 5

MARKET FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

14ITEM 6

SELECTED FINANCIAL DATA

14ITEM 7

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

18ITEM 8

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

27ITEM 9

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

27PART IIIITEM 10

DIRECTORS AND EXECUTIVE OFFICERS

28ITEM 11

EXECUTIVE COMPENSATION

31ITEM 12

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

37ITEM 13

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

39ITEM 14

CONTROLS AND PROCEDURES

39ITEM 15

EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

40SIGNATURES

43FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

F-1 - F-30EXHIBIT INDEX

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Special Note Regarding Forward-Looking Statements





This Report on Form 10-K (this Report) contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of
1934 and 27A of the Securities Act. Discussions containing such forward-looking statements may be found in Items 1, 3, and 7 hereof, as well as within this Report generally. In addition, when used in this Report, the words believes,
anticipates, expects and similar expressions are intended to identify forward-looking statements. Although the Company believes that its plans, intentions and expectations reflected in or suggested by such forward-looking
statements are reasonable, such forward-looking statements are subject to a number of risks and uncertainties, and we can give no assurance that such plans, intentions or exceptions will be achieved. Important factors that could cause actual results
to differ materially from the forward-looking statements made in this Report are set forth under the caption Risk Factors and elsewhere in this Report. All forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by these cautionary statements.





Many such factors are outside the control of
TransDigm Holding Company and its subsidiaries. Consequently, such forward-looking statements should be regarded solely as our current plans, estimates and beliefs. We do not undertake and specifically decline any obligation to publicly release the
results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.





In this Report, the term TransDigm refers to TransDigm Inc. and its subsidiaries. The term Holdings refers to TransDigm
Holding Company which holds all of the outstanding capital stock of TransDigm. The term Company refers to Holdings, together with TransDigm and its subsidiaries.





PART I





ITEM 1.    
BUSINESS





The Company





TransDigm is a leading supplier of highly engineered aircraft components for use on nearly all commercial and military aircraft. Most of the Companys products share three common characteristics:
(1) highly engineered and proprietary; (2) significant aftermarket content; and (3) large shares of niche markets.





TransDigm sells its
products to commercial airlines, aircraft maintenance facilities, aircraft and aircraft system original equipment manufacturers (OEMs) and various agencies of the United States and foreign governments. TransDigm generates the majority of
its earnings before interest, taxes, depreciation and amortization (EBITDA) from sales of replacement parts in the commercial and defense aftermarkets. Most of TransDigms OEM sales are on an exclusive sole source basis; therefore,
in most cases, TransDigm is the only certified provider of these parts in the aftermarket. Aftermarket parts sales are driven by the size and usage of the worldwide aircraft fleet, are historically relatively stable and generate recurring revenues
over the life of an aircraft that are many times the size of the original OEM purchases. TransDigm has over 40 years of experience in most of its product lines, which allows it to benefit from a large and growing installed base of aircraft.





TransDigm focuses its businesses on continual value creation. The business philosophy is centered around three value principles: (1)
obtaining profitable new business by applying its technical capabilities to specific engineering problems; (2) striving to continually improve productivity; and (3) pricing its product to fairly reflect the unique value provided. Additionally, the
Company continually seeks acquisition opportunities compatible with its value creation philosophy. The Company has a demonstrated capability to acquire, integrate and improve aerospace businesses.




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TransDigm differentiates itself based on its engineering and manufacturing capabilities, and typically
will not bid on non-proprietary build to print business. TransDigm products have strong brand names within the airline industry and a reputation for high quality, reliability and customer service. TransDigm focuses on developing highly
customized products to solve specific problems of aircraft operators and manufacturers. While aftermarket sales accounted for approximately 70% of TransDigms fiscal 2002 net sales and OEM sales account for the remaining 30%, aftermarket sales
typically carry a substantially higher gross margin than sales to OEMs.





TransDigm was formed in 1993 through a management-led buyout of
the Aerospace Components Group of IMO Industries Inc. Since its formation, TransDigm has successfully established leadership positions in well-defined, profitable niches of the aircraft components market that it believes offer sustainable growth and
opportunities.





Products





TransDigms products have a long history in the aircraft component industry and are found on virtually all types of commercial and military aircraft. Management estimates that over 75% of TransDigms net sales are derived
from products for which it has achieved sole source designation, and that over 90% of TransDigms net sales are derived from products of proprietary design. TransDigms products are organized into two groupings: Power System Components and
Airframe System Components. For financial disclosure purposes, the Company reports as one business segment because of the similar nature of its products (a majority are highly engineered aircraft components) as well as the similarity of the
customers, distribution methods, production processes and regulatory environment across the Company.





Power System Components generated
63% of TransDigm reported net sales in fiscal 2002 and primarily serve the power requirements of commercial and military aircraft. The major customers for these products include substantially all worldwide engine/auxiliary power unit, or APU, end
users such as American Airlines, British Airways, Delta, Air France, and Lufthansa and engine/APU OEMs such as United Technologies, Rolls Royce, General Electric, and Honeywell; regional and business jet end users such as Comair, Mesa and
Continental Express, and regional and business jet OEMs such as Bombardier, Cessna, Gulfstream and Raytheon; and various United States and foreign defense agencies and OEMs such as Lockheed Martin. The major products are ignition system components
such as igniters, exciters and spark plugs, used to start and restart turbine and reciprocating aircraft engines; gear pumps used primarily in lubrication and fuel applications; actuators and controls used in numerous motion applications and
batteries/chargers used to provide engine start and system back-up power.





Airframe System Components generated 37% of TransDigm reported
net sales in fiscal 2002 and primarily serve the requirements of various airframe systems used in commercial and military aircraft. The major customers for these products are the worldwide large commercial transport end users and OEMs such as Boeing
and Airbus; the regional and business jet end users and OEMs mentioned above, and the various United States and foreign defense agencies and OEMs. The major products are engineered connectors used in fuel, pneumatic and hydraulic applications;
engineered latches used in various bin, security, door and other applications on both the interior and exterior of the airframe; and lavatory hardware and components.





The Power System Components and Airframe System Components are produced and sold under a number of industry trade names. The Power System Components are manufactured by the AeroControlex, Champion
Aerospace and Marathon product groups. AeroControlexs major products are gear pumps, actuators and controls. Champion Aerospace produces various ignition system components, including igniters, spark plugs and exciters. Marathon manufactures
nickel cadmium batteries/chargers. The Airframe System Components are manufactured by AdelWiggins and Adams Rite Aerospace product groups. AdelWiggins major product line is an extensive offering of engineered connectors. Adams Rite Aerospace
primarily offers engineered latches and lavatory components.




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Sales and Marketing





Consistent with TransDigms overall strategy, TransDigms sales and marketing organization is structured to understand and anticipate the needs of customers in order to continually develop a
stream of technical solutions that generate significant value. In particular, TransDigm focuses on the high-margin, repeatable aftermarket segment.





TransDigm has structured its sales efforts along their major product lines, assigning a product line manager to each line. The product line managers are expected to grow the sales and profitability of their product line faster than
the served market and to achieve the targeted annual level of bookings, sales, new business and profitability for each product. Assisting the product line managers are account managers and sales engineers who are responsible for covering major OEM
and airline accounts. Account managers and sales engineers are expected to be familiar with the personnel, organization and needs of specific customers, for achieving total bookings and new business goals at each account, and, in conjunction with
the product line managers, for determining when additional resources are required at customer locations. Most of TransDigms sales personnel are compensated in part on their bookings and sales and ability to identify and convert new business
opportunities.





Though the majority are employees, the account manager function may be performed by independent representatives depending
on the specific customer, product and geographic location. TransDigm also uses a number of distributors to provide logistical support as well as primary customer contact with certain smaller accounts. TransDigms major distributors are Aviall,
Satair and AAR.





Backlog





Management believes that sales order backlog (i.e., orders for products that have not yet been shipped) is a useful indicator of future sales. As of September 30, 2002, the Company estimated its sales order backlog at $124.7 million
compared to an estimated $116.8 million as of September 30, 2001. The majority of the purchase orders outstanding as of September 30, 2002 are scheduled for delivery within the next twelve months. Purchase orders may be subject to cancellation by
the customer prior to shipment. The level of unfilled purchase orders at any given date during the year will be materially affected by the timing of the Companys receipt of purchase orders and the speed with which those orders are filled.
Accordingly, the Companys backlog as of September 30, 2002 may not necessarily represent the actual amount of shipments or sales for any future period.





Foreign Operations





Although the Company manufactures all of its products in the
United States, some components are purchased from foreign suppliers. The Companys direct sales to foreign customers were approximately 24% of sales or $59.4 million in fiscal 2002. In addition, a portion of the Companys products sold to
domestic distributors are resold to foreign end-users. All of these sales are subject to numerous additional risks, including the impact of foreign government regulations, currency fluctuations, political uncertainties and differences in business
practices. There can be no assurance that foreign governments will not adopt regulations or take other action that would have a direct or indirect adverse impact on the business or market opportunities of the Company within such governments
countries. Furthermore, there can be no assurance that the political, cultural and economic climate outside the United States will be favorable to the Companys operations and growth strategy.





Manufacturing and Engineering





TransDigm
maintains five manufacturing facilities. Each facility serves its respective product lines and comprises manufacturing, distribution, engineering as well as administrative functions, including management, sales and finance. The facilities encompass
approximately 105,000, 44,000, 150,000, 50,000 and 169,000 square feet of manufacturing space in Los Angeles, California, Cleveland, Ohio, Waco, Texas, Fullerton, California, and Liberty, South Carolina, respectively. The Company continually takes
various steps to improve productivity and reduce costs, including consolidating operations, developing improved control systems that




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allow for accurate product line profit and loss accounting, investing in equipment and tooling,
installing modern information systems and implementing broad-based employee training programs. Management believes that TransDigms manufacturing systems and equipment are critical competitive factors that permit it to meet the rigorous
tolerances and cost sensitive price structure of aircraft customers. TransDigm focuses its manufacturing activities by product line, alternating its equipment among designs as demand requires.





Each of TransDigms operating groups attempt to differentiate itself from its competitors by efficiently and consistently producing uniquely engineered products with high quality and
timely delivery. TransDigms proprietary products are designed by its engineering staff and intended to serve unmet needs in the aircraft component industry, particularly through its new product initiatives. See Business-Products.
These proprietary designs must withstand the extraordinary conditions and stresses that will be endured by products during use and meet the rigorous demands of TransDigms customers tolerance and quality requirements.





TransDigm uses sophisticated equipment and procedures to ensure the quality of its products and to comply with military specifications and Federal
Aviation Administration (FAA) and OEM certification requirements. TransDigm performs a variety of testing procedures, including testing under different temperature, humidity and altitude levels, shock and vibration testing and X-ray
fluorescent measurement. These procedures, together with other customer approved techniques for document, process and quality control, are used throughout TransDigms manufacturing facilities.





Customers





TransDigms customers
include: (A) worldwide commercial airlines, including national and regional airlines, particularly for aftermarket maintenance, repair and overhaul (MRO) components, (B) large commercial transport and regional and business aircraft OEMs,
(C) various agencies of the United States and foreign governments, including the United States military, (D) military OEMs, and (E) various other industrial customers. For the year ended September 30, 2002, Aviall (a distributor of aftermarket parts
to airlines throughout the world), the United States Government and Honeywell International, Inc. each accounted for approximately 11% of the Companys net sales.





TransDigm has strong customer relationships with virtually all important large commercial transport, regional, general aviation and military OEMs. The demand for TransDigms aftermarket parts and
services is related to TransDigms extensive installed base, revenue passenger miles and, to a lesser extent, airline profitability and the size and age of the worldwide aircraft fleet. Some of TransDigms business is executed under
long-term agreements with customers, which encompass many products under a common agreement. TransDigm is also a leading supplier of components used on United States designed military aircraft. TransDigms products are used on a variety
of fighter aircraft, freighters and helicopters, including the Boeing F-15 and F-18, Lockheed Martin F-16, the E2C (Hawkeye), Joint Strike Fighter, Boeing C-17, Lockheed C-130 and the Blackhawk and Apache helicopters.





Competition





TransDigm competes with a
number of established companies, including divisions of larger companies that have significantly greater financial, technological and marketing resources. The niche markets within the aerospace industry served by TransDigm are relatively fragmented
with several competitors for each of the products and services provided by the Company. Due to the global nature of the commercial aircraft industry, competition in these categories comes from both U.S. and foreign companies. TransDigm knows of no
single competitor, however, that provides the same range of products and services as those provided by TransDigm. Competitors in TransDigms product lines range in size from divisions of large corporations to small privately held entities, with
only one or two components in their entire product line. TransDigm believes that its ability to compete depends on high product performance, consistently high quality and timely delivery, competitive price, and superior customer service and support.
There can be no assurance that TransDigm will be able to compete successfully with respect to these or other factors in the future.




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Governmental Regulation





The commercial aircraft component industry is highly regulated by both the FAA in the United States and by the Joint Aviation Authorities in Europe and other agencies throughout the world, while the
military aircraft component industry is governed by military quality specifications. TransDigm, and the components it manufactures, 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. If material authorizations or approvals were revoked or suspended, the operations of TransDigm would be adversely affected. In the future, new and more stringent government
regulations may be adopted, or industry oversight may be heightened, which may have an adverse impact on TransDigm.





TransDigm must also
satisfy the requirements of its customers, including OEMs and airlines that are subject to FAA regulations, and provide these customers with products and services 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, and TransDigm currently satisfies or exceeds these maintenance standards in its repair and overhaul services. Several of
TransDigms operating divisions include FAA approved repair stations.





TransDigms operations are also subject to a variety of
worker and community safety laws. The Occupational Health and Safety Act (OHSA) mandates general requirements for safe workplaces for all employees. In addition, OHSA provides special procedures and measures for the handling of certain
hazardous and toxic substances. TransDigm believes that its operations are in material compliance with OHSAs health and safety requirements.





Raw Materials and Patents





TransDigm requires the use of various raw materials, including titanium, aluminum,
nickel powder, nickel screen, stainless steel, iridium and cadmium, in its manufacturing processes. The availability and prices of such raw materials may fluctuate and TransDigm may not be able to recover price increases in these supplies. TransDigm
also purchases a variety of manufactured component parts from various suppliers. At times, TransDigms operating units concentrate their orders among a few suppliers in order to strengthen their supplier relationships. Raw materials and
component parts are generally available from multiple suppliers at competitive prices. However, any delay in TransDigms ability to obtain necessary raw materials and component parts may affect its ability to meet customer production needs.





TransDigm has various trade secrets, proprietary information, trademarks, trade names, patents, copyrights and other intellectual
property rights, which TransDigm believes, in the aggregate but not individually, are important to its business.





Environmental
Matters





TransDigms operations and current and/or former facilities are subject to federal, state and local environmental laws
and to regulation by government agencies, including the Environmental Protection Agency. Among other matters, these regulatory authorities impose requirements that regulate the emission, discharge, generation, management, transportation and disposal
of hazardous materials and pollutants, govern response actions to hazardous materials which may be or have been released to the environment, and require TransDigm to obtain and maintain permits in connection with its operations. The extensive
regulatory framework imposes significant compliance burdens and risks on TransDigm. Although management believes that TransDigms operations and its facilities are in compliance in all material respects with applicable environmental laws, there
can be no assurance that future changes in such laws, regulations or interpretations thereof or the nature of TransDigms operations will not require TransDigm to make significant additional expenditures to ensure compliance in the future.
According to some environmental laws, a current or previous owner or operator of real property may be liable for the costs of investigations, removal or remediation of hazardous materials at such property. Those laws typically impose liability
whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous materials. Persons who arrange, or are deemed to have arranged, for disposal or




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treatment of hazardous materials also may be liable for the costs of investigation, removal or
remediation of those substances at the disposal or treatment site, regardless of whether the affected site is owned or operated by that person. Because TransDigm owns and/or operates a number of facilities, and because TransDigm arranges for the
disposal of hazardous materials at many disposal sites, TransDigm may incur costs for investigation, removal and remediation, as well as capital costs associated with compliance. Although those environmental costs have not been material in the past
and are not expected to be material in the future, there can be no assurance that changes in environmental laws or unexpected investigations and clean-up costs will not be material. TransDigm does not currently contemplate material capital
expenditures for environmental compliance remediation for fiscal 2003.





TransDigm has been addressing contaminated soil and groundwater
beneath the facility in Waco, Texas. Although TransDigm cannot provide assurance that material expenditures will not be required in the future to address currently unidentified contamination or to satisfy further requirements of the Texas Natural
Resources Conservation Commission (TNRCC), TransDigm believes, based upon information currently available, that the current soil and groundwater remediation at our Waco facility will not require the incurrence of material expenditures.





In connection with the acquisition of Marathon in fiscal 1997, a $2.0 million escrow was created to cover the cost of remediation that
TNRCC might require for those contaminants at the Waco facility. During September 1998, the former owner of Marathon filed a lawsuit against the Company to release the environmental escrow alleging that TransDigm had violated the requirements of the
stock purchase agreement relating to the investigation of the presence of certain contaminants at the Waco, Texas facility. The Company has filed counter claims against the seller and cannot presently determine the ultimate outcome of this matter.
Current estimates indicate the $2.0 million escrow is adequate to cover any costs that may be required to meet TNRCC requirements.





Employees





As of September 30, 2002, TransDigm had approximately 950 employees. Approximately 9% of TransDigm
employees were represented by the United Steelworkers Union, and approximately 6% were represented by the United Automobile, Aerospace and Agricultural Implement Workers of America. Collective bargaining agreements between TransDigm and these labor
unions expire in April 2005 and November 2004, respectively. TransDigm considers its relationship with its employees generally to be satisfactory.




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Risk Factors





Set forth below are important risks and uncertainties that could cause our actual results to differ materially from those expressed in forward-looking statements made by our management. In this
section only, the words TransDigm, we, us and our refer to TransDigm Inc. and our subsidiaries unless the context otherwise indicates. The term Holdings refers to TransDigm Holding Company.
References to the Company are to Holdings, together with TransDigm and its subsidiaries.





Substantial
LeverageOur substantial indebtedness could adversely affect our financial health.





The Company has a significant
amount of indebtedness. The following chart shows certain of the Companys important credit statistics:





At September 30, 2002(dollars in millions)Total TransDigm indebtedness

$
377.7Total Holdings indebtedness

$
31.3





In addition, at September 30, 2002, the Company had a consolidated stockholders
deficiency of $77.2 million, which resulted from the merger consideration paid in fiscal 1999 in conjunction with the recapitalization being charged directly to Holdings equity (see Note 1 to the consolidated financial statements included elsewhere
in this report).





The Companys 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 from operations 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.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------




In addition to the restrictive covenants contained in our senior secured credit facility (the Senior Credit Facility)
and the Indenture governing the Senior Subordinated Notes and the Holdings PIK Notes (the Indentures), the Senior Credit Facility contains covenants that require us to meet certain financial ratios. Any failure to comply with the
restrictions of the Senior Credit Facility, the Indentures or any other subsequent financing agreements may result in an event of default. An event of default may allow the creditors, if the agreements so provide, to accelerate the related debt as
well as any other debt to which a




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cross-acceleration or cross-default provision applies. In addition, the lenders may be able to terminate
any commitments they had made to supply us with further funds.





Additional Borrowings AvailableDespite current indebtedness
levels, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks associated with our substantial leverage.





We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the indenture governing the Senior Subordinated Notes do not fully prohibit us or our
subsidiaries from doing so. Our Senior Credit Facility will permit additional borrowings of up to $180.0 million, including $30.0 million under our Revolving Credit Facility and $150.0 million of uncommitted, additional bank borrowings. All of those
borrowings would be senior to the Notes and the related guarantees. If new debt is added to our subsidiaries current debt levels, the related risks that we and they now face could intensify.





Ability to Service DebtTo service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many
factors beyond our control.





Our ability to make payments on and to refinance our indebtedness, or to fund planned capital
expenditures and research and development, will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our
control.





Based upon the current level of operations and anticipated cost savings and operating improvements and absent any disruptive
events, we believe our cash flow from operations and available cash, together with available borrowings under the Senior Credit Facility, will be adequate to meet our future liquidity needs for at least the next several years.





We cannot provide assurance, however, that our business will generate sufficient cash flow from operations, that currently anticipated cost savings
and operating improvements will be realized on schedule or at all or that future borrowings will be available to us under the Senior Credit Facility in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.
We may need to refinance all or a portion of our indebtedness on or before maturity. We cannot provide assurance that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.





Risks Related to TerrorismWe may not yet know the full impact of the September 11, 2001 terrorist attacks, and any future terrorist attacks may have
a material adverse impact on our business.





On September 11, 2001, the United States was subjected to multiple terrorist attacks,
which involved the hijacking of four U.S. commercial aircraft. In the aftermath of the terrorist attacks, passenger traffic on commercial flights was significantly lower than prior to the attacks and many commercial airlines reduced their operating
schedules. The overall result of the terrorist attacks was billions of dollars in losses to the airlines industry. The full impact of these events and any future terrorist attacks is not yet known and could result in further reductions in the use of
commercial aircraft. Such future reductions may cause airlines to delay purchases of spare parts and new aircraft or file for bankruptcy. If demand for new aircraft and spare parts decreases, there may be a decrease in demand for certain of our
products.





Dependence on Major CustomersWe rely heavily on certain customers for much of our sales.





Our three largest customers for the year ended September 30, 2002, were Aviall (a distributor of aftermarket parts to airlines throughout the world),
the United States Government and Honeywell International, Inc. These customers each accounted for approximately 11% of our consolidated net sales in fiscal 2002. Our top ten customers for the year ended September 30, 2002 accounted for approximately
60% of our consolidated net sales. The loss of any one or more of these key customers could have a material adverse effect on our business.




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Customer ContractsWe generally do not have guaranteed future sales of our products. Further,
we are obligated under fixed price contracts with some of our customers, so we take the risk for cost overruns.





As is customary
in our business, we do not have long-term contracts with most of our aftermarket customers and therefore do not have guaranteed future sales. Although we do have long-term contracts with many of our OEM customers, some of those customers may
terminate these contracts on short notice and, in many other cases, our customers have not committed to buy any minimum quantity of our products. In addition, in certain cases, we must anticipate the future volume of orders based upon the historic
purchasing patterns of customers and upon our discussions with customers as to their anticipated future requirements. Cancellations, reductions or delays in orders by a customer or a group of customers could have a material adverse effect on our
business, financial condition and results of operations.





We also have entered into multi-year, fixed-price contracts with some of our
customers, where we agree to perform the work for a fixed price and, accordingly, realize all the benefit or detriment resulting from any decreased or increased costs for making these products. Sometimes we accept a fixed-price contract for a
product which we have not yet produced, which increases the risks of delays or cost overruns.





Most of our contracts do not permit us to
recover for increases in input prices, taxes or labor costs, although some contracts provide for renegotiation to address certain material adverse changes. Any such increases are likely to have an adverse effect on our business.





Aircraft Components Segment RisksOur business is sensitive to the number of flight hours that our customers planes spend aloft and
to our customers profitability. These items are, in turn, affected by general economic conditions. In addition, our sales to manufacturers of new large aircraft are cyclical.





We compete in the aircraft component segment of the aerospace industry. Our business is directly affected by economic factors and other trends that affect our customers, including projected
market growth that may not materialize or be sustainable. Specifically, the aircraft component segment is sensitive to changes in the number of miles flown by paying customers of commercial airlines, which we refer to as revenue passenger miles,
and, to a lesser extent, to changes in the profitability of the commercial airline industry and the size and age of the worldwide aircraft fleet.





Revenue passenger miles and airline profitability have historically been correlated with the general economic environment, although national and international events can also play a key role. For example, revenue passenger miles
declined primarily as a result of increased security concerns among airline customers following the events of September 11, 2001. See Risks Related to Terrorism. Any future reduction would reduce the use of commercial aircraft and,
consequently, the need for spare parts and new aircraft. During periods of reduced airline profitability, some airlines may elect to delay purchases of spare parts, preferring instead to deplete existing inventories or file for bankruptcy. If demand
for new aircraft and spare parts decreases, there may be a decrease in demand for certain of our products. Therefore, any future decline in revenue passenger miles, airline profitability or the size of the worldwide aircraft fleet, for any reason,
could have a material adverse effect on our business.





In addition, sales to manufacturers of large commercial aircraft, which accounted
for approximately 13% of our net sales in fiscal 2002, have historically experienced periodic downturns. In the past, these sales have been affected by airline profitability, which is impacted by fuel and labor costs and price competition, and other
things. Due in part to these factors, the number of large commercial aircraft delivered has dropped from a peak of approximately 914 aircraft in 1999. As a result of the events of September 11, 2001 and a weakened economy, many industry analysts
expect aircraft deliveries to trend significantly downward over the next few years. Prior downturns have adversely effected our net sales, gross margin and net income. These and certain other factors may cause a downturn in sales to manufacturers of
large commercial aircraft in the future which may have a material adverse effect on our business





.




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Fluctuations in Defense SpendingA decline in the U.S. defense budget may adversely affect
our sales of parts used in military aircraft.





Approximately 23% of our sales in fiscal 2002 were related to products used in
military aircraft, most of which were spare parts provided to various governmental agencies.





The United States defense budget has
fluctuated in recent years, at times resulting in reduced demand for new aircraft and spare parts. In addition, foreign military sales are affected by U.S. government regulations, regulations by the purchasing foreign government and political
uncertainties in the United States and abroad. The United States defense budget may continue to fluctuate, and may decline, and sales of defense related items to foreign governments may decrease. If there is a decline which reduces demand for
our components, our business may be adversely affected.





In addition, the terms of defense contracts with the U.S. government generally
permit the government to terminate contracts partially or completely, with or without cause, at any time. Approximately 11% of our sales in fiscal 2002 were to the U.S. government. Any unexpected termination of a significant government contract
could have an adverse effect on our business.





Government Regulation and Industry OversightOur business would be adversely
affected if we lost our government or industry approvals or if more onerous government regulations were enacted or industry oversight increased.





The aircraft component industry is highly regulated in the United States and in other countries. In order to sell our components, we and the components we manufacture must be certified by the Federal Aviation Administration, the
United States Department of Defense and similar agencies in foreign countries and by individual manufacturers.





If new and more stringent
government regulations are adopted or if industry oversight increases we might incur significant expenses to comply with any new regulations or heightened industry oversight. If material authorizations or approvals were revoked or suspended, our
business would be adversely affected.





To the extent that we operate outside the United States, we are subject to the Foreign Corrupt
Practices Act, or FCPA, which generally prohibits United States companies and their intermediaries from bribing foreign officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment. In particular, we may be
held liable for actions taken by our strategic or local partners even though such partners are foreign companies that are not subject to the FCPA. Any determination that we have violated the FCPA could result in sanctions that could have a material
adverse effect on our business.





Risks Associated with our WorkforceWe are dependent on our highly trained employees and any
work stoppage or difficulty hiring similar employees would adversely affect our business.





Because our products are complicated
and very detailed, we are highly dependent on an educated and trained workforce. There is substantial competition for skilled personnel in the aircraft component industry and we could be adversely affected by a shortage of skilled employees. We may
not be able to fill new positions or vacancies created by expansion or turnover or attract and retain qualified personnel.





At September
30, 2002, approximately 9% of our employees were represented by the United Steelworkers Union, and approximately 6% were represented by the United Automobile, Aerospace and Agricultural Implement Workers of America. Our collective bargaining
agreements with these labor unions expire in April 2005 and November 2004, respectively. Although we believe that our relations with our employees are good, we cannot provide assurance that we will be able to negotiate a satisfactory renewal of
these collective bargaining agreements or that our employee relations will remain stable. Because we maintain a relatively small inventory of finished goods any work shortage could have a material adverse effect on our business.




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Dependence on Key PersonnelIf we lose our senior management or technical personnel, our
business may be adversely affected.





Our success is dependent upon our senior management, as well as on our ability to attract
and retain qualified personnel, including engineers. There is substantial competition for these kinds of personnel in the aircraft component industry. We may not be able to retain our existing senior management or engineering staff, fill new
positions or vacancies created by expansion or turnover, or attract additional qualified personnel. Although we have entered into employment agreements with certain executive officers, these agreements may not be renewed.





Risks Associated with SuppliersOur business is dependent on the availability of certain components and raw materials that we buy from suppliers.





Our business is affected by the price and availability of the raw materials and component parts that we use to manufacture our
components. Our business, therefore, could be adversely impacted by factors affecting our suppliers, or by increased costs of such raw materials or components if we are unable to pass along such price increases to our customers. Because we maintain
a relatively small inventory of raw materials and component parts, our business could be adversely affected if we are unable to obtain these raw materials and components from our suppliers in the quantities we require or on favorable terms. Although
we believe that we could identify alternative suppliers, or alternative raw materials or component parts, 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.





Potential Exposure to Environmental
LiabilitiesWe may be liable for penalties under a variety of environmental laws, even if we did not cause any environmental problems. Changes in environmental laws or unexpected investigations could adversely affect our business.





Our business and our facilities are subject to a number of federal, state and local laws and regulations, which govern, among
other things, the discharge of hazardous materials into the air and water as well as the handling, storage and disposal of such materials.





Pursuant to certain environmental laws, a current or previous owner or operator of land may be liable for the costs of investigation, removal or remediation of hazardous materials at such property. These laws typically impose
liability whether or not the owner or operator knew of, or was responsible for, the presence of any hazardous materials. Persons who arrange (as defined under these statutes) for the disposal or treatment of hazardous materials also may be liable
for the costs of investigation, removal or remediation of such substances at the disposal or treatment site, regardless of whether the affected site is owned or operated by them.





Because we own and operate a number of facilities, and because we arrange for the disposal of hazardous materials at many disposal sites, we may incur costs for investigation, removal and remediation,
as well as capital costs associated with compliance with these laws. Although such environmental costs have not been material in the past and are not expected to be material in the future, changes in environmental laws or unexpected investigations
and clean-up costs could have a material adverse effect on our business.





Risks Associated with International OperationsOur
international business exposes us to risks relating to increased regulation and political or economic instability, globally or within certain foreign countries.





Although the Company manufactures all of its products in the United States, some components are purchased from foreign suppliers. Our direct sales to foreign customers were approximately $59.4 million,
$54.8 million and $36.2 million in fiscal 2002, fiscal 2001 and fiscal 2000, respectively. In addition, a portion of the products we sell to domestic distributors is resold to foreign end-users. All of these sales are subject to numerous additional
risks, including the impact of foreign government regulations, currency fluctuations, political uncertainties and differences in business practices.




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Foreign governments could adopt regulations or take other actions that would have a direct or indirect
adverse impact on our business or market opportunities abroad. Furthermore, the political, cultural and economic climate outside the United States may not be favorable to our business and growth strategy.





Risks Related to Potential Future AcquisitionsWe intend to pursue future acquisitions and our business may be adversely affected if we cannot
consummate acquisitions on satisfactory terms or effectively integrate new operations.





We intend to pursue acquisitions that we
believe will present opportunities consistent with the Companys value generation strategy. This acquisition strategy may require substantial capital, and we may not be able to raise the necessary funds on terms satisfactory to us or at all.
Our acquisition strategy is also limited by the availability of suitable acquisition candidates. We cannot provide assurance that we will be able to consummate any future acquisitions.





We regularly engage in discussions with respect to potential acquisition and investment opportunities. If we consummate an acquisition, our capitalization and results of operations may change
significantly. Future acquisitions would likely result in the incurrence of debt and contingent liabilities and an increase in interest expense and amortization expenses or periodic impairment charges related to goodwill and other intangible assets,
which could have a material adverse effect upon our business.





Acquisitions involve numerous risks, including difficulties in the
assimilation of the operations, technologies, services and products of the acquired companies and the diversion of managements attention from other business concerns. For all of these reasons, if any such acquisitions occur, our business could
be adversely affected.





CompetitionWe face significant competition.





We operate in a highly competitive global industry and compete against a number of companies, including divisions of larger companies, some of which have
significantly greater financial, technological and marketing resources than us. Competitors in our product lines are both U.S. and foreign companies and range in size from divisions of large corporations to small privately held entities. We believe
that our ability to compete depends on high product performance, consistently high quality, short lead-time and timely delivery, competitive price, superior customer service and support and continued certification under customer quality requirements
and assurance programs. Our inability to compete successfully with respect to these or other factors may materially adversely affect our business and financial condition.





Control by OdysseyWe are controlled by Odyssey, whose interests may not be aligned with yours.





Odyssey Investment Partners (Odyssey) and its co-investors indirectly own approximately 83% of the common equity interests in our parent company, Holdings, on a fully diluted basis
(including shares issuable upon exercise of warrants but excluding shares issuable upon exercise of stock options) and, therefore, have the power, subject to certain exceptions, to control Holdings. They also control the appointment of management
and the entering into of mergers, sales of substantially all assets and other extraordinary transactions. The interests of Odyssey may not in all cases be aligned with the Companys creditors and other shareholders.





Product Liability; Claims ExposureWe could be adversely affected as a result of a lawsuit if one of our components causes an aircraft to crash and we
are not covered by our insurance policies.





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. While we believe that our liability insurance is adequate to protect us from future products liability claims, if claims were to arise, such
insurance coverage may not be adequate.




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Additionally, we may not be able to maintain insurance coverage in the future at an acceptable cost. Any
such liability not covered by insurance or for which third party indemnification is not available could have a material adverse effect on our business.





Forward-Looking StatementsOur Forward-Looking Statements May Prove To Be Inaccurate.





This Report
includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, including statements about forecasts, our plans, strategies and prospects in this Report. Although we
believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we can give no assurance that they will be achieved. Important factors that could cause actual results to differ
materially from the forward-looking statements we make in this Report are set forth above in this Risk Factors section and elsewhere in this Report. All forward-looking statements attributable to us or persons acting on our behalf are
expressly qualified in their entirety by these cautionary statements.





ITEM 2.    
PROPERTIES





TransDigm owns and operates a 130,000 square foot facility in Los Angeles, California, a 44,000
square foot facility in Cleveland, Ohio, a 219,000 square foot facility in Waco, Texas and a 219,000 square foot facility in Liberty, South Carolina. In addition, TransDigm leases and operates a 100,000 square foot facility in Fullerton, California
and approximately 19,000 square feet in Richmond Heights, Ohio, which is also TransDigms headquarters. TransDigm also leases certain of its other non-material facilities. Management believes that its machinery, plants and offices are in
satisfactory operating condition and will have sufficient capacity to meet foreseeable future needs without incurring significant additional capital expenditures.





ITEM 3.    
LEGAL PROCEEDINGS





During the ordinary course of business, TransDigm is from time to time threatened with, or
may become a party to, legal actions and other proceedings. While TransDigm is currently involved in some legal proceedings, management believes the results of these proceedings will not have a material effect on the financial condition, results of
operations or cash flows of TransDigm. TransDigm believes that its potential exposure to those legal actions is adequately covered by its aviation product and general liability insurance.





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.




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PART II





ITEM 5.    
MARKET FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS





Market Information





There is no established public market for the common stock of Holdings.





Holders





As of September 30, 2002, there were 22 record holders of Holdings
common stock. Holdings is the sole shareholder of TransDigms common stock.





Dividends





There have been no cash dividends declared on any class of common equity for the two most recent fiscal years. See Managements Discussion and
Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources and Note 9 to the consolidated financial statements appearing elsewhere in this Report for restrictions on Holdings ability to pay dividends
and TransDigms ability to transfer funds to Holdings.





Securities Authorized for Issuance under Equity Compensation Plans





See Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters elsewhere in this
Report.





ITEM 6.    
SELECTED FINANCIAL DATA





Selected Historical Financial and Other Data of TransDigm Holding Company





The following table sets forth selected historical consolidated financial and other data of Holdings for each of the fiscal years
ended September 30, 1998 through 2002 which have been derived from Holdings audited consolidated financial statements for those years. Separate historical financial information of TransDigm is not presented since the Senior Subordinated Notes
are guaranteed by Holdings and all direct and indirect subsidiaries of TransDigm and since Holdings has no significant operations or assets separate from its investment in TransDigm.





The Company acquired Marathon Power Technologies Company on August 8, 1997, ZMP, Inc. and its wholly-owned subsidiary, Adams Rite Aerospace, on April 23, 1999 and Christie Electric Corp. on March 8,
2000. On March 26, 2001, the Company acquired an exclusive, worldwide license to produce and sell products composed of a lubrication and scavenge pump product line along with certain related equipment and inventory. On May 31, 2001, the Company
(through Champion Aerospace) acquired substantially all of the assets and certain liabilities of the Champion Aviation Products business (Champion Aviation) from Federal Mogul Ignition Company, a wholly-owned subsidiary of Federal-Mogul
Corporation. All of the acquisitions were accounted for as purchases. The results of operations of Champion Aerospace, Marathon, ZMP, Adams Rite Aerospace, Christie Electric Corp. and the acquired product line are included in Holdings
consolidated financial statements from the date of each of the acquisitions.





The information presented below should be read together
with the Managements Discussion and Analysis of Financial Condition and Results of Operations section and the consolidated financial statements and the notes thereto included elsewhere herein.




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Fiscal Year Ended September 30,1998

1999


2000

2001

2002(Dollars in Thousands)Statement of Operations Data:Net sales

$
110,868

$
130,818


$
150,457

$
200,773

$
248,802Gross profit (1)


51,473


60,867



68,264


82,248


114,227Selling and administrative


10,473


13,620



16,799


20,669


21,905Amortization of intangibles


2,438


2,063



1,843


2,966


6,294Research and development


1,724


2,139



2,308


2,943


2,057Merger expenses





40,012









Operating income (1)


36,838


3,033



47,314


55,670


83,971Interest expense, net (2)


3,175


22,722



28,563


31,926


36,538Warrant put value adjustment


6,540












Pre-tax income (loss)


27,123


(19,689
)


18,751


23,744


47,433Provision (benefit) for income taxes


12,986


(2,772
)


7,972


9,386


16,804Net income (loss)

$
14,137

$
(16,917
)

$
10,779

$
14,358

$
30,629








Fiscal Year Ended September 30,1998


1999


2000


2001


2002(Dollars in Thousands)Balance Sheet Data (at end of period):Cash and Cash Equivalents

$
19,486


$
2,729


$
4,309


$
11,221


$
49,206Working capital


16,654



35,531



39,437



55,672



99,035Total assets


115,785



164,417



168,833



372,898



402,226Long-term debt, including current portion


45,000



266,557



261,601



413,209



408,952Total stockholders equity (deficiency)


36,427



(127,622
)


(118,409
)


(103,388
)


(77,156
)Other Financial Data:Cash flows provided by (used in):Operating activities

$
23,455


$
(16,219
)

$
16,305


$
22,761


$
56,452Investing activities


(4,295
)


(44,599
)


(5,120
)


(173,588
)


(5,439
)Financing activities


(5,071
)


44,061



(9,605
)


157,739



(13,028
)EBITDA (3)


43,305



9,407



53,826



64,316



97,463EBITDA, As Defined (4)


43,547



50,562



54,011



70,955



97,463EBITDA, As Defined, margin


39.3
%


38.7
%


35.9
%


35.3
%


39.2
%Depreciation and amortization

$
6,467


$
6,374


$
6,512


$
8,646


$
13,492Capital expenditures


5,061



3,043



4,368



4,486



3,816Ratio of earnings to fixed charges (5)


9.0x



.1x



1.6x



1.7x



2.3xRatio of EBITDA, As Defined, to interest expense


13.7x



2.2x



1.9x



2.2x



2.7xRatio of EBITDA, As Defined, to interest expense, As Defined (6)


13.7x



2.4x



2.1x



2.4x



3.0xRatio of total debt to EBITDA, As Defined


1.0x



5.3x



4.8x



5.8x



4.2x





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|(1) |  | Gross profit and operating income include the effect of a non-cash charge of $242 in fiscal 1998 due to a purchase accounting adjustment to inventory associated
with the acquisition of Marathon, a non-cash charge of $1,143 in fiscal 1999 due to a purchase accounting adjustment to inventory associated with the acquisition of Adams Rite Aerospace, a non-cash charge of $185 in fiscal 2000 due to a purchase
accounting adjustment to inventory associated with the acquisition of Christie, and non-cash charges of $3,193 and $3,446 in fiscal 2001 due to purchase accounting adjustments to inventory associated with the acquisitions of assets and liabilities
from Champion Aviation and a lube pump product line, respectively.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(2) |  | All of the interest expense reported for fiscal 1998 represents interest expense of TransDigm. Holdings had no interest expense prior to the Recapitalization
discussed in Note 1 to the consolidated financial statements of Holdings included elsewhere in this Report. After the Recapitalization, Holdings incurred $3,706, $2,988, $2,670 and $2,000 of interest expense during fiscal 2002, 2001, 2000 and 1999,
respectively, relating to the Holdings PIK Notes. Holdings has no other interest expense. TransDigm is not an obligor or a guarantor under the Holdings PIK Notes.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(3) |  | EBITDA represents earnings before interest, taxes, depreciation, amortization and warrant put value adjustment. EBITDA is presented because management believes
it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in Holdings industry. However, other companies in Holdings industry may calculate EBITDA differently than Holdings does.
EBITDA is not a measurement of financial performance under accounting principles generally accepted in the United States of America and should not be considered as an alternative to cash flow from operating activities, as a measure of liquidity or
an alternative to net income as indicators of Holdings operating performance or any other measures of performance derived in accordance with accounting principles generally accepted in the United States of America. See Holdings
consolidated statements of cash flows included in Holdings consolidated financial statements included elsewhere in this Report.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(4) |  | EBITDA, As Defined, is calculated as follows:
|--- |  | ---------------------------------------------




1998

1999

2000

2001

2002EBITDA

$
43,305

$
9,407

$
53,826

$
64,316

$
97,463Adjustments:Merger Expenses





40,012








Inventory Purchase AccountingAdjustments


242


1,143


185


6,639


EBITDA, As Defined

$
43,547

$
50,562

$
54,011

$
70,955

$
97,463





EBITDA, As Defined, is presented herein to provide additional
information with respect to the ability of Holdings to satisfy its debt service, capital expenditure and working capital requirements and because certain types of covenants in TransDigms and Holdings borrowing arrangements are tied to
similar measures. While EBITDA-based measures are frequently used as measures of operations and the ability to meet debt service requirements, they are not necessarily comparable to other similarly titled captions of other companies due to
differences in methods of calculation.




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|(5) |  | For purposes of computing the ratio of earnings to fixed charges, earnings consist of earnings before income taxes plus fixed charges. Fixed charges consist of
interest expense, amortization of debt expense and the portion (approximately 33%) of rental expense that management believes is representative of the interest component of rental expense. Earnings were insufficient to cover fixed charges by $19,689
for fiscal 1999.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(6) |  | Interest Expense, As Defined, represents the Companys consolidated interest expense exclusive of the non-cash interest expense recognized for the Holdings
PIK Notes issued in connection with the Recapitalization. This ratio is provided because a debt covenant in the Companys credit facility is based on a similar measure.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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





Overview





General





TransDigm is a leading supplier of highly engineered aircraft components for use on nearly all commercial and military aircraft. Most of the Companys products share three common characteristics: (1) highly engineered and
proprietary; (2) significant aftermarket content; and (3) large shares of niche markets. TransDigm sells its products to commercial airlines, aircraft maintenance facilities, aircraft and aircraft system original equipment manufacturers
(OEMs) and various agencies of the United States and foreign governments. TransDigm generates the majority of its income from operations and earnings before interest, taxes, depreciation and amortization (EBITDA) from sales
of replacement parts in the commercial and defense aftermarkets. Most of TransDigms OEM sales are on an exclusive sole source basis; therefore, in most cases, TransDigm is the only certified provider of these parts in the aftermarket.
Aftermarket parts sales are driven by the size and usage of the worldwide aircraft fleet, are historically relatively stable and generate recurring revenues over the life of an aircraft that are many times the size of the original OEM purchases.
TransDigm has over 40 years of experience in most of its product lines, which allows it to benefit from a large and growing installed base of aircraft.





In connection with the Recapitalization that occurred during fiscal 1999, including the financing and the application of the proceeds thereof, TransDigm incurred certain nonrecurring costs and charges, consisting primarily of
compensation costs for management bonuses and stock options that were canceled in conjunction with the recapitalization, the cost of terminating a financial advisory services agreement with an affiliate of one of our stockholders, the write-off of
deferred financing costs, and professional, advisory and financing fees. TransDigm recorded a one-time charge of approximately $40.0 million ($29.0 million after tax) related to the Recapitalization during the year ended September 30, 1999. Because
the cash costs included in this charge were funded principally through the proceeds of Senior Subordinated Notes and borrowings under our credit facility, this cost did not materially impact our liquidity, ongoing operations or market position.





The following is managements discussion and analysis of certain significant factors that have affected the Companys
financial position and operating results during the periods included in the accompanying consolidated financial statements. The Companys fiscal year ends on September 30.





Recent Developments





The aerospace industry was hit particularly hard by the
events of September 11, 2001. The immediate reduction in air traffic severely impacted the profitability of the airline industry, which began to curtail flights and stretch out or cancel airframe deliveries. Facing this expected downturn, the
Company implemented a series of actions to significantly reduce its cost structure while maintaining its ability to respond to market dynamics and develop new business. As part of this effort, the Company significantly reduced its workforce in
October 2001.





The Company generated net sales, operating income and EBITDA, As Defined, of $248.8 million, $84.0 million and $97.5
million, respectively for fiscal 2002, and $200.8 million, $55.7 million and $71.0 million for fiscal 2001. As previously reported, on a pro forma basis (as if the Champion Aerospace acquisition had occurred on the first day of the fiscal year), the
Companys net sales, operating income and EBITDA, As Defined were $247.8 million, $65.6 million and $84.2 million in fiscal 2001. During fiscal year 2002, the Company was selected by Airbus to provide certain cockpit door security mechanisms
for a complete retrofit of both their wide body and narrow body fleet. The Company received orders from Airbus for these cockpit door security mechanisms totaling approximately $22 million during fiscal 2002 and anticipates receiving additional
orders in fiscal 2003 and beyond. Approximately $11 million of the orders were shipped and




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recorded as sales through September 30, 2002. Shipments will continue into fiscal 2003 and future years.
The Airbus sales helped to offset declines in sales from other products during 2002 as a result of the events of September 11, 2001.





EBITDA represents earnings before interest, taxes, depreciation, and amortization. EBITDA, As Defined, is calculated by adding to EBITDA the incremental inventory costs associated with the write up of inventory required by the
purchase accounting treatment applied to the acquisitions of Champion Aerospace and a product line. EBITDA and EBITDA, As Defined, are presented herein to provide additional information with respect to the ability of the Company to satisfy its debt
service, capital expenditure and working capital requirements and because certain types of covenants in TransDigms and Holdings borrowing arrangements are tied to similar measures. While EBITDA-based measures are frequently used as
measures of operations and the ability to meet debt service requirements, they are not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. EBITDA and EBITDA, As Defined, are not
measurements of financial performance under accounting principles generally accepted in the United States of America and should not be considered as an alternative to cash flow from operating activities, as a measure of liquidity or an alternative
to net income as indicators of the Companys operating performance or any other measures of performance derived in accordance with accounting principles generally accepted in the United States of America.





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 the Companys current outlook will prove to be correct.





Significant Acquisition





In the ordinary course of business, the Company pursues acquisitions where management believes it can enhance value, reduce costs
and develop new business. The following is a summary of a significant acquisition during fiscal 2001.





On May 31, 2001, TransDigm
(through Champion Aerospace) acquired substantially all of the assets and certain liabilities of the Champion Aviation Products business from Federal Mogul Ignition Company, or Federal-Mogul, a wholly-owned subsidiary of Federal-Mogul Corporation,
for approximately $160.1 million in cash, subject to adjustment based on the level of acquired working capital as of the closing of the acquisition. Champion Aerospace is engaged in researching, designing, developing, engineering, manufacturing,
marketing, distributing and selling ignition systems and related components and other products. The products include, without limitation, igniters, spark plugs and exciters for turbine and piston aircraft applications as well as other aerospace
engine and industrial applications.





Significant Accounting Policies





Holdings consolidated financial statements reflect the selection and application of accounting policies that require management to make significant estimates and assumptions. The
Companys significant accounting policies are described in Note 3 to Holdings consolidated financial statements included elsewhere in this Report.





Accounting estimates are an integral part of Holdings consolidated financial statements and are based on knowledge and experience about past and current events and on assumptions about future events. Significant
accounting estimates reflected in Holdings consolidated financial statements for fiscal years 2000, 2001 and 2002 include the valuation allowances for inventory obsolescence and uncollectible accounts receivable, accrued liabilities recognized
for losses on uncompleted contracts, environmental costs, sales returns and repairs, and allocations of purchase prices for business combinations, along with pending purchase price adjustment amounts.




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Results of Operations





The following table sets forth, for the periods indicated, certain operating data of the Company as a percentage of net sales.





Fiscal Year Ended September 30,2000


2001


2002Net sales

100
%

100
%

100
%Gross profit

45


41


46Selling and administrative

11


10


9Amortization of intangibles

1


2


2Research and development

2


1


1Income from operations

31


28


34Interest expensenet

19


16


15Income tax provision

5


5


7Net income

7
%

7
%

12
%





Changes in Results of Operations





Fiscal Year Ended September 30, 2002 Compared With Fiscal Year Ended September 30, 2001.





| |  | Net Sales.  Net sales increased by $48.0 million, or 23.9%, to $248.8 million for the year ended September 30, 2002 from $200.8 million for the
year ended September 30, 2001, primarily due to the Champion Aerospace and product line acquisitions as well as new business with Airbus relating to the sale of certain cockpit security door mechanisms, which more than offset decreases in sales
resulting from the industry events triggered in part by the September 11, 2001 terrorist attacks.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Gross Profit.  Gross profit (net sales less cost of sales) increased by $32.0 million, or 38.9%, to $114.2 million for the year ended September
30, 2002 from $82.2 million for the year ended September 30, 2001. This increase is attributable to higher sales discussed above and $6.6 million, or 3.3% of sales, of non-cash charges in 2001 resulting from inventory purchase price accounting
adjustments pertaining to the Champion Aerospace and product line acquisitions. Gross profit as a percentage of net sales increased to 46% for the year ended September 30, 2002 from 41% for the year ended September 30, 2001, principally due to 2001
non-cash charges discussed above, cost saving actions taken after the September 11, 2001 terrorist attacks, and the strength of the Companys propriety products and market positions.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Selling and Administrative.  Selling and administrative expenses increased by $1.2 million, or 6.0%, to $21.9 million for the year ended
September 30, 2002 from $20.7 million for the year ended September 30, 2001, primarily due to the Champion Aerospace acquisition offset by cost saving actions taken after the September 11, 2001 terrorist attacks. Selling and administrative expenses
as a percentage of net sales decreased slightly from 10% for the year ended September 30, 2001 to 9% for the year ended September 30, 2002 due to increased selling and administrative efficiencies as a result of the Champion Aerospace acquisition and
September 11th related cost reductions.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Amortization of Intangibles.  Amortization of intangibles increased by $3.3 million, or 112%, to $6.3 million for the year ended September 30,
2002 from $3.0 million for the year ended September 30, 2001, primarily as a result of the intangible assets recognized in connection with the Champion Aerospace acquisition.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Research and Development.  Research and development expense decreased $0.6 million, or 30.1%, from $2.9 million for the year ended September
30, 2001 to $2.1 million for the year ended September 30, 2002, primarily due to September 11th related cost reductions. Research and development expense as a
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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percentage of net sales was consistent at 1% for each of the years ended September 30, 2002 and September 30, 2001.





| |  | Income from Operations.  Income from operations increased $28.3 million, or 50.8%, from $55.7 million for the year ended September 30, 2001 to
$84.0 million for the year ended September 30, 2002, due to the factors described previously.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Interest Expense.  Interest expense increased by $4.6 million, or 14.4%, to $36.5 million for the year ended September 30, 2002 from $31.9
million for the year ended September 30, 2001. This was caused by an increase in the average level of outstanding borrowings as a result of the Champion Aerospace acquisition and the issuance of $75 million in aggregate principal amount of
additional Senior Subordinated Notes in June 2002, partially offset by a decrease in interest rates on borrowings under the Companys credit facility.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Income Taxes.  Income tax expense as a percentage of income before income taxes was 35.4% for fiscal 2002 compared to 39.5% for fiscal 2001,
primarily due to increased tax benefits generated by research and development tax credits and a decline in non-deductible goodwill amortization and interest expense as a percentage of income before income taxes. During the year ended September 30,
2002, the Company filed amended income tax returns for fiscal years 1998 through 2000 with the Internal Revenue Service (IRS) requesting refunds totaling approximately $1.8 million for research and development tax credits that had not
been claimed on previously filed tax returns. Because these income tax returns are currently being audited by the IRS, the Company has not recorded potential tax refunds that could result from these additional credits.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Net Income.  The Company earned $30.6 million for the year ended September 30, 2002 compared to $14.4 million for the year ended September 30,
2001 primarily as a result of the factors referred to above.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Fiscal Year Ended September 30, 2001 Compared With
Fiscal Year Ended September 30, 2000.





| |  | Net Sales.  Net sales increased by $50.3 million, or 33.4%, to $200.8 million for the year ended September 30, 2001 from $150.5 million for the
year ended September 30, 2000. Approximately $34.3 million of the increase was due to the Champion Aerospace and product line acquisitions and the remainder was due to increased pricing and volume on existing products and new business opportunities.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Gross Profit.  Gross profit (net sales less cost of sales) increased by $13.9 million, or 20.5%, to $82.2 million for the year ended September
30, 2001 from $68.3 million for the year ended September 30, 2000. This increase is attributable to higher sales discussed above. Gross profit as a percentage of net sales declined to 41% for the year ended September 30, 2001 from 45% for the year
ended September 30, 2000, principally due to $6.6 million, 3.3% of sales, of non-cash charges from inventory purchase accounting adjustments related to the Champion Aerospace and product line acquisitions.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Selling and Administrative.  Selling and administrative expenses increased by $3.9 million, or 23%, to $20.7 million for the year ended
September 30, 2001 from $16.8 million for the year ended September 30, 2000. Approximately $2.1 million of the increase was due to the Champion Aerospace and product line acquisitions and the remainder was due to additional new business initiatives.
Selling and administrative expenses as a percentage of net sales decreased slightly from 11% for the year ended September 30, 2000 to 10% for the year ended September 30, 2001.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Amortization of Intangibles.  Amortization of intangibles increased by $1.2 million, or 60.9%, to $3.0 million for the year ended September 30,
2001 from $1.8 million for the year ended September 30, 2000. This increase is primarily the result of amortization of intangible assets recognized in connection with the Champion Aerospace acquisition.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Research and Development.  Research and development expense increased $0.6 million, or 27.5%, to $2.9 million for the year ended September 30,
2001 compared to $2.3 million for the year ended September 30, 2000, principally due to the Champion Aerospace acquisition and additional research and development activities to complement the Companys sales efforts. Research and development
expense as a percentage of net sales decreased slightly from 2% for the year ended September 30, 2000 to 1% for the year ended September 30, 2001.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  | Income from Operations.  Income from operations increased $8.4 million, or 17.7%, from $47.3 million for the year ended September 30, 2000 to
$55.7 million for the year ended September 30, 2001, due to the factors described previously.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Interest Expense.  Interest expense increased by $3.3 million, or 11.8%, to $31.9 million for the year ended September 30, 2001 from $28.6
million for the year ended September 30, 2000. This was caused by an increase in the average level of outstanding borrowings in connection with the Champion Aerospace acquisition, partially offset by a decrease in interest rates.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Income Taxes.  Income tax expense as a percentage of income before income taxes was 39.5% for fiscal 2001 compared to 42.5% for fiscal 2000,
primarily due to increased tax benefits generated by foreign sales and a decline in non-deductible goodwill amortization and interest expense as a percentage of income before income taxes.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Net Income.  The Company earned $14.4 million for the year ended September 30, 2001 compared to $10.8 million for the year ended September 30,
2000 primarily as a result of the factors referred to above.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Inflation





Many of the Companys raw materials and operating expenses are sensitive to the effects of inflation, which could result in changing operating costs. The
effects of inflation on the Companys businesses during the years ended September 30, 2002, 2001 and 2000 were not significant.





Liquidity and Capital Resources





The Company generated approximately $56.5 million of cash from operating
activities during the year ended September 30, 2002 compared to approximately $22.8 million during the year ended September 30, 2001. The increase is primarily due to increased earnings from the Champion Aerospace and product line acquisitions, cost
saving actions the Company undertook as a result of the September 11, 2001 terrorist attacks, a decrease in accounts receivable, and the strength of the Companys proprietary products and market positions.





Cash used in investing activities was approximately $5.4 million during the year ended September 30, 2002 compared to approximately $173.6 million used during
the year ended September 30, 2001. The decrease is mainly due to the acquisitions of Champion Aerospace and a product line in fiscal 2001.





Cash used by financing activities during the year ended September 30, 2002 was approximately $13.0 million compared to approximately $157.7 million provided by financing activities during the year ended September 30, 2001. The cash
used in financing activities during fiscal 2002 resulted from the repayment of approximately $84.8 million in term loans under the Companys senior secured credit facility (the Senior Credit Facility) offset by proceeds from the
issuance of additional Senior Subordinated Notes, net of fees, of $73.6 million. The cash provided by financing activities of approximately $157.7 million during fiscal 2001 was primarily due to the incurrence of substantial indebtedness relating to
the acquisition of Champion Aerospace.





The Companys Senior Credit Facility consists of (1) a $30.0 million Revolving Credit
Facility maturing in November 2004 and (2) a Term Loan Facility in an aggregate principal amount of $263.8 million, consisting of a $43.3 million Tranche A Facility which was repaid in fiscal 2002, a $105.5 million Tranche B Facility maturing in May
2006 and a $115.0 million Tranche C Facility maturing in May 2007. As of September 30, 2002, the outstanding balances of the Revolving Credit Facility and the Tranche A, B and C facilities were $0, $0, $83.6 million and $92.2 million, respectively.
No additional borrowings are available under the Tranche A, B and C facilities of the Term Loan Facility.





The interest rate for the
Senior Credit Facility is, at the Companys option, either (A) a floating rate equal to the base rate plus the applicable margin, as defined in the Senior Credit Facility, or (B) the Eurodollar rate for fixed periods of one, two, three, or six
months, plus the applicable margin. The overall interest rate and applicable margin are determined based on (1) in the case of the Tranche A Facility and the Revolving Credit




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Facility, (A) an interest rate determined by the base rate, plus 2.25%, 2.00%, 1.75% or 1.50% depending on Holdings ability to achieve the
respective debt coverage ratio specified in the Senior Credit Facility, as amended; or (B) an interest rate determined by the Eurodollar Rate, plus 3.25%, 3.00%, 2.75% or 2.50% depending on Holdings ability to achieve the respective debt
coverage ratio specified in the Senior Credit Facility, as amended; and (2) in the case of the Tranche B Facility and the Tranche C Facility, (A) an interest rate determined by the base rate, plus 2.50%; or (B) an interest rate determined by the
Eurodollar rate, plus 3.50%. The Senior Credit Facility is subject to mandatory prepayment with a defined percentage of net proceeds from certain asset sales, insurance proceeds or other awards that are payable in connection with the loss,
destruction or condemnation of any assets, certain new debt and equity offerings and, during fiscal 2003 and thereafter, 50% of excess cash flow (as defined in the Senior Credit Facility) in excess of a predetermined amount under the Senior Credit
Facility.





The Senior Credit Facility requires the Company to repay the outstanding indebtedness on a periodic basis through the various
maturity dates. The Senior Credit Facility and the indentures governing the Senior Subordinated Notes and the Holdings PIK Notes (the Indentures) also contain restrictive covenants that, among other things, limit the incurrence of
additional indebtedness, the payment of dividends, transactions with affiliates, asset sales, acquisitions, mergers and consolidations, liens and encumbrances, and prepayments of other indebtedness. In addition, the Senior Credit Facility and
Indentures require the Company to meet certain financial ratios. Any failure to comply with the restrictions of the Senior Credit Facility, the Indentures or any other subsequent financing agreements may result in an event of default. An event of
default may allow the creditors, if the agreements so provide, to accelerate the related debt as well as any other debt to which a cross-acceleration or cross-default provision applies. In addition, the lenders may be able to terminate any
commitments they had made to supply the Company with further funds. The Company is currently in compliance with the covenants contained in the Senior Credit Facility and the Indentures.





TransDigm repaid the Tranche A facility and part of the Tranche B and C facilities with the net proceeds from the offering of $75 million in aggregate principal amount of additional Senior
Subordinated Notes in fiscal 2002. In addition, TransDigm amended its Senior Credit Facility in connection with the offering of the additional Senior Subordinated Notes. The amendments to the Senior Credit Facility:





| |  |  | allowed TransDigm to incur the indebtedness represented by the Senior Subordinated Notes;
| | - |  | -----------------------------------------------------------------------------------------




| |  |  | allow TransDigm to pay dividends to Holdings for the purpose of retiring the Holdings PIK Notes;
| | - |  | ------------------------------------------------------------------------------------------------




| |  |  | allow TransDigm to incur up to $150.0 million of additional bank borrowings or subordinated debt (for which there are currently no commitments to provide such
funds), subject to certain restrictions, including a requirement that such debt must be used:
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | to finance acquisitions permitted by the Senior Credit Facility, as amended, or
| | - |  | -------------------------------------------------------------------------------




| |  |  | to pay the dividends to Holdings to retire the Holdings PIK Notes;
| | - |  | ------------------------------------------------------------------




| |  |  | allow TransDigm to effect permitted acquisitions, with the aggregate amount paid for all such permitted acquisitions not to exceed $225.0 million;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | require that at least $10.0 million must remain unused and available under the $30.0 million Revolving Credit Facility immediately following any acquisition;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | modified certain existing financial covenants; and
| | - |  | --------------------------------------------------




| |  |  | waived any mandatory prepayment from excess cash flow for fiscal 2002.
| | - |  | ----------------------------------------------------------------------




The Chairman of the Board of Directors of TransDigm and Holdings, Mr. Peacock, holds a presently-exercisable put option enabling him to require Holdings to purchase up to 80% of his common stock
(including shares that may be acquired through the exercise of stock options and held at least six months) at




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fair value, subject to certain restrictions under the Companys long-term debt agreements and subject to his continued service as Chairman
of the Board of TransDigm and Holdings. As of September 30, 2002, 8,114 shares of common stock that Mr. Peacock can acquire under presently-exercisable stock options are subject to the put. The estimated fair value of the 6,491 shares Mr. Peacock
could require Holdings to purchase, net of the exercise price of the related stock options, totaled approximately $15.0 million at September 30, 2002. Mr. Peacock and other members of management hold put rights that may become exercisable in the
future with respect to other shares of common stock, including shares of common stock subject to options. See Management  Employment Agreements and Management  Stock Option Plans. Also see Notes 13 and 16 of the
consolidated financial statements included elsewhere in this Report.





The prepayment provision of the Holdings PIK Notes contains a
prepayment penalty that begins to increase on December 4, 2003. TransDigm may pay a dividend to Holdings to repurchase the Holdings PIK Notes prior to December 4, 2003. The Senior Credit Facility, as amended, will permit this dividend. In addition,
TransDigm anticipates that, on the date of its payment, this dividend will be permitted under the restricted payments covenant of the Indenture governing the Senior Subordinated Notes.





The following table sets forth the Companys contractual cash obligations and other commercial commitments for the next several fiscal years (in millions):





2003

2004

2005

2006

2007

2008 and Thereafter

TotalContractual Cash Obligations:Long-Term Debt (1)

$
4.5

$
13.1

$
36.7

$
54.9

$
66.6

$
231.3

$
407.1Operating Leases


1.3


1.3


1.2


1.0


.7


3.8


9.3Redeemable Preferred Stock (2)

















18.4


18.4Other Long-Term Obligations


2.6


2.2


2.2











7.0Total Contractual Cash Obligations

$
8.4

$
16.6

$
40.1

$
55.9

$
67.3

$
253.5

$
441.8


---

| | (1) |  | This assumes repayment of $31.3 million of Holdings PIK Notes in fiscal 2009. As mentioned earlier, TransDigm may pay a dividend to Holdings to be used to
prepay the Holdings PIK Notes before the end of fiscal 2004. The amounts also exclude a $1.9 million premium incurred in connection with the offering of the additional Senior Subordinated Notes in fiscal 2002 which will be amortized over the term of
the notes.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (2) |  | This amount excludes $2.3 million of unamortized original issue discount and issuance costs as of September 30, 2002.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------




The Companys primary future cash needs will consist of debt service, working capital and capital expenditures. The Company incurs capital
expenditures for the purpose of maintaining and replacing existing equipment and facilities and, from time to time, for facility expansion. Capital expenditures totaled approximately $3.8 million and $4.5 million during fiscal 2002 and 2001,
respectively. The Company expects its capital expenditures will increase moderately in the future.





The Company may from time to time
seek to retire its outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market
conditions, the Companys liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. In addition, the Company may issue additional debt if prevailing market conditions are favorable to doing so.





The Company intends to pursue additional acquisitions that present opportunities consistent with the Companys value generation
strategy. The Company regularly engages in discussions with respect to potential acquisitions and investments. However, there are no binding agreements with respect to any material acquisitions at this time, and there can be no assurance that the
Company will be able to reach an




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agreement with respect to any future acquisition. The Companys acquisition strategy may require substantial capital, and no assurance can
be given that the Company will be able to raise any necessary funds on acceptable terms or at all. If the Company incurs additional debt to finance acquisitions, total interest expense will increase.





The Companys ability to make scheduled payments of principal of, or to pay the interest on, or to refinance, the Companys indebtedness, or to fund
planned capital expenditures and research and development efforts, will depend on its ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other
factors that are beyond its control. Based on its current level of operations and anticipated cost savings and operating improvements, management believes that cash flow from operations, available cash and available borrowings under the Senior
Credit Facility, will be adequate to meet future liquidity needs for at least the next several years. There can be no assurance, however, that the Companys business will generate sufficient cash flow from operations, that currently anticipated
cost savings and operating improvements will be realized on schedule or at all or that future borrowings will be available to the Company under the Senior Credit Facility in an amount sufficient to enable it to pay its indebtedness or to fund its
other liquidity needs. The Company may need to refinance all or a portion of its indebtedness on or before maturity. There can be no assurance that the Company will be able to refinance any of its indebtedness on commercially reasonable terms or at
all. See Risk Factors.





New Accounting Standards





In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assetswhich became effective for the Company on October 1, 2002. Under the provisions of SFAS No. 142 amortization of goodwill ceased effective October 1, 2002. The adoption of this statement will result in the elimination of approximately $5 million
of annual goodwill amortization expense beginning in fiscal 2003. Goodwill amortization will be replaced with the requirement to test goodwill at least annually for impairment. The initial impairment test must be completed within six months of
adoption of the new standard. The Company has not determined the impact, if any, that the impairment test will have on its consolidated financial position or results of operations.





In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. This statement requires entities to record the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. The amount recorded as a liability will be capitalized by increasing the carrying amount of the related long-lived asset. Subsequent to initial measurement, the liability is accreted to the ultimate
amount anticipated to be paid and is also adjusted for revisions to the timing of the amount of estimated cash flows. The capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either
settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The provisions of this statement became effective for the Companys fiscal year ending September 30, 2003. The Company has not determined the impact, if
any, that this statement will have on its consolidated financial position or results of operations.





In August 2001, the FASB issued SFAS
No. 144, Accounting for Impairment or Disposals of Long-Lived Assets. This statement specifies the accounting model to be used for long-lived assets to be disposed of by sale (whether previously held and used or newly acquired) and by
broadening the presentation of discontinued operations to include more disposal transactions. The provisions of this statement became effective for the Companys fiscal year ending September 30, 2003. The Company has not determined the impact,
if any, that this statement will have on its consolidated financial position or results of operations.





In June 2002, the FASB issued
SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which changes the accounting for costs such as lease termination costs and certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or other exit or disposal activity initiated after December 31, 2002. The statement requires companies to recognize the fair value of costs associated with exit or disposal activities when they are incurred
rather than at the date of a commitment to an exit or disposal plan. The Company anticipates that the adoption of this statement will not have a material effect on its financial position or results of operations.




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Quantitative and Qualitative Disclosure About Market Risk





At September 30, 2002, the Company is subject to interest rate risk with respect to borrowings under its Senior Credit Facility as the interest rates on such
borrowings vary with market conditions and, thus, the amount of outstanding borrowings approximates the fair value of the indebtedness. The weighted average interest rate on the $175.8 million of borrowings outstanding under the Senior Credit
Facility at September 30, 2002 was 5.4%. The effect of a hypothetical one percentage point increase in interest rates would increase the Companys annual interest costs under the Senior Credit Facility by approximately $1.8 million based on the
amount of borrowings outstanding at September 30, 2002.





Also outstanding at September 30, 2002 was $200.0 million of Company
indebtedness in the form of the Senior Subordinated Notes, $31.3 million of Holdings PIK Notes and Holdings 16% Redeemable Preferred Stock with an aggregate liquidation preference of $18.4 million. In addition, as of September 30, 2002, 8,114 shares
of common stock that the Chairman of the Board of Directors of TransDigm and Holdings, Mr. Peacock, can acquire under presently-exercisable stock options are subject to a put that enables Mr. Peacock to require Holdings to repurchase, at fair market
value, up to 80% of such shares after such shares are held at least six months, subject to certain restrictions under the Companys long-term debt agreements and subject to his continued service as Chairman of the Board of TransDigm and
Holdings. The estimated fair value of the 6,491 shares that Mr. Peacock could require Holdings to purchase, net of the exercise price of the related stock options, totaled approximately $15.0 million at September 30, 2002. Mr. Peacock and other
members of management hold put rights that may become exercisable in the future with respect to other shares of common stock, including shares of common stock subject to options. The interest rates on the Senior Subordinated Notes and the Holdings
PIK Notes are fixed at 10 3/8 % and 12% per year, respectively, and the dividends accrue on the Holdings 16% Redeemable Preferred Stock at 16% annually. The fair value of the Senior Subordinated Notes was approximately $205 million at September 30,
2002, based upon quoted market prices. A determination of the fair value of the Holdings PIK Notes and the Holdings 16% Redeemable Preferred Stock is not considered practicable because they are not publicly traded. Because the common stock subject
to put rights is required to be repurchased at fair market value, the value of Holdings repurchase obligation will increase to the extent the fair market value of Holdings common stock increases.





Additional Disclosure Required by Indenture





Separate financial statements of TransDigm Inc. are not presented since Holdings has no operations or assets separate from its investment in TransDigm Inc. and since the Senior Subordinated Notes are guaranteed by Holdings and all
direct and indirect subsidiaries of TransDigm Inc. (other than one wholly-owned, non-guarantor subsidiary that has inconsequential assets, liabilities and equity). In addition, Holdings only obligations at September 30, 2002 other than its
guarantees of debt under the indenture that governs the Senior Subordinated Notes and the Senior Credit Facility consist of (1) the Holdings PIK Notes of $31.3 million due in fiscal 2009; (2) the Holdings 16% Redeemable Preferred Stock with an
aggregate liquidation preference of $18.4 million; and (3) put rights held by certain persons to require Holdings to repurchase, at fair market value, shares of Holdings common stock (including shares that may be acquired through
the exercise of stock options) held by such persons. The Holdings PIK Notes bear interest in the form of additional Holdings PIK Notes at 12% annually and the Holdings 16% Redeemable Preferred Stock accrues dividends in cash, or at Holdings
option, in the form of additional shares of Holdings cumulative redeemable preferred stock, at 16% annually. Interest expense recognized on the Holdings PIK Notes during the year ended September 30, 2002 was $3.7 million. Dividend accrual on the
Holdings 16% Redeemable Preferred Stock during the year ended September 30, 2002 was $2.6 million. As of September 30, 2002, up to 80% of the 8,114 shares of common stock that the Chairman of the Board of Directors of TransDigm and Holdings, Mr.
Peacock, can acquire under presently-exercisable stock options are subject to a put after such shares are held at least six months, subject to certain restrictions under the Companys long-term debt agreements and subject to his continued
service as Chairman of the Board of TransDigm and Holdings. The estimated fair value of the 6,491 shares that Mr. Peacock could require Holdings to purchase, net of the exercise price of the related stock options, totaled approximately $15.0 million
at September 30, 2002. Mr. Peacock and other members of management hold put rights that may become exercisable in the future with respect to other




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shares of common stock, including shares of common stock subject to options. Because the common stock subject to put rights is required to be
repurchased at fair market value, the value of Holdings repurchase obligation will increase to the extent the fair market value of Holdings common stock increases.





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.




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##### Table of Contents




PART III





ITEM 10.    
DIRECTORS AND EXECUTIVE OFFICERS





The following table sets forth certain information concerning the directors
and executive officers of Holdings and the Company:





Name

Age

PositionDouglas W. Peacock

64

Chairman of the Board of DirectorsW. Nicholas Howley

50

President, Chief Executive Officer and DirectorRobert S. Henderson

46

President, AdelWiggins GroupRaymond F. Laubenthal

41

President, AeroControlex GroupJohn F. Leary

55

President, Adams Rite Aerospace, Inc.Albert J. Rodriguez

42

President, Marathon Power Technologies CompanyW. Todd Littleton

39

President, Champion Aerospace Inc.Gregory Rufus

46

Vice President and Chief Financial OfficerStephen Berger

63

DirectorMuzzafar Mirza

44

DirectorWilliam Hopkins

39

DirectorThomas R. Wall, IV

44

DirectorJohn W. Paxton

65

Director





Mr. Peacock has been Chairman of the Board of Directors of TransDigm since its
inception in September 1993 and Chairman of the Board of Directors of Holdings since the consummation of the Recapitalization. Prior to December 2001, Mr. Peacock also served as Chief Executive Officer of TransDigm and Holdings. He is also a
director of Microporous Products, L.P. Prior to joining TransDigm, Mr. Peacock spent six years with IMO Industries Inc. as Executive Vice President of IMOs Instruments and Aero Components Group from 1991 to 1993, Executive Vice President of
Power Systems from 1989 to 1991, and managed IMOs Turbomachinery business from 1987 to 1989. Prior to joining IMO, Mr. Peacock spent 15 years in various managerial positions at Westinghouse Electric Corp. Mr. Peacock received a B.S. degree in
chemical engineering from Washington State University and a Ph.D. in physical chemistry from the University of Illinois.





Mr.
Howley has been a Director and President of TransDigm and Holdings since the consummation of the Recapitalization. He has served as Chief Executive Officer of TransDigm and Holdings since December 2001. From the completion of the
Recapitalization until December 2001, Mr. Howley served as President and Chief Operating Officer of TransDigm and Holdings. Mr. Howley served as Executive Vice President of TransDigm and President of the AeroControlex Group from TransDigms
inception in September 1993 to the date of the consummation of the Recapitalization. Prior to joining TransDigm, Mr. Howley served as General Manager of IMO Industries Inc. Aeroproducts Division, and Director of Finance for the 15 divisions of
IMOs Turbomachinery, Aerospace, and Power Transmission groups. Mr. Howley received his B.S. in engineering from Drexel University and an MBA from the Harvard University Graduate School of Business.





Mr. Henderson became President of the AdelWiggins Group in August 1999. He previously had served as President of Marathon Power Technologies Company since
March 1998. From November 1994 until March 1998, he served as Manager of Operations for the AdelWiggins Group. From 1991 until 1994, Mr. Henderson served as Operations Manager at RainBird Sprinkler. Mr. Henderson received his B.A. in mathematics
from Brown University and attended the Harvard University Graduate School of Business.




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Mr. Laubenthal has been President of the AeroControlex Group since November 1998. From December
1996 until November 1998, Mr. Laubenthal served as Director of Manufacturing and Engineering for the AeroControlex Group and had prior extensive experience in manufacturing and engineering at Parker Hannifin Corporation and Textron. From October
1993 to December 1996, Mr. Laubenthal served as Director of Manufacturing for the AeroControlex Group. Mr. Laubenthal received a B.S. degree in mechanical engineering from Case Western Reserve University and an MBA from Northern Illinois University.





Mr. Leary has been President of Adams Rite Aerospace, Inc. since June 1999. From 1995 to June 1999, Mr. Leary was a General
Operations Manager with Furon Company. From 1991 to 1995, Mr. Leary was the Plant Manager of Emerson Electric, Chromalox Division. Mr. Leary received a B.S. degree in Mechanical Engineering from the New Jersey Institute of Technology.





Mr. Rodriguezhas been President of Marathon Power Technologies Company since September 1999. From January 1998 until September 1999, Mr.
Rodriguez served as Director of Commercial Operations for the AeroControlex Group. From 1993 to 1997, Mr. Rodriguez served as Director of Sales and Marketing for the AeroControlex Group. Mr. Rodriguez has prior experience with IMO Industries,
Esterline, as well as Kaiser Aerospace. Mr. Rodriguez received his Bachelor of Engineering with a concentration in Chemical Engineering from Stevens Institute of Technology.





Mr. Littletonhas been President of Champion Aerospace Inc. since March 2002. He previously had served as Director of Operations, Engineering for Champion Aerospace Inc. since July 2001. Mr.
Littleton came to this position from Robert Bosch Corp. where he was Director of Manufacturing for Anti-Lock Brakes and Fuel Systems Products in Anderson, S.C. from 1989 to July 2001. Prior to that, he was Business Unit Manager with responsibility
for Boschs fuel systems product business. His prior experience also includes various operating management and engineering assignments with WABCO and T&S Brass. Mr. Littleton received a B.S. degree in mechanical engineering from Auburn
University and has completed the Executive Leadership Skills Program at the University of South Carolina.





Mr. Rufus became Vice
President and Chief Financial Officer in August 2000. Prior to joining TransDigm, Mr. Rufus spent 19 years at Emerson Electric, including divisional vice president responsibilities at Ridge Tool, Liebert Corp., and Harris Calorific, all part of the
Emerson organization. Prior to Emerson, Mr. Rufus spent four years with Ernst & Young. Mr. Rufus received his CPA certification in Ohio in 1980. Mr. Rufus received a B.A. degree in accounting from Baldwin-Wallace College and attended the
Weatherhead School of Management at Case Western Reserve University.





Mr. Berger has served as a Director of Holdings and
TransDigm since the consummation of the Recapitalization. He is also currently serving as Chairman of Odyssey Investment Partners, LLC. Prior to joining Odyssey Investment Partners, LLC, Mr. Berger was a general partner of Odyssey Partners, LP. From
1990 to 1993, Mr. Berger served as Chairman and CEO of FGIC, a wholly-owned subsidiary of GE Capital Corp., and subsequently became Executive Vice President of GE Capital Corp. From 1985 to 1990, Mr. Berger was Executive Director of the Port
Authority of New York and New Jersey. Mr. Berger presently serves as a member of the Board of Trustees of Brandeis University and a member of the Board of Directors of Dayton Superior.





Mr. Mirza has served as a Director of Holdings and TransDigm since the consummation of the Recapitalization. Mr. Mirza is also currently a Managing Principal of Odyssey Investment Partners, LLC
and was a principal in the private equity investing group of Odyssey Partners, LP from 1993 to 1997. In addition, Mr. Mizra is currently a member of the Board of Directors of Dresser, Inc. From 1988 to 1993, Mr. Mirza was employed by the merchant
banking group of GE Capital Corp.





Mr. Hopkins has served as a Director of Holdings and TransDigm since the consummation of the
Recapitalization. Mr. Hopkins is also currently a Managing Principal of Odyssey Investment Partners, LLC and was a principal in the private equity investing group of Odyssey Partners, LP from 1994 to 1997. In addition, Mr. Hopkins is currently a
member of the Board of Directors of Dayton Superior Corporation. Prior to joining Odyssey, Mr. Hopkins was a member of the merchant banking group of GE Capital Corp.




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Mr. Wall has served as a Director of Holdings and TransDigm since their inception in 1993. Mr.
Wall joined Kelso & Company in 1983 and has served as a Managing Director of Kelso & Company since 1990. Mr. Wall presently serves as a member of the Board of Directors of Citation Corporation, Consolidated Vision Group, Inc., Key
Components, Inc., Mitchell Supreme Fuel Company, Mosler Inc., Peebles, Inc., and 21st Century Newspapers, Inc.





Mr. Paxton has
served as a Director of Holdings and TransDigm since the consummation of the Recapitalization. Mr. Paxton has been President of the Bar Code Business Unit of Zebra Technologies since February 2002 and is currently a member of its Board of Directors.
Immediately prior to joining Zebra, Mr. Paxton headed Paxton Associates, LLC, a Business Consulting Firm. From March 1999 to December 2000, Mr. Paxton was Chairman and Chief Executive Officer of Telxon Corporation. In December 1998, Mr. Paxton
became Chairman of Odyssey Industrial Technologies, LLC, a joint venture partnership with Odyssey Investment Partners, a private equity fund engaged in making investments primarily in middle market companies in a variety of industries. Beginning in
October 1995, he was affiliated with Monarch Marking Systems and Paxar Corporation, following Paxars acquisition of Monarch in March 1997. In October 1995, Mr. Paxton was named Monarchs President and Chief Executive Officer and served on
Monarchs board of directors. In October 1997, he became Executive Vice President of Paxar Corporation and President of the companys Printing Solutions Group and served in these positions until the end of 1998. Mr. Paxton is a director of
Dayton Superior Corporation, whose board he joined in 2001.





Board Committees





Holdings Board of Directors has a Compensation Committee and an Audit Committee. The Compensation Committee, which is comprised of Messrs. Berger, Mirza
and Hopkins, establishes salaries, incentives and other forms of compensation for executive officers and administers incentive compensation and benefit plans provided for employees. The Audit Committee, which is comprised of Messrs. Mirza and
Hopkins, reviews Holdings and TransDigms audit policies and oversees the engagement of Holdings and TransDigms independent auditors.




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ITEM 11.    
EXECUTIVE COMPENSATION





The following table sets forth the aggregate compensation paid or accrued by
TransDigm for services rendered during fiscal 2002, 2001, and 2000 to each Chief Executive Officer of TransDigm during fiscal 2002 and each of the four other most highly paid individuals who were serving as executive officers of TransDigm at the end
of fiscal 2002 (collectively the Named Executive Officers):





SUMMARY COMPENSATION TABLE





Long-Term CompensationAnnual Compensation


AwardsName and Principal Position

Fiscal Year

Salary

Bonus

Other Annual Compensation (2)


Securities Underlying Options/SARs

All Other CompensationDouglas W. Peacock,

2002

$
162,500

$
10,000

$
24,193
(9)



$
14,786
(3)Chairman of the Board and

2001


345,000


420,000








17,795Chief Executive Officer (1)

2000


330,000


200,000








18,575W. Nicholas Howley,

2002


310,000


200,000








13,922
(4)President, Chief Executive

2001


243,750


335,000








12,641Officer and Director (1)

2000


225,000


135,000








12,094Robert S. Henderson,

2002


166,875


65,000








10,046
(5)President of AdelWiggins

2001


160,250


87,500








10,5952000


155,000


45,000








10,583Raymond F. Laubenthal

2002


150,000


75,000








10,482
(6)President of AeroControlex

2001


134,250


90,000








9,0202000


121,998


37,500








8,660John F. Leary

2002


160,125


70,000





50 options


10,555
(7)President of Adams Rite

2001


154,500


65,000








9,091Aerospace

2000


148,750


55,000








8,742Gregory Rufus,

2002


147,000


65,000





175 options


10,206
(8)Vice President and

2001


137,250


92,500








7,185Chief Financial Officer

2000


13,207


40,000





575 options


279


---

|(1) |  | Effective December 3, 2001, Mr. Howley was named to the position of President and Chief Executive Officer. He previously served as President, Chief Operating
Officer and Director. Mr. Peacock, who previously served as Chief Executive Officer, continues to serve as Chairman of the Board.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(2) |  | Does not include perquisites and other personal benefits because the value of these items did not exceed the lesser of $50,000 or 10% of reported salary and
bonus of any of the listed executives, other than Mr. Peacock.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(3) |  | Includes $6,000 in contributions by TransDigm, as projected to calendar year end 2002, to a plan established under Section  401(k) of the Internal Revenue
Code (the 401(k) plan) and $8,786 of Company paid life insurance.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(4) |  | Includes $12,000 in contributions by TransDigm, as projected to calendar year end 2002, to the 401(k) plan and $1,922 in Company-paid life insurance.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



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|(5) |  | Includes $8,706 in contributions by TransDigm, as projected to calendar year end 2002, to the 401(k) plan and $1,340 in Company-paid life insurance.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------




|(6) |  | Includes $9,180 in contributions by TransDigm, as projected to calendar year end 2002, to the 401(k) plan and $1,302 in Company-paid life insurance.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------




|(7) |  | Includes $9,690 in contributions by TransDigm, as projected to calendar year end 2002, to the 401(k) plan and $865 in Company-paid life insurance.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------




|(8) |  | Includes $9,000 in contributions by TransDigm, as projected to calendar year end 2002, to the 401(k) plan and $1,206 in Company-paid life insurance.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------




|(9) |  | Includes perquisites, $18,168 of which was for the imputed value for use of a Company automobile.
|--- |  | -------------------------------------------------------------------------------------------------



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AGGREGATED OPTION/SAR EXERCISES


IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES





Name

Exercise Price

Shares Acquired on Exercise

Value Realized

Number of Shares Underlying
Unexercised Options/SAR at Fiscal Year-End

Value of Unexercised
In- The Money Options/SARs At Fiscal Year-End (2)Douglas W. Peacock,

$
100





Exercisable

2,992

Exercisable

$
7,420,160Chairman of the Board (1)








Unexercisable



Unexercisable


335





Exercisable

3,097

Exercisable


6,952,765Unexercisable



Unexercisable


1,040





Exercisable

2,025

Exercisable


3,118,500Unexercisable

2,475

Unexercisable


3,811,500W. Nicholas Howley,


100





Exercisable

3,890

Exercisable


9,647,200President, Chief Executive








Unexercisable



Unexercisable


Officer and Director (1)


335





Exercisable

1,900

Exercisable


4,265,500Unexercisable



Unexercisable


1,040





Exercisable

2,025

Exercisable


3,118,500Unexercisable

2,475

Unexercisable


3,811,500Robert S. Henderson,


154





Exercisable

172

Exercisable


417,272President of AdelWiggins








Unexercisable



Unexercisable


200





Exercisable

400

Exercisable


952,000Unexercisable



Unexercisable


335





Exercisable

200

Exercisable


449,000Unexercisable



Unexercisable


1,040





Exercisable

315

Exercisable


485,100Unexercisable

385

Unexercisable


592,900Raymond F. Laubenthal


100





Exercisable

80

Exercisable


198,400President of AeroControlex








Unexercisable



Unexercisable


200





Exercisable

400

Exercisable


952,000Unexercisable



Unexercisable


335





Exercisable

300

Exercisable


673,500Unexercisable



Unexercisable


1,040





Exercisable

315

Exercisable


485,100Unexercisable

385

Unexercisable


592,900John F. Leary


1,040





Exercisable

225

Exercisable


346,500President of Adams Rite








Unexercisable

275

Unexercisable


423,500Aerospace


1,490





Exercisable

0

Exercisable


Unexercisable

50

Unexercisable


54,500Gregory Rufus,


1,180





Exercisable

259

Exercisable


362,600Vice President and








Unexercisable

316

Unexercisable


442,400Chief Financial Officer


1,490





Exercisable



Exercisable


Unexercisable

175

Unexercisable


190,750


---

|(1) |  | Effective December 3, 2001, Mr. Howley was named to the position of President and Chief Executive Officer. He previously served as President, Chief Operating
Officer and Director. Mr. Peacock, who previously served as Chief Executive Officer, continues to serve as Chairman of the Board.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(2) |  | The value of an unexercised option equals the aggregate fair value of the shares underlying the option (based on a per share value of $2,580 at September 30,
2002), less the aggregate exercise price of the option. The $2,580 per share value used in this calculation is only an estimate as of September 30, 2002. The actual share value on that date may have been different, and share values are subject to
change over time.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Management Stockholders Agreement





In connection with the Recapitalization, Holdings, Odyssey and the employee stockholders of Holdings, including the Named Executive Officers (the Management Stockholders) entered
into a Management Stockholders Agreement (the Management Stockholders Agreement) which governs the shares of common stock of Holdings (the Common Stock) retained by such persons after the Recapitalization and any
new shares acquired thereafter, including pursuant to the exercise of options. Subsequent to the Recapitalization, certain additional Management Stockholders have been signatories to the Management Stockholders Agreement. See Executive
CompensationStock Option Plan.





The Management Stockholders Agreement provides that, except for certain transfers to
family members and family trusts, no Management Stockholder may transfer Common Stock until the fifth anniversary of the Recapitalization, and thereafter, any proposed transfer will be subject to Holdings right of first refusal.





The Management Stockholders Agreement also provides that upon termination of the employment of a Management Stockholder under certain
circumstances, that Management Stockholder will have certain put rights and Holdings will have certain call rights regarding any Common Stock or any options to purchase Common Stock, in each case, owned by him at that time.





Pursuant to his employment agreement, as amended, Mr. Peacock has additional rights to require Holdings to repurchase a portion of his Common Stock under certain
circumstances. See Executive Compensation-Employment Agreements.





If the provisions of any law, the terms of credit and
financing arrangements or Holdings financial circumstances would prevent Holdings from making a repurchase of shares pursuant to the Management Stockholders Agreement, Holdings will not make such purchase until all such prohibitions
lapse, and will then pay the Management Stockholder, in addition to the repurchase price, a specified rate of interest on the repurchase price.





The Management Stockholders Agreement further provides that, in the event of certain types of transfers of Common Stock by Odyssey, the Management Stockholders may participate in those transfers and/or Odyssey may require the
Management Stockholders to transfer their shares in those transactions, in each case, on a pro rata basis.





Pursuant to the Management
Stockholders Agreement, the Management Stockholders are entitled to participate on a pro rata basis with, and on the same terms as, Odyssey in any future offering of Common Stock. Those participation rights will lapse following a public
offering of Common Stock if the Common Stock so offered is then listed on a national exchange or if the public offering includes 50% or more of the outstanding Common Stock that will have been issued following the offering.





Employment Agreements





In connection with
the Recapitalization, Holdings entered into an employment agreement with each of Messrs. Peacock and Howley. Effective as of December 3, 2001, Mr. Peacock resigned from his position as Chief Executive Officer of Holdings and TransDigm, but continues
to serve as Holdings and TransDigms Chairman of the Board. Mr. Howley has succeeded Mr. Peacock to the position of Chief Executive Officer of Holdings and TransDigm. In connection with these events, Holdings amended the terms of its
employment agreements with Messrs. Peacock and Howley.





Pursuant to the amended agreement with Mr. Peacock, Mr. Peacock will serve as
Holdings and TransDigms Chairman of the Board through the earlier of December 3, 2006 or the occurrence of a change in control (as defined in his employment agreement), during which time he will receive an annual base salary
at a rate no less than $100,000. In the event Mr. Peacocks service terminates by reason of death, disability, termination without cause or resignation with good reason (all as defined in his employment agreement),
Holdings will continue payment of base salary, bonus and other perquisites and benefits for 18 months thereafter. In the event Mr. Peacocks services are terminated for any reason (other than for cause), Holdings will provide
medical coverage for Mr. Peacock and his spouse following such termination for their respective lives.




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Under Mr. Howleys amended employment agreement, Mr. Howley will serve as Holdings and
TransDigms President and Chief Executive Officer for a period of at least five years, during which time he will receive an annual base salary at a rate no less than $335,000. In the event Mr. Howleys employment terminates by reason of
death, disability, termination without cause or resignation with good reason (all as defined in his employment agreement), Holdings will continue payment of base salary, bonus and other perquisites and benefits for 18 months
thereafter.





Pursuant to these employment agreements, Messrs. Peacock and Howley are also eligible for annual salary increases as
determined by Holdings Compensation Committee, and annual cash bonuses based on achievement of performance criteria established by Holdings Board of Directors.





Additionally, Mr. Peacocks employment agreement provides that so long as he serves as Chairman of the Board, Mr. Peacock can require Holdings to repurchase up to 80% of his common stock
(including certain options to purchase common stock), provided that Holdings satisfy certain financial targets. Mr. Peacocks right to require the repurchase of these shares became exercisable in fiscal 2002 and Mr. Peacock shall have this
right so long as he continues to serve as Chairman of the Board for Holdings and TransDigm. Holdings will be permitted to honor this repurchase obligation to Mr. Peacock by issuing notes under certain circumstances. Mr. Peacock may also require
repurchase of his common stock under certain circumstances as set forth in the management stockholders agreement. See Management Stockholders Agreement.





1994 Stock Incentive Plan





In May 1994, Holdings adopted the TransDigm Holding
Company Stock Incentive Plan (the 1994 Plan). The 1994 Plan governs the 14,716 options outstanding as of September 30, 2002 that were retained pursuant to the Recapitalization (the Rollover Options), including the Rollover
Options held by the Named Executive Officers. A total of 37,500 shares of Common Stock of Holdings were reserved for issuance under the 1994 Plan. However, Holdings has no intention of issuing any future options under the 1994 Plan.





The Compensation Committee has discretion under the 1994 Plan to adjust options to reflect certain specified events such as stock dividends, stock
splits, recapitalizations, mergers or reorganizations of, or by Holdings. In addition, the Board of Directors has the right to suspend or terminate the 1994 Plan, provided that no action of the Board of Directors may alter or impair a 1994 Plan
participants rights without his or her consent. The stock option agreements issued under the 1994 Plan may be altered or amended by the Compensation Committee, provided that no action of the Compensation Committee may adversely affect a 1994
Plan participants rights under any such stock option agreement without his or her consent.





The Rollover Options are fully vested,
nonforfeitable and have exercise prices equal to the per-share fair market value of Holdings Common Stock at the time of grant. Certain of the Rollover Options are intended to qualify as incentive stock options to the extent
permitted under the Internal Revenue Code. The Rollover Options generally will expire 10 years after grant and may expire earlier in the event of a participants termination of employment.





1998 Stock Option Plan





During fiscal 1999, Holdings adopted the 1998
Stock Option Plan (the Option Plan), pursuant to which stock options may be granted to Independent Directors (as defined in the Option Plan), or to employees or consultants of Holdings, TransDigm and any subsidiary of Holdings or
TransDigm (collectively, the Plan Participants). A total of 18,990 shares of Common Stock of Holdings were reserved for issuance under the Option Plan and 1,975, 1,570, 1,695 and 15,115 of the options were issued during fiscal 2002,
2001, 2000 and 1999, respectively. During fiscal 2002, 2001 and 2000, stock options pertaining to 960, 320 and 1,995 shares of Common Stock, respectively, were forfeited by employees due to terminations of such employees employment. Options to
purchase these shares may be reissued by Holdings to other Plan Participants in the future. Holdings Chief Executive Officer has discretion to select the Plan Participants and to specify the terms of such options, including the number of
shares, the exercise price and the terms of vesting and expiration of options, subject to approval by the Compensation Committee.




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The Compensation Committee has discretion under the Option Plan to adjust options to reflect certain
specified events such as stock dividends, stock splits, recapitalizations, mergers or reorganizations of, or by Holdings. In addition, the Board of Directors has the right to amend, suspend or terminate the Option Plan, subject to stockholder
approval for certain amendments.





In connection with the Recapitalization, and subsequent thereto, Holdings has granted options to
certain employees of TransDigm, including the Named Executive Officers, for the purchase of shares of Common Stock of Holdings (the New Options). Such New Options are intended to qualify as incentive stock options to the
extent permitted under the Internal Revenue Code, and have an exercise price equal to the price per share paid by Odyssey in connection with the Recapitalization (with respect to the New Options issued in connection with the Recapitalization) or the
per-share fair market value of Holdings Common Stock at the time of grant (with respect to later grants of New Options). The New Options generally will expire 10 years after grant and may expire earlier in the event of a holders
termination of employment.





Prior to May 31, 2001, the New Options vested upon the passage of time and/or upon Holdings attainment
of certain financial targets. On May 31, 2001, the New Options were modified to provide for the vesting of an additional percentage of each optionees New Options so that a total of 45% of each optionees (including each Named Executive
Officers) New Options outstanding as of May 31, 2001 were vested effective September 30, 2001. Additionally, such May 31, 2001 modification provided that, subject to each optionees (including each Named Executive Officers)
continued employment with Holdings or TransDigm and, in the case of Mr. Peacock, continued service as Chairman of the Board of Holdings and TransDigm, the remaining 55% of each optionees (including each Named Executive Officers) New
Options were eligible to become exercisable upon the earlier of (1) the date which is seven years and nine months after such New Option was granted, or (2) a change in control, if any, on or prior to September 30, 2003, pursuant to which
certain investor return targets are satisfied.





Effective July 8, 2002, the New Options were further modified so that, subject to each
optionees (including each Named Executive Officers) continued employment with TransDigm or Holdings and, in the case of Mr. Peacock, continued service as Chairman of the Board of Holdings and TransDigm, the remaining 55% of each
optionees (including each Named Executive Officers) New Options are eligible to become exercisable upon the earlier of (1) the date which is seven years and nine months after such New Option was granted, or (2) a change in
control, if any, on or prior to September 30, 2004, pursuant to which certain investor return targets are satisfied.





New Options
issued after May 31, 2001 vest as follows: 45% of each such New Option is eligible to become exercisable, subject to each optionees continued employment with TransDigm or Holdings, on the first anniversary of the grant date of such New Option
and the remaining 55% of each such New Option is eligible to become exercisable, subject to each optionees continued employment with TransDigm or Holdings, upon the earlier of (i) the date which is seven years and nine months after such grant
date, or (ii) a change in control, if any, on or prior to September 30, 2004, pursuant to which certain investor return targets are satisfied.





1999 Stock Purchase Plan





During fiscal 1999, Holdings adopted the 1999 Stock Purchase Plan of TransDigm
Holding Company (the Stock Purchase Plan), pursuant to which Holdings may grant employees, consultants and other persons having a unique relationship with Holdings or one of its subsidiaries the right to purchase Common Stock of Holdings
(Grants). A total of 671 shares of Common Stock of Holdings have been reserved for Grants under the Stock Purchase Plan.





The
Compensation Committee has discretion to select the Stock Purchase Plans participants and to specify the terms of the Grants, including the price of the Common Stock to be purchased under a Grant and any conditions on a participants
right to transfer or sell his Common Stock, which terms shall be set forth in a subscription agreement. The price of the Common Stock purchased under a Grant may not be less than 50% of the Fair Market Value of the Common Stock on the date of a
Grant. Each Grant shall be subject to the Management Stockholders Agreement.





The Compensation Committee has discretion under the
Stock Purchase Plan to adjust options to reflect certain specified events such as stock dividends, stock splits, recapitalizations, mergers or reorganizations of, or by Holdings. The Compensation Committee may also make amendments to outstanding
Grants consistent with the Stock Purchase Plan, provided that amendments adverse to a participant may only be made with a participants consent unless the amendment is provided for or contemplated in the subscription agreement and the
Management Stockholders Agreement. In addition, the Board of Directors has the right to amend, suspend or terminate the Stock Purchase Plan at any time.





No Grants may be made beyond five years after the effective date of the Stock Purchase Plan. Holdings has not yet awarded any Grants under the Stock Purchase Plan.




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ITEM 12.    
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT





The following table sets forth certain
information regarding the beneficial ownership of the Common Stock of Holdings as of September 30, 2002 with respect to each beneficial owner of more than 5% of the outstanding shares of Holdings:





Common Stock Beneficially OwnedName and Address of Beneficial Owner

Shares


PercentageOdyssey Investment Partners, LP

100,240
(1)

83.7
%280 Park AvenueWest Tower, 38th FloorNew York, NY 10017Kelso & Company

18,422
(2)

15.4320 Park Avenue, 24 FloorNew York, NY 10022





The following table sets forth the beneficial ownership as of September 30, 2002 of the
Common Stock of Holdings by each director, the Named Executive Officers and by all officers and directors as a group:





Common Stock Beneficially OwnedName of Beneficial Owner

Shares


PercentageDirectorsStephen Berger

100,240
(1)

83.7William Hopkins

100,240
(1)

83.7W. Nicholas Howley

7,815
(3)

6.1Muzzafar Mirza

100,240
(1)

83.7John W. Paxton




*Douglas W. Peacock

8,925
(4)

7.0Thomas R. Wall, IV

18,422
(2)

15.4Non-DirectorsRobert S. Henderson

1,087
(5)

*Raymond F. Laubenthal

1,095
(6)

*John F. Leary

225
(7)

*Gregory Rufus

259
(8)

*All officers and directors as a group (13 members)

139,065
(9)

99.8


---

| |  |  | Less than 1.0%
| | - |  | --------------




|(1) |  | Consists of 100,240 shares of common stock owned by Odyssey Investment Partners, LP (the Fund), Odyssey Coinvestment, LLC
(Coinvestment), TD Coinvestment I, LLC (TD I), and TD Coinvestment II, LLC (TD II and together with the Fund, Coinvestment and TD I, Odyssey). Odyssey Capital Partners, LLC is the general partner of
the Fund. Odyssey Investment Partners, LLC is the manager of the Fund and the managing member of each of Coinvestment, TD I and TD II. Stephen Berger, Muzzafar Mirza, William Hopkins (directors of Holdings) and Brian Kwait and Paul Barnett are
managing members of Odyssey Capital Partners, LLC and Odyssey Investment Partners, LLC and, therefore, may each be deemed to share voting and investment power with respect to such shares deemed to be owned by Odyssey. Each of them disclaims
beneficial ownership of such shares.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(2) |  | KIA IV-TD, LLC (KIA IV-TD) and Kelso Equity Partners II, L.P. (KEP II) have beneficial ownership of 17,473 and 949 shares, respectively. Due
to their common control, KIA IV-TD, Kelso Partners IV, L.P., the managing member of KIA IV-TD (KP IV and, together with KIA IV-TD and KEP II, Kelso), and KEP II could be deemed to beneficially own each others shares,
but each disclaims such beneficial ownership. In addition, Mr. Wall, Joseph S. Schuchert, Frank T. Nickell, George E. Matelich, Michael B. Goldberg, David I. Wahrhaftig, Frank K. Bynum, Jr. and Phillip E. Berney may be deemed to share beneficial
ownership of shares beneficially owned by KIA IV-TD, KP IV and KEP II by virtue of their status as general partners of KP IV, which is the managing member of KIA IV-TD, and as general partners of KEP II, but each disclaims such beneficial ownership.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(3) |  | Includes options to purchase 7,815 shares exercisable within 60 days.
|--- |  | ---------------------------------------------------------------------




|(4) |  | Includes options to purchase 8,114 shares exercisable within 60 days and 811 shares and votes owned by TD Equity LLC, of which Mr. Peacock is the managing
member. Mr. Peacock disclaims ownership of the 811 shares and votes owned by TD Equity LLC.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(5) |  | Includes options to purchase 1,087 shares exercisable within 60 days.
|--- |  | ---------------------------------------------------------------------




|(6) |  | Includes options to purchase 1,095 shares exercisable within 60 days.
|--- |  | ---------------------------------------------------------------------




|(7) |  | Includes options to purchase 225 shares exercisable within 60 days.
|--- |  | -------------------------------------------------------------------




|(8) |  | Includes options to purchase 259 shares exercisable within 60 days.
|--- |  | -------------------------------------------------------------------




|(9) |  | As described in footnotes (1), (2), and (4), Messrs. Berger, Hopkins and Mirza may each be deemed to share investment and voting power with respect to 100,240
shares deemed to be beneficially owned by the General Partner of Odyssey, Mr. Wall may be deemed to share investment and voting power with respect to 18,422 shares owned by Kelso and Mr. Peacock may be deemed to share investment and voting power
with respect to 811 shares owned by TD Equity LLC. Each of Messrs. Berger, Hopkins, Mirza, Wall and Peacock disclaims ownership of such shares. Excluding such shares, all officers and directors as a group beneficially own 19,592 shares, or 14.1%,
which are purchasable within 60 days upon the exercise of options.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Equity Compensation Plan
Information





The following table gives information about the Companys common stock that may be issued upon the exercise of
options under its 1994 Stock Incentive Plan, its 1998 Stock Option Plan and its 1999 Stock Purchase Plan as of September 30, 2002.





Plan Category

Number of securities to be
issued upon exercise of outstanding options,
warrants and rights

Weighted-average exercise
price of outstanding options, warrants and
rights

Number of securities remaining
available for future issuance under equity compensation
plans (excluding securities reflected in column
(a))(a)

(b)

(c)Equity compensation plans
approved by security holders

0

n/a

0Equity compensation plans
not approved by security holders (1)

31,706

$698

2,581Total

31,706

$698

2,581




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(1) Includes information regarding Holdings 1999 Stock Purchase Plan, 1998 Stock Option Plan and
1994 Stock Incentive Plan, with the exception of column (c), which does not include options available for future issuance under Holdings 1994 Stock Incentive Plan. The Company has not issued any options under the 1994 Stock Incentive Plan
since the consummation of the Recapitalization and does not intend to issue any options under the 1994 Stock Incentive Plan in the future. For descriptions of the 1994 Stock Incentive Plan, the 1998 Stock Option Plan and the 1999 Stock Purchase
Plan, see Executive Compensation1994 Stock Incentive Plan, Executive Compensation1998 Stock Option Plan and Executive Compensation1999 Stock Purchase Plan.





ITEM 13.    
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS





Tax Allocation Agreement





TransDigm and Holdings are parties to a Tax Allocation Agreement. Under the terms of the Tax Allocation Agreement, TransDigm is obligated to make payments to
Holdings equal to the amount of income taxes that TransDigm and subsidiaries would have owed for federal and state income taxes if TransDigm and subsidiaries were, for tax purposes, a separate consolidated group.





Stockholders Agreements





Pursuant to
a merger agreement, Holdings, Odyssey and KIA IV-TD and KEP II entered into a stockholders agreement (the Stockholders Agreement) concurrently with consummation of the Recapitalization. The Stockholders Agreement provides for customary
transfer restrictions, tag-along and drag-along rights, registration rights and an agreement among the parties to vote their shares of Common Stock, including the agreement of Odyssey to designate a representative of Kelso to the Board of Directors
of Holdings. See also Executive Compensation  Management Stockholders Agreement and Executive Compensation  Employment Agreements for a description of certain agreements that TransDigm and Holdings have
entered into with certain members of management in connection with the Recapitalization.





Odyssey Financial Services





TransDigm reimburses Odyssey for all of Odysseys reasonable and customary out of pocket expenses that it incurs in connection with advisory
services that it provides to TransDigm. Odyssey is the majority stockholder of Holdings. In addition, Messrs. Berger, Hopkins and Mirza, each a director of Holdings and TransDigm, are managing members of the General Partner of Odyssey.





ITEM 14.    
CONTROLS AND PROCEDURES





Holdings and TransDigm maintain disclosure controls and procedures that are designed
to ensure that information required to be disclosed in Holdings and TransDigms Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such
information is accumulated and communicated to Holdings and TransDigms management, including their Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing
and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and
management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.





Within 90 days prior to the date of this report, Holdings and TransDigm carried out an evaluation, under the supervision and with the participation of Holdings and TransDigms management, including Holdings and
TransDigms Chief Executive Officer and the Holdings and TransDigms Chief Financial Officer, of the effectiveness of the design and operation of Holdings and TransDigms disclosure controls and procedures. Based on the
foregoing, Holdings and TransDigms Chief Executive Officer and Chief Financial Officer concluded that Holdings and TransDigms disclosure controls and procedures were effective.




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There have been no significant changes in Holdings or TransDigms internal controls or in
other factors that could significantly affect the internal controls subsequent to the date Holdings and TransDigm completed their evaluations.





ITEM 15.    
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.





(a)
(1)                 Financial Statements





The
following consolidated financial statements of Holdings are included in a separate section of this Report following the signature pages:





Independent Auditors Report





Consolidated Balance Sheets  September 30, 2002 and 2001





Consolidated Statements of Income  Years Ended September 30, 2002, 2001 and 2000





Consolidated Statements of Changes in Stockholders Deficiency  Years Ended September 30, 2002, 2001 and 2000





Consolidated Statements of Cash Flows  Years Ended September 30, 2002, 2001 and 2000





Notes to Consolidated Financial Statements





(a)
(2)                 Financial Statement Schedules





The following financial statement schedule is included in a separate section of this Report following the signature pages  Valuation and Qualifying Accounts  Years Ended September 30, 2002, 2001 and 2000.





(a) (3)                 Exhibits





Number

Description of Exhibit2.1*

Agreement and Plan of Merger, dated August 3, 1998, between Phase II Acquisition Corp. and TransDigm Holding Company.2.2*

Amendment One, dated November 9, 1998, to the Agreement and Plan of Merger between Phase II Acquisition Corp. and TransDigm Holding Company.2.3*

Agreement and Plan of Reorganization, dated as of March 31, 1999, by and among TransDigm Inc., ARA Acquisition Corporation, ZMP, Inc. and TCW Special
Placements Fund II.2.4

Asset Purchase Agreement, dated as of April 29, 2001, by and between Aviation Acquisition Corporation and Federal-Mogul Ignition Company. (Incorporated
herein by reference to Exhibit 2.1 to Holdings Form 10-Q for the period ended March 31, 2001). (File No. 1631079).3.1

Restated Certificate of Incorporation, filed on May 31, 2001, of TransDigm Holding Company. (Incorporated herein by reference to Exhibit 3.1 to
Holdings Form 8-K dated May 31, 2001). (File No. 1658668).3.2

Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations
and Restrictions Thereof of 16% Cumulative Redeemable Preferred Stock of TransDigm Holding Company. (Incorporated herein by reference to Exhibit 4.1 to Holdings Form 8-K dated May 31, 2001). (File No. 1658668).3.3*

Certificate of Ownership and Merger, filed on December 3, 1998, merging Phase II Acquisition Corp. with and into TransDigm Holding Company.3.4*

Certificate of Incorporation, filed on July 2, 1993, of NovaDigm Acquisition, Inc. (TransDigm Inc.).3.5*

Certificate of Amendment, filed on July 22, 1993, of the Certificate of Incorporation of NovaDigm Acquisition, Inc. (TransDigm Inc.).3.6*

Certificate of Ownership and Merger, filed on September 13, 1993, merging IMO Aerospace Company with and into TransDigm Inc.3.8*

Bylaws of TransDigm Holding Company.




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Number

Description of Exhibit3.9*

Bylaws of NovaDigm Acquisition, Inc. (TransDigm Inc.).4.1*

Indenture, dated December 3, 1998, among TransDigm Inc., TransDigm Holding Company and Marathon Power Technologies Company and State Street Bank and Trust
Company, as trustee, relating to the 10 3/8% Senior Subordinated Notes due 2008 and the registered 10 3/8% Senior Subordinated Notes due 2008.4.2*

Supplemental Indenture, dated April 23, 1999, among ZMP, Inc. and Adams Rite Aerospace, Inc. and State Street Bank and Trust Company, as
trustee.4.3*

Specimen Certificate of 10 3/8% Senior Subordinated Notes due 2008 (included in Exhibit 4.1 hereto).4.4*

Specimen Certificate of the registered 10 3/8% Senior Subordinated Notes due 2008 (included in Exhibit 4.1 hereto).4.5*

Registration Rights Agreement, dated December 3, 1998, among TransDigm Inc., TransDigm Holding Company and Marathon Power Technologies Company and BT Alex.
Brown Incorporated and Credit Suisse First Boston Corporation.4.6***

Registration Rights Agreement, dated June 7, 2002, among TransDigm Inc., the Guarantors and the Initial Purchasers (each as defined therein), relating to the
$75 million of 10 3/8% Senior Subordinated Notes due 2008.4.7*

Indenture, dated December 3, 1998, between TransDigm Holding Company and State Street Bank and Trust Company, as trustee, relating to $20,000,000 aggregate
principal amount of 12% Pay-in-Kind Senior Notes due 2009.4.8*

Specimen Certificate of 12% Pay-in-Kind Senior Notes due 2009 (included in Exhibit 4.7 hereto).4.9*

Registration Rights Agreement, dated December 3, 1998, among TransDigm Holding Company and Kelso Investment Associates IV, L.P. and Kelso Equity Partners II,
L.P.4.10

Investment Agreement, dated as of May 31, 2001, by and between TransDigm Holding Company and First Union Investors, Inc. (Incorporated herein by reference to
Exhibit 4.3 to Holdings Form 8-K dated May 31, 2001). (File No. 1658668).4.11***

Supplemental Indenture, dated June 26, 2001, among Champion Aerospace Inc., Christic Electric Corp. TransDigm Inc., TransDigm Holding Company, Adams Rite
Aerospace, Inc., ZMP, Inc., and Marathon Power Technologies Company and State Street Bank and Trust Company, as trustee.10.1*

Stockholders Agreement, dated December 3, 1998, by and among TransDigm Holding Company, Odyssey Investment Partners Fund, LP, Odyssey Coinvestors, LLC,
TD-Equity LLC, KIA IV-TD, LLC and Kelso Equity Partners II, L.P.10.2*

Stockholders Agreement, dated December 3, 1998, by and among TransDigm Holding Company, Odyssey Investment Partners Fund and certain employee
stockholders of TransDigm Holding Company.10.3+

First Amendment to the Management Stockholders Agreement10.4*

Tax Allocation Agreement, dated December 3, 1998, between TransDigm Holding Company and TransDigm Inc.10.5**

Employment Agreement dated May 19, 1999, between TransDigm Holding Company and Douglas W. Peacock.10.6***

Employment Agreement Amendment, dated January 17, 2002, between TransDigm Holding Company and Douglas W. Peacock.10.7**

Employment Agreement dated May 19, 1999, between TransDigm Holding Company and W. Nicholas Howley.10.8***

Employment Agreement Amendment, dated January 17, 2002, between TransDigm Holding Company and W. Nicholas Howley.10.9+

TransDigm Inc. Executives Retirement Savings Plan.10.10+

1994 Stock Incentive Plan of TransDigm Holding Company.10.11+

1998 Stock Option Plan of TransDigm Holding Company.10.12+

1999 Stock Purchase Plan of TransDigm Holding Company.10.13

Amended and Restated Credit Agreement, dated as of December 3, 1998 and amended and restated as of May 31, 2001, by and among TransDigm Holding Company,
TransDigm Inc., various lending institutions party thereto, Credit Suisse First Boston, as Syndication Agent and Bankers Trust Company, as Administrative Agent. (Incorporated herein by reference to Exhibit 4.2 to Holdings Form 8-K dated May 31
2001). (File No. 1658668).10.14***

First Amendment and Consent, dated as of May 14, 2002, to the Amended and Restated Credit




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Number

Description of ExhibitAgreement.12.1+

Statement of Computation of Ratio of Earnings to Fixed Charges.12.2+

Ratio of EBITDA (as defined) to Interest Expense.12.3+

Ratio of EBITDA (as defined) to Interest Expense (as defined).12.4+

Ratio of Total Debt to EBITDA (as defined).21.1+

Subsidiaries of TransDigm Holding Company.24.1+

TransDigm Holding Company Power of Attorney (included in the signature pages to this Report).24.2+

TransDigm Inc. Power of Attorney (included in the signature pages to this Report).


---




|+ |  | Filed herewith.
|- |  | ---------------




|* |  | (Incorporated by reference to same titled exhibit to the Co-Registrants Registration Statement on Form S-4 dated January 29, 1999 File No. 333-71397, as
amended.)
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------




|** |  | (Incorporated by reference to same titled exhibit to the Co-Registrants Form 10-K dated December 23, 1999 File No. 333-71397.)
|-- |  | -------------------------------------------------------------------------------------------------------------------------------




|*** |  | Incorporated by reference to the same titled exhibit to the Co-Registrants Registration Statement on Form S-4 dated June 28, 2002 File No. 333-91574, as
amended.)
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------




(b)    Reports on Form 8-K





On July 26, 2002, the Company filed a report on Form 8-K related to TransDigm Inc.s press release announcing its offer to exchange up to $75 million in aggregate
principal amount of its registered 10 3/8% Senior Subordinated Notes due 2008 for its outstanding unregistered 10 3/8% Senior Subordinated Notes due 2008.





On August 13, 2002, the Company filed a report on Form 8-K related to disclosure of information not previously publicly disclosed in accordance with Regulation FD. Such disclosure related to the
certifications provided to the SEC by the Co-Registrants as required by 18 U.S.C. Section 1350 (as created by Section 906 of the Sarbanes-Oxley Act of 2002) in connection with the filing by the Co-Registrants of their Quarterly Report on Form 10-Q.





On September 24, 2002, the Company filed a report on Form 8-K related to TransDigm Inc.s press release
updating its earnings guidance to investors for the fiscal year ended September 30, 2002.





|(c) |  | Exhibits
|--- |  | --------




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





|(d) |  | Separate Financial Statements and Schedules
|--- |  | -------------------------------------------




The following financial statement schedule is included in a separate section of this Report following the signature pageValuation and Qualifying AccountsYears
Ended September 30, 2002, 2001 and 2000.







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SIGNATURES





Pursuant to the requirements of Section 13 of the Securities Act of 1934, as amended, each of the
Co-Registrants has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Richmond Heights, State of Ohio, on December 20, 2002.





TRANSDIGM HOLDING COMPANYBy:

/s/    Gregory RufusGregory RufusChief Financial OfficerTRANSDIGM INC.By:

/s/    Gregory
RufusGregory RufusChief Financial Officer







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TRANSDIGM HOLDING COMPANY





The undersigned directors and officers of TransDigm Holding Company, hereby constitute and appoint Gregory Rufus, with full power of substitution and resubstitution, as attorney-in-fact for each of the
undersigned, and in the name, place and stead of each of the undersigned, to execute on behalf of each of the undersigned an Annual Report on Form 10-K for the fiscal year ended September 30, 2002 pursuant to Section 13 of the Securities and
Exchange Act of 1934 and to execute any and all amendments to such report and to file the same, with all exhibits thereto and other documents required to be filed in connection therewith, granting to such attorney full power to act with or without
the others, and to have full power and authority to do and perform, in the name and on behalf of each of the undersigned, every act whatsoever necessary, advisable or appropriate to be done in the premises, hereby ratifying and approving the act of
said attorney and any such substitute.





This Power of Attorney may be executed in multiple counterparts, each of which shall be deemed an
original with respect to the person executing it.





Pursuant to the requirements of the Securities Act of 1934, this Report has been
signed below by the following persons on behalf of the Co-Registrant and in the capacities and as of the dates indicated.





Signature

Title

Date/s/ Douglas W. Peacock Douglas W. Peacock

Chairman of the Board

December 20, 2002/s/ W. Nicholas Howley W. Nicholas Howley

President and Chief Executive Officer (Principal Executive Officer) and Director

December 20, 2002/s/ Gregory Rufus Gregory Rufus

Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

December 20, 2002/s/ Stephen Berger Stephen Berger

Director

December 20, 2002/s/ William Hopkins William Hopkins

Director

December 20, 2002/s/ Muzzafar Mirza Muzzafar Mirza

Director

December 20, 2002/s/ John W. Paxton John W. Paxton

Director

December 20, 2002/s/ Thomas R. Wall, IV Thomas R. Wall, IV

Director

December 20, 2002




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CERTIFICATIONS





I, W. Nicholas Howley, certify that:





1.    I have reviewed this
annual report on Form 10-K of TransDigm Holding Company;





2.    Based on my knowledge, this annual report does not
contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
annual report;





3.    Based on my knowledge, the financial statements, and other financial information included in
this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;





4.    The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules l3a-14 and 15d-14) for the registrant and we have:





a)    Designed such
disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual
report is being prepared;





b)    Evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual report (the Evaluation Date); and





c)    Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;





5.    The registrants other certifying officer and I have disclosed, based on our most recent evaluation, to the registrants
auditors and the audit committee of registrants boards of directors (or persons performing the equivalent function):





a)    All significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in internal controls; and





b)    Any fraud,
whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and





6.    The registrants other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.





Date: December 20, 2002



/s/    W. Nicholas HowleyW. Nicholas HowleyPresident and Chief Executive Officer(Principal Executive Officer)




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I, Gregory Rufus, certify that:





1.    I have reviewed this annual report on Form 10-K of TransDigm Holding Company;





2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this annual report;





3.    Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this annual report;





4.    The
registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules l3a-14 and 15d-14) for the registrant and we have:





a)    Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;





b)    Evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the Evaluation Date);
and





c)    Presented in this annual report our conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;





5.    The registrants other certifying officer
and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants boards of directors (or persons performing the equivalent function):





a)    All significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability
to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and





b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and





6.    The registrants other certifying officer and I have indicated in this annual report whether or not there were significant changes
in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.





Date: December 20, 2002



/s/ Gregory RufusGregory RufusVice President and Chief Financial Officer(Principal Financial and Accounting Officer)




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TRANSDIGM INC.





The undersigned directors and officers of TransDigm Inc., hereby constitute and appoint Gregory Rufus, with full power of substitution and resubstitution, as attorney-in-fact for each of the
undersigned, and in the name, place and stead of each of the undersigned, to execute on behalf of each of the undersigned an Annual Report on Form 10-K for the fiscal year ended September 30, 2002 pursuant to Section 13 of the Securities and
Exchange Act of 1934 and to execute any and all amendments to such report and to file the same, with all exhibits thereto and other documents required to be filed in connection therewith, granting to such attorney full power to act with or without
the others, and to have full power and authority to do and perform, in the name and on behalf of each of the undersigned, every act whatsoever necessary, advisable or appropriate to be done in the premises, hereby ratifying and approving the act of
said attorney and any such substitute.





This Power of Attorney may be executed in multiple counterparts, each of which shall be deemed an
original with respect to the person executing it.





Pursuant to the requirements of the Securities Act of 1934, this Report has been
signed below by the following persons on behalf of the Co-Registrant and in the capacities and as of the dates indicated.





Signature

Title

Date/s/ Douglas W. Peacock Douglas W. Peacock

Chairman of the Board

December 20, 2002/s/ W. Nicholas Howley W. Nicholas Howley

President and Chief Executive Officer (Principal Executive Officer) and Director

December 20, 2002/s/ Gregory Rufus Gregory Rufus

Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

December 20, 2002/s/ Stephen Berger Stephen Berger

Director

December 20, 2002/s/ William Hopkins William Hopkins

Director

December 20, 2002/s/ Muzzafar Mirza Muzzafar Mirza

Director

December 20, 2002/s/ John W. Paxton John W. Paxton

Director

December 20, 2002/s/ Thomas R. Wall, IV Thomas R. Wall, IV

Director

December 20, 2002







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CERTIFICATIONS





I, W. Nicholas Howley, certify that:





1.    I have reviewed this
annual report on Form 10-K of TransDigm Inc.;





2.    Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;





3.    Based on my knowledge, the financial statements, and other financial information included in this annual
report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;





4.    The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules l3a-14 and 15d-14) for the registrant and we have:





a)    Designed such disclosure controls and procedures to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;





b)    Evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the Evaluation Date); and





c)    Presented in this annual report
our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;





5.    The registrants other certifying officer and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants boards of directors
(or persons performing the equivalent function):





a)    All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and





b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrants internal controls; and





6.    The registrants other certifying officer and I have
indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.








Date: December 20, 2002



/s/    W. Nicholas HowleyW. Nicholas HowleyPresident and Chief Executive Officer(Principal Executive Officer)




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I, Gregory Rufus, certify that:





1.    I have reviewed this annual report on Form 10-K of TransDigm Inc.;





2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this annual report;





3.    Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this annual report;





4.    The
registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules l3a-14 and 15d-14) for the registrant and we have:





a)    Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;





b)    Evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the Evaluation Date);
and





c)    Presented in this annual report our conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;





5.    The registrants other certifying officer
and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants boards of directors (or persons performing the equivalent function):





a)    All significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability
to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and





b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and





6.    The registrants other certifying officer and I have indicated in this annual report whether or not there were significant changes
in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.








Date: December 20, 2002



/s/    Gregory RufusGregory RufusVice President and Chief Financial Officer(Principal Financial and Accounting Officer)




-49-




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##### Table of Contents




TRANSDIGM HOLDING COMPANY AND SUBSIDIARIES





ANNUAL REPORT ON FORM 10-K:


FISCAL YEAR ENDED
SEPTEMBER 30, 2002





ITEM 8 AND ITEM 15(a) (1)





FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





INDEX








Financial Statements:

PageIndependent Auditors Report

F-1Consolidated Balance Sheets as of September 30, 2002 and 2001

F-2Consolidated Statements of Income for the Years EndedSeptember 30, 2002, 2001 and 2000

F-3Consolidated Statements of Changes in Stockholders Deficiency for theYears Ended September 30, 2002, 2001 and 2000

F-4Consolidated Statements of Cash Flows for the Years EndedSeptember 30, 2002, 2001 and 2000

F-5Notes to Consolidated Financial Statements

F-6  F-28Supplementary Data:Independent Auditors Report

F-29Valuation and Qualifying Accounts for the Years EndedSeptember 30, 2002, 2001 and 2000

F-30







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##### Table of Contents




INDEPENDENT AUDITORS REPORT





To the Shareholders and Board of Directors of


TransDigm Holding Company





We have audited the accompanying consolidated balance sheets
of TransDigm Holding Company and subsidiaries (the Company) as of September 30, 2002 and 2001, and the related consolidated statements of income, changes in stockholders deficiency and cash flows for each of the three years in the
period ended September 30, 2002. 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 TransDigm
Holding Company and subsidiaries as of September 30, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2002 in conformity with accounting principles generally
accepted in the United States of America.





Deloitte & Touche LLP





Cleveland, Ohio


December 2, 2002




F-1




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##### Table of Contents




TRANSDIGM HOLDING COMPANY





CONSOLIDATED BALANCE SHEETS


AS OF SEPTEMBER 30, 2002 AND 2001





(In Thousands of Dollars)


---




2002


2001ASSETSCURRENT ASSETS:Cash and cash equivalents

$
49,206


$
11,221Accounts receivable, net (Note 4)


37,341



40,215Inventories (Note 5)


51,429



47,872Deferred income taxes (Note 12)


9,959



9,749Prepaid expenses and other


715



447Total current assets


148,650



109,504PROPERTY, PLANT AND EQUIPMENT  Net (Note 6)


39,192



42,095INTANGIBLE ASSETS  Net (Note 7)


200,023



203,858DEBT ISSUE COSTS  Net


11,622



12,494DEFERRED INCOME TAXES AND OTHER (Note 12)


2,739



4,947TOTAL ASSETS

$
402,226


$
372,898LIABILITIES AND STOCKHOLDERS DEFICIENCYCURRENT LIABILITIES:Current portion of long-term liabilities (Notes 9 and 11)

$
7,084


$
15,822Accounts payable


11,835



9,181Accrued liabilities (Note 8)


30,696



28,829Total current liabilities


49,615



53,832LONG-TERM DEBTLess current portion (Note 9)


404,468



399,587OTHER NON-CURRENT LIABILITIES (Note 11)


6,268



8,033Total liabilities


460,351



461,452CUMULATIVE REDEEMABLE PREFERRED STOCK (Note 13)


16,124



13,222REDEEMABLE COMMON STOCK (Note 13)


2,907



1,612STOCKHOLDERS DEFICIENCY:Common stock, $.01 par value (Note 13)


102,080



102,080Warrants (Note 13)


1,934



1,934Retained deficit


(180,506
)


(206,901
)Accumulated other comprehensive loss


(664
)


(501
)Total stockholders deficiency


(77,156
)


(103,388
)TOTAL LIABILITIES AND STOCKHOLDERS DEFICIENCY

$
402,226


$
372,898





See notes to consolidated financial statements.




F-2




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##### Table of Contents




TRANSDIGM HOLDING COMPANY





CONSOLIDATED STATEMENTS OF INCOME


(In Thousands of Dollars)


---




Years Ended September 30,2002

2001

2000NET SALES (Note 4)

$
248,802

$
200,773

$
150,457COST OF SALES (Including charges of $6,639 and $185 in 2001 and 2000, respectively, due to inventory purchase accounting
adjustments) (Note 2)


134,575


118,525


82,193GROSS PROFIT


114,227


82,248


68,264OPERATING EXPENSES:Selling and administrative


21,905


20,669


16,799Amortization of intangibles


6,294


2,966


1,843Research and development


2,057


2,943


2,308Total operating expenses


30,256


26,578


20,950INCOME FROM OPERATIONS


83,971


55,670


47,314INTEREST EXPENSENET


36,538


31,926


28,563INCOME BEFORE INCOME TAXES


47,433


23,744


18,751INCOME TAX PROVISION (Note 12)


16,804


9,386


7,972NET INCOME

$
30,629

$
14,358

$
10,779





See notes to consolidated financial statements.




F-3




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##### Table of Contents




TRANSDIGM HOLDING COMPANY





CONSOLIDATED STATEMENTS OF CHANGES IN


STOCKHOLDERS DEFICIENCY


(In Thousands of Dollars)


---

Common Stock


Warrants

Retained Deficit


Accumulated Other Comprehensive Loss


TotalBALANCE, OCTOBER 1, 1999

$
102,097





$
(229,237
)

$
(482
)

$
(127,622
)Comprehensive income:Net income









10,779







10,779Other comprehensive income













32



32Comprehensive income

















10,811Exercise of stock options


274














274Income tax benefit from stock options


460














460Adjustment of redeemable common stock


(675
)





(1,657
)






(2,332
)BALANCE, SEPTEMBER 30, 2000


102,156






(220,115
)


(450
)


(118,409
)Comprehensive income:Net income









14,358







14,358Other comprehensive loss













(51
)


(51
)Comprehensive income

















14,307Issuance of warrants for purchase of common stock





$
1,934










1,934Purchase of common stock


(125
)













(125
)Income tax benefit from stock options


49














49Adjustment of redeemable common stock









(256
)






(256
)Cumulative redeemable preferred stock:Dividends accrued









(800
)






(800
)Accretion for original issuance discount









(88
)






(88
)BALANCE, SEPTEMBER 30, 2001


102,080



1,934


(206,901
)


(501
)


(103,388
)Comprehensive income:Net income









30,629







30,629Other comprehensive loss













(163
)


(163
)Comprehensive income

















30,466Adjustment of redeemable common stock









(1,332
)






(1,332
)Cumulative redeemable preferred stock:Dividends accrued









(2,629
)






(2,629
)Accretion for original issuance discount









(273
)






(273
)BALANCE, SEPTEMBER 30, 2002

$
102,080


$
1,934

$
(180,506
)

$
(664
)

$
(77,156
)





See notes to consolidated financial statements.




F-4




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##### Table of Contents




TRANSDIGM HOLDING COMPANY





CONSOLIDATED STATEMENTS OF CASH FLOWS


(In Thousands of Dollars)


---




Years Ended September 30,2002


2001


2000OPERATING ACTIVITIES:Net income

$
30,629


$
14,358


$
10,779Adjustments to reconcile net income to net cash provided by operating activities:Depreciation


7,198



5,680



4,669Amortization of intangibles


6,294



2,966



1,843Amortization/write-off of debt issue costs and note premium


4,146



1,946



1,705Interest deferral on Holdings PIK Notes


3,659



2,958



2,639Changes in assets and liabilities, net of effects from acquisition of businesses (Note 2):Accounts receivable


3,020



(13,331
)


(3,970
)Inventories


(3,542
)


4,530



(2,337
)Prepaid expenses and other assets


887



2,325



2,328Accounts payable


2,524



(947
)


191Accrued and other liabilities


1,637



2,276



(1,542
)Net cash provided by operating activities


56,452



22,761



16,305INVESTING ACTIVITIES:Capital expenditures


(3,816
)


(4,486
)


(4,368
)Acquisition of Champion Aviation (Note 2)






(162,318
)Acquisition of lube pump product line (Note 2)






(6,784
)Acquisition of ZMP, Inc. (Note 2)










1,648Acquisition of Christie Electric Corp. (Note 2)










(2,400
)Other


(1,623
)Net cash used in investing activities


(5,439
)


(173,588
)


(5,120
)FINANCING ACTIVITIES:Borrowings under credit facility, net of fees of $5,040






157,560Proceeds from senior subordinated notes, net of fees of $3,377


73,629Proceeds from exercise of stock options










295Proceeds from issuance of cumulative redeemable preferred stock and warrants, net of fees of $733 (Note 2)






14,267Repayment of amounts borrowed under credit facility


(84,820
)


(13,949
)


(7,595
)Payment of Honeywell license obligation


(1,800
)Purchase of common stock, including redeemable common stock


(37
)


(139
)


(2,305
)Net cash (used in) provided by financing activities


(13,028
)


157,739



(9,605
)NET INCREASE IN CASH AND CASH EQUIVALENTS


37,985



6,912



1,580CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR


11,221



4,309



2,729CASH AND CASH EQUIVALENTS, END OF YEAR

$
49,206


$
11,221


$
4,309SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the year for interest

$
27,431


$
26,078


$
23,955Cash paid during the year for income taxes

$
15,684


$
6,200


$
5,004





See notes to consolidated financial statements.




F-5




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##### Table of Contents




TRANSDIGM HOLDING COMPANY





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000


---




|1. |  | DESCRIPTION OF THE BUSINESS AND RECAPITALIZATION
|-- |  | ------------------------------------------------




Description of the Business - TransDigm Holding Company (Holdings), through its wholly-owned operating subsidiary, TransDigm Inc.
(TransDigm), is a premier supplier of engineered power system and airframe components servicing predominantly the aerospace industry. TransDigm, which includes the AeroControlex and AdelWiggins Groups, along with its wholly-owned
subsidiaries, Champion Aerospace Inc. (Champion), Marathon Power Technologies Company (Marathon), ZMP, Inc. (ZMP), and Adams Rite Aerospace, Inc. (Adams Rite) (collectively, the Company)
offers a broad line of proprietary aerospace components. Major product offerings in the Power System Components categories include ignition system components, fuel and lube pumps, mechanical controls, and batteries and chargers. Major product
offerings in the Airframe System Components categories include engineered connectors, engineered latches, and lavatory hardware and components.





Recapitalization - On December 3, 1998, an entity formed by affiliates of Odyssey Investment Partners, LP (Odyssey), and Holdings consummated a definitive agreement and plan of
merger (the Merger Agreement or the Merger). Pursuant to the terms of the Merger, Holdings was the surviving corporation in the Merger. In connection with the Merger, owners of Holdings outstanding common stock
received, in exchange for each outstanding share of common stock (except for shares held directly or indirectly by Holdings or the Rolled Shares, as defined in the Merger Agreement), the Per Share Merger Consideration, as defined in the
Merger Agreement. The aggregate consideration payable pursuant to the Merger, including amounts payable to holders of options and warrants, was approximately $299.7 million.





The Merger was treated as a recapitalization for financial reporting purposes, which had no impact on the historical basis of Holdings consolidated assets and
liabilities but resulted in the majority of the merger consideration being charged directly to Holdings equity, creating the Companys stockholders deficiency.





Separate Financial Statements - Separate financial statements of TransDigm are not presented since TransDigms Senior Subordinated Notes (see Note 9) are
guaranteed by Holdings and all direct and indirect subsidiaries of TransDigm and since Holdings has no significant operations or assets separate from its investment in TransDigm.





|2. |  | ACQUISITIONS
|-- |  | ------------




Champion Aviation - Through a newly-formed, wholly-owned subsidiary, Champion Aerospace Inc., TransDigm acquired substantially all of the assets and certain liabilities of the Champion Aviation Products (Champion
Aviation) business on May 31, 2001 (the Acquisition), from Federal Mogul Ignition Company (Federal-Mogul), a wholly-owned subsidiary of Federal-Mogul Corporation, for approximately $160.1 million in cash, subject to
adjustment based on the level of acquired working capital as of the closing of the Acquisition. Champion Aviation is engaged in researching, designing, developing, engineering, manufacturing, marketing, distributing and selling ignition systems and
related components and other products (including, without limitation, igniters, spark plugs, and exciters) for turbine and piston aircraft applications as well as other aerospace engine and industrial applications.





The purchase price consideration of $160.1 million in cash and $2.2 million of costs associated with the Acquisition was funded through:
(1) $147.6 million of new borrowings under the Companys existing Senior Credit Facility, (2) $14.3 million received (net of fees of $.7 million) from the issuance of $15 million of Holdings 16% Cumulative Redeemable Preferred Stock (see
Note 13) and warrants to




F-6




---

##### Table of Contents

purchase 1,381.87 shares of Holdings common stock (see Note 13), and (3) the use of $.4 million of the
Companys existing cash balances. TransDigm also borrowed an additional $15 million under the Senior Credit Facility to pay $5 million of debt issuance costs and provide $10 million of working capital for future operations. Fees paid to Odyssey
in connection with the acquisition totaled approximately $1.7 million.





Approximately $2.6 million of the
additional borrowings were obtained under the Companys revolving credit line, $45 million was added to the Companys existing Tranche B Facility, and $115 million was borrowed in the form of a new Tranche C Facility maturing in May 2007
under the Senior Credit Facility.





The Company accounted for the Acquisition as a purchase and included the
results of operations of the acquired business in its fiscal 2001 consolidated financial statements from the effective date of the Acquisition. The purchase price was allocated based on the estimated fair values of the assets and liabilities
acquired in conjunction with the Acquisition and resulted in goodwill of approximately $134 million being recorded on the Companys consolidated balance sheet. This goodwill is being amortized on a straight-line basis over forty years.





The following table summarizes the unaudited, consolidated pro forma results of operations of the Company, as if
the Acquisition had occurred at the beginning of the years ended September 30 (in thousands):





2001

2000Net sales

$
247,761

$
219,073Operating income


65,560


60,879Net income


15,137


10,380





This pro forma information is not necessarily indicative of the
results that actually would have been obtained if the operations had been combined as of the beginning of the years presented and is not intended to be a projection of future results.





Lube Pump Product Line - During the first and second quarters of fiscal 2001, the Company entered into a series of agreements with Honeywell International, Inc.
(Honeywell) which provided the Company an exclusive, worldwide license to produce and sell products composing Honeywells lube pump product line for at least forty years and enabled the Company to acquire approximately $5.9 million
of inventory pertaining to the product line, along with certain related assets. Under the agreements, the Company made cash payments approximating $6.6 million at closing and is required to make future, specified (see Note 11) and variable royalty
payments for the license. The Company also agreed to supply certain products to Honeywell for a period of five years.





The Company accounted for the acquisition as a purchase and has included the results of operations of the acquired product line (which were not material through September 30, 2001) in its fiscal 2001 consolidated financial statements
from the effective date of the acquisition (March 26, 2001). Intangible assets of $15.7 million, consisting of the license agreement and goodwill that were recorded as a result of the acquisition are being amortized on a straight-line basis over
twenty years.





The purchase price of the inventory acquired from Honeywell is subject to adjustment based upon a
final determination of the value acquired, as defined.





Pro forma net sales and results of operations for this
acquisition, had the acquisition occurred at the beginning of the years ended September 30, 2001 and 2000, are not significant and, accordingly, are not provided.




F-7




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##### Table of Contents




On March 8, 2000, Marathon acquired all of the issued and outstanding common
shares of Christie Electric Corp. (Christie) for $2.4 million. The Company accounted for the acquisition as a purchase and included the results of operations of Christie, which are not material to the Companys consolidated results
of operations, in its fiscal 2000 consolidated financial statements from the effective date of acquisition. Goodwill of $1.8 million, which resulted from the acquisition, is being amortized on a straight-line basis over forty years.





On April 23, 1999, TransDigm acquired all of the outstanding common stock of ZMP, Inc., the corporate parent of Adams Rite
Aerospace, Inc. through a merger. During the year ended September 30, 2000, the Company received a purchase price adjustment of $1.6 million, net of expenses, and credited the amount against goodwill previously recognized in connection with the
merger.





|3. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- |  | ------------------------------------------




Consolidation - The accompanying consolidated financial statements include the accounts of TransDigm Holding Company and subsidiaries. All significant intercompany balances and transactions have
been eliminated.





Revenue Recognition - Revenue is recognized when products are shipped to the customer.
Any anticipated losses on contracts are charged to earnings when identified.





Cash Equivalents - The
Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.





Allowance for Uncollectible Accounts - The Company reserves for amounts determined to be uncollectible based on specific identification and historical experience.





Inventories -Inventories are stated at the lower of cost or market. Cost of inventories is determined by the average cost and the first-in, first-out (FIFO)
methods. Provision for potentially obsolete or slow-moving inventory is made based on managements analysis of inventory levels and future sales forecasts. In accordance with industry practice, all inventories are classified as current assets
even though a portion of the inventories may not be sold within one year.





Property, Plant and Equipment -
Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method at rates based on the estimated useful lives of the assets.





Debt Issue Costs, Premiums and Discounts - The cost of obtaining financing as well as premiums and discounts are amortized using the interest method over the terms
of the respective obligations/securities.





Intangible Assets - Intangible assets are amortized on a
straight-line basis over their respective estimated useful lives ranging from 5 to 40 years. The Company assesses the recoverability of intangibles by determining whether the amortization over the remaining life can be recovered through projected,
undiscounted, cash flows from future operations.





Income Taxes - The Company accounts for income taxes
using an asset and liability approach. Deferred taxes are recorded for the difference between the book and tax basis of various assets and liabilities.





Product Warranty Costs - The Company generally provides a one year warranty on certain products beginning on the date the product is installed on an aircraft. A provision for estimated sales
returns and the cost of repairs is recorded at the time of sale and periodically adjusted to reflect actual experience.




F-8




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##### Table of Contents




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.





Comprehensive Loss - The Companys accumulated other comprehensive loss, consisting principally of its minimum pension liability adjustment, is reported separately in the accompanying
consolidated balance sheets and statements of changes in stockholders deficiency, net of taxes of $521,000, $404,000, and $317,000 at September 30, 2002, 2001, and 2000, respectively.





Segment Reporting - The Companys principal business, aircraft component supplier, is reported as one segment. Substantially all of the Companys
operations are located within the United States.





Reclassifications -Certain reclassifications have been
made to the fiscal 2001 and 2000 financial statements and related notes to conform to the classifications used in fiscal 2002.





|4. |  | SALES AND ACCOUNTS RECEIVABLE
|-- |  | -----------------------------




Sales -The Companys sales and receivables are concentrated in the aerospace industry. The major customers for Power System Components include commercial and defense aftermarket end users
of engines and APUs, engine and APU OEMs, and regional and business jet OEMs and end users. The major customers for Airframe System Components include commercial and defense aftermarket end users, commercial transport OEMs, and regional and business
jet OEMs and end users.





Information concerning the Companys net sales by its major system component
categories is as follows for the years ended September 30 (in thousands):





2002

2001

2000Power System Components

$
156,222

$
106,811

$
67,275Airframe System Components


92,580


93,962


83,182Total

$
248,802

$
200,773

$
150,457





For the year ended September 30, 2002, three customers each
accounted for approximately 11% of the Companys net sales. Two customers represented approximately 17% and 8% of the Companys net sales during the year ended September 30, 2001 and two customers represented approximately 10% and 9% of
the Companys net sales for the year ended September 30, 2000. Export sales to customers, primarily in Western Europe, were $59.4 million in fiscal 2002, $54.8 million in fiscal 2001, and $36.2 million in fiscal 2000.





Accounts Receivable - Accounts receivable consist of the following at September 30 (in thousands):





2002


2001Due from U.S. government or prime contractors underU.S. government programs

$
2,670


$
3,798Commercial customers


35,976



37,573Allowance for uncollectible accounts


(1,305
)


(1,156
)Accounts receivable - net

$
37,341


$
40,215




F-9




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##### Table of Contents




Approximately 28% of the Companys receivables at September 30, 2002 were
due from two customers. In addition, approximately 39% of the Companys receivables were due from entities which principally operate outside of the United States. Credit is extended based on an evaluation of each customers financial
condition and collateral is generally not required.





|5. |  | INVENTORIES
|-- |  | -----------




Inventories consist of the following at September 30 (in thousands):





2002


2001Work-in-progress and finished goods

$
28,534


$
30,990Raw materials and purchased component parts


30,010



24,177Total


58,544



55,167Reserve for excess and obsolete inventory


(7,115
)


(7,295
)Inventories - net

$
51,429


$
47,872





|6. |  | PROPERTY, PLANT AND EQUIPMENT
|-- |  | -----------------------------




Property, plant and equipment consist of the following at September 30 (in thousands):





2002


2001Land and improvements

$
5,464


$
4,881Buildings and improvements


15,287



19,316Machinery and equipment


43,421



38,024Furniture and fixtures


5,893



5,560Construction in progress


1,252



814Total


71,317



68,595Accumulated depreciation


(32,125
)


(26,500
)Property, plant and equipment - net

$
39,192


$
42,095





|7. |  | INTANGIBLE ASSETS
|-- |  | -----------------




Intangible assets, net of accumulated amortization, consist of the following at September 30 (in thousands):





2002

2001Goodwill

$
158,453

$
191,630Trademarks and trade names


19,852Honeywell license agreement (Note 2)


11,191


11,946Technology


9,078Other


1,449


282Total

$
200,023

$
203,858





Accumulated amortization of intangibles was $29.6 million at
September 30, 2002 and $23.3 million at September 30, 2001.




F-10




---

##### Table of Contents




During fiscal 2002, the purchase price allocation of the Champion Aviation
acquisition (see Note 2) was finalized and resulted in the recognition of trademarks and trade names intangible assets of $20.5 million and technology (patented and unpatented) intangible assets of $10.9 million, with a corresponding reduction in
previously recorded goodwill.





|8. |  | ACCRUED LIABILITIES
|-- |  | -------------------




Accrued liabilities consist of the following at September 30 (in thousands):





2002

2001Estimated losses on uncompleted contracts

$
8,429

$
10,233Interest


7,310


5,540Compensation and related benefits


6,155


6,650Sales returns and repairs


4,249


3,363Professional services


1,291


688Income taxes payable


282


1,062Other


2,980


1,293Total

$
30,696

$
28,829





|9. |  | DEBT
|-- |  | ----




Summary - The Companys long-term debt consists of the following at September 30 (in thousands):





2002


2001Term loans:Tranche A





$
40,713Tranche B

$
83,629



105,186Tranche C


92,163



114,713Senior Subordinated Notes


200,000



125,000Holdings PIK Notes


31,256



27,597Premium on Senior Subordinated Notes


1,904Total debt


408,952



413,209Current maturities


(4,484
)


(13,622
)Long-term portion

$
404,468


$
399,587





Revolving Credit and Term Loans TransDigms
Senior Credit Facility totals $293 million, which consists of (1) a $30 million revolving credit line maturing in November 2004 and (2) a term loan facility in the aggregate of $263 million, consisting of a $43 million Tranche A Facility, which was
repaid in fiscal 2002, a $105 million Tranche B Facility maturing in May 2006, and a $115 million Tranche C Facility maturing in May 2007. At September 30, 2002, the Company had $30 million of borrowings (the entire revolving credit line) available
under the credit facility.





The interest rate under the credit facility is, at TransDigms option, either (A)
a floating rate equal to the Base Rate plus the Applicable Margin, as defined in the credit facility; or (B) the Eurodollar Rate for fixed periods of one, two, three, or six months, plus the Applicable Margin. The credit facility is subject to
mandatory prepayment with a defined percentage of net proceeds from certain asset sales, insurance proceeds or other awards that are payable in connection with the loss, destruction or condemnation of any assets, certain new debt and equity
offerings and 50% of excess cash flow (as defined in the credit facility) over a predetermined amount defined in the credit facility. The interest rate on outstanding borrowings at September 30, 2002 was 5.375%.




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All obligations under the Senior Credit Facility are guaranteed by Holdings and
each of the subsidiaries, direct and indirect, of TransDigm. The indebtedness outstanding under the Senior Credit Facility is secured by a pledge of the stock of TransDigm and all of its domestic subsidiaries and a perfected lien and security
interest in assets other than real estate (tangible and intangible) of TransDigm, its direct and indirect subsidiaries and Holdings. The agreement also contains a number of restrictive covenants that, among other things, restrict Holdings, TransDigm
and their subsidiaries from various actions, including mergers and sales of assets, use of proceeds, granting of liens, incurrence of indebtedness, voluntary prepayment of indebtedness, capital expenditures, payment of dividends, business
activities, investments and acquisitions, and transactions with affiliates. The agreement also requires the Company to comply with certain financial covenants pertaining to earnings, interest coverage and leverage. The Company was in compliance with
all financial covenants of the Senior Credit Facility as of September 30, 2002. The maturities of the Companys term loans by fiscal year are as follows: $ 4.5 million in fiscal 2003, $13.1 million in fiscal 2004, $36.7 million in fiscal 2005,
$54.9 million in fiscal 2006, and $66.6 million in fiscal 2007.





On June 7, 2002, the Senior Credit Facility was
amended to, among other things, permit TransDigm to: (1) incur up to $150 million of additional bank borrowings or subordinated debt (for which there are currently no commitments to provide such funds) to finance permitted acquisitions or pay
dividends to Holdings to retire certain paid-in-kind subordinated notes issued by Holdings (the Holdings PIK Notes) and (2) make future permitted acquisitions as long as the aggregate purchase price of such permitted
acquisitions does not exceed $225 million and certain other conditions are met. The amendment also modified certain financial covenants and waived any mandatory prepayment of amounts owed under the Senior Credit Facility from excess cash flow, if
any, generated by TransDigm during fiscal 2002.





Senior Subordinated Notes- TransDigms Senior
Subordinated Notes (the Notes) bear interest at an annual rate of 10 3 / 8 %, maturing on December 1, 2008, and are unsecured obligations of TransDigm ranking subordinate to the Companys
senior debt, as defined in the note agreement. The Notes are redeemable after December 1, 2003, in whole or in part, at specified redemption prices, which decline over the remaining term of the Notes. If a change in control of the Company occurs,
the holders of the Notes will have the right to demand that the Company redeem the Notes at a purchase price equal to 101% of the principal amount of the Notes plus accrued interest. The Notes contain many of the same restrictive covenants included
in the Senior Credit Facility. The Company was in compliance with all financial covenants of the Notes as of September 30, 2002.





On June 7, 2002, the Company issued $75 million of additional Notes at a premium of approximately $2 million. The proceeds of the additional Notes, net of fees and expenses of approximately $3 million, were used to repay $74 million
of the borrowings outstanding under the Companys Senior Credit Facility ($33 million under the Tranche A Facility, $19.5 million under the Tranche B Facility, and $21.5 million under the Tranche C Facility).





Holdings PIK Notes- In connection with the Merger (see Note 1), Holdings issued $20 million of pay-in-kind notes due in fiscal
2009 (Holdings PIK Notes or PIK Notes). The PIK Notes are unsecured obligations of Holdings, which has no significant assets or operations. Interest on the PIK Notes is accrued at an annual fixed rate of 12% and is payable
semi-annually in the form of additional PIK Notes through December 2003. Thereafter, cash interest is payable semi-annually commencing in the year 2004. The PIK Notes are redeemable by Holdings prior to their maturity under certain circumstances and
contain many of the same restrictive covenants included in the Notes and Senior Credit Facility. The Company was in compliance with all financial covenants of the PIK Notes as of September 30, 2002.





|10. |  | RETIREMENT PLANS
|--- |  | ----------------




The Company has two non-contributory defined benefit pension plans, which together cover certain union employees. The plans provide benefits of stated amounts for each year of service. The




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Companys funding policy is to contribute actuarially determined amounts
allowable under Internal Revenue Service regulations. The plans assets consist primarily of guaranteed investment contracts with an insurance company.





Financial information for the defined benefit plans is provided below (in thousands):





Years Ended September 30,2002


2001Change in benefit obligation:Benefit obligation, beginning of year

$
5,394


$
5,034Service cost


82



82Interest cost


379



359Benefits paid


(271
)


(298
)Actuarial losses


392



217Benefit obligation, end of year

$
5,976


$
5,394





2002


2001Change in plan assets:Fair value of plan assets, beginning of year

$
4,422


$
3,846Actual return on plan assets


250



239Employer contribution


518



635Benefits paid


(271
)


(298
)Fair value of plan assets, end of year

$
4,919


$
4,422





2002


2001Amounts recognized in the consolidated balance sheets at September 30 consist of:Intangible assets

$
390


$
311Accrued liabilities


(396
)


(551
)Other non-current liabilities


(661
)


(421
)Accumulated other comprehensive loss


1,181



880Net amount recognized

$
514


$
219





2002


2001Weighted-average assumptions as of September 30:Discount rate

6.5
%

7.0
%Expected return on plan assets

6.0
%

6.0
%





Years Ended September
30,2002


2001


2000Components of net periodic benefit cost:Service cost

$
82


$
82


$
87Interest cost


379



359



333Expected return on plan assets


(271
)


(236
)


(210
)Net amortization and deferral


91



83



71Net periodic pension cost

$
281


$
288


$
281




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The Company also sponsors certain defined contribution employee savings plans
that cover substantially all of the Companys non-union employees. Under the plans, the Company contributes a percentage of employee compensation and matches a portion of employee contributions. The cost recognized for such contributions under
these plans for the years ended September 30, was approximately $1.8 million, $1.0 million, and $1.2 million in fiscal 2002, 2001, and 2000, respectively.





|11. |  | OTHER NON-CURRENT LIABILITIES
|--- |  | -----------------------------




Other non-current liabilities consist of the following at September 30 (in thousands):





2002


2001Obligation under Honeywell license agreement (net of imputed interest of $557 in fiscal 2002 and $1,043 in 2001) (Note
2)

$
6,443


$
7,757Accrued pension costs (Note 10)


661



421Other


1,764



2,055Total


8,868



10,233Current portion of Honeywell license agreement obligation


(2,600
)


(2,200
)Other non-current liabilities

$
6,268


$
8,033





The Honeywell license agreement obligation is non-interest bearing
and is due as follows: $2.6 million in fiscal 2003 and $2.2 million in both fiscal 2004 and 2005. The obligation has been recorded at its present value using an imputed interest rate of 8%.





|12. |  | INCOME TAXES
|--- |  | ------------




The provision for income taxes consists of the following for the years ended September 30 (in thousands):





2002

2001


2000Current

$
14,904

$
9,239


$
6,288Deferred


1,433


186



1,545Net operating loss carryforward - state and local income taxes


467


(39
)


139Total

$
16,804

$
9,386


$
7,972





The differences between the provision for income taxes at the
federal statutory income tax rate and the tax provision shown in the consolidated statements of income for the years ended September 30 are as follows (in thousands):





2002


2001


2000Tax at statutory rate of 35%

$
16,601


$
8,310


$
6,563State and local income taxes


1,910



650



700Benefit from foreign sales


(934
)


(483
)


(363
)Nondeductible goodwill amortization and interest expense


790



746



711Research and development credits


(1,272
)Other - net


(291
)


163



361Provision for income taxes

$
16,804


$
9,386


$
7,972




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The components of the deferred tax assets at September 30 consist of the
following (in thousands):





2002


2001CURRENT ASSET:Estimated losses on uncompleted contracts

$
3,304


$
3,991Inventory


1,928



1,844Employee benefits


1,589



1,723Sales returns and repairs


1,786



1,012Other accrued liabilities


1,352



1,179Total

$
9,959


$
9,749NON-CURRENT ASSET:Holdings PIK Notes interest

$
4,097


$
2,761Intangible assets


(579
)


1,910Retirement and other accrued obligations


1,098



870Property, plant and equipment


(2,388
)


(1,785
)Net operating loss carryforwards - state and local income taxes (expiring in fiscal 2022)


34



499Total

$
2,262


$
4,255





During the year ended September 30, 2002, the Company filed amended
income tax returns for fiscal years 1997 through 2000 with the Internal Revenue Service (IRS) requesting refunds totaling approximately $1.8 million for research and development tax credits that had not been claimed on previously filed
tax returns for these years. Because these income tax returns are currently being audited by the IRS, the Company has not recorded potential tax refunds that could result from these credits.





|13. |  | CAPITAL STOCK, WARRANTS, AND OPTIONS
|--- |  | ------------------------------------




Common Stock - Authorized common stock of the Company consists of 900,000 shares of common stock (voting), par value $.01 per share and 100,000 shares of Class A (non-voting) common stock. The
total number of shares of voting common stock outstanding at September 30, 2002 and 2001 was 119,789 and 119,814, respectively. No shares of Class A (non-voting) common stock were outstanding at September 30, 2002 and 2001. Common stock issued to
management personnel is subject to certain agreements, which provide management shareholders the right (a put) to require the Company to repurchase their shares of common stock under certain conditions at fair market value. Accordingly,
the estimated put value of the outstanding shares of voting common stock held by management (1,127 and 1,152 shares at September 30, 2002 and 2001, respectively) has been classified as redeemable common stock in the accompanying consolidated balance
sheets.





Common Stock Options - Holdings has granted options to purchase Common Stock to certain employees
of TransDigm and Holdings. All outstanding options issued prior to the Recapitalization (See Note 1) are vested. Prior to May 31, 2001, the terms of any stock options issued subsequent to, or in connection with, the Recapitalization (the New
Options) vested upon the passage of time and/or upon Holdings attainment of certain financial targets. On May 31, 2001, the New Options were modified to provide for the vesting of an additional percentage of each optionees New
Options so that a total of 45% of each of the New Options outstanding at May 31, 2001 were vested effective September 30, 2001. Additionally, such May 31, 2001 modification provided that, subject to each optionees continued employment with
Holdings or TransDigm and, in the case of the Chairman of the Board of Holdings and TransDigm, continued service as Chairman of the Board of Holdings and TransDigm, the remaining 55% of the New Options were eligible to become exercisable upon the
earlier of (1) the date which is seven years and nine months after such New Option was granted, or (2) a change in control, if any, on or prior to September 30, 2003, pursuant to which certain investor return targets are satisfied.




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Effective July 8, 2002, the New Options were further modified so that, subject to each optionees continued
employment with TransDigm or Holdings and, in the case of the Chairman of the Board of Holdings and TransDigm, continued service as Chairman of the Board of Holdings and TransDigm, the remaining 55% of each optionees New Options are eligible
to become exercisable upon the earlier of (1) the date which is seven years and nine months after such New Option was granted, or (2) a change in control, if any, on or prior to September 30, 2004, pursuant to which certain investor
return targets are satisfied.





New Options issued after May 31, 2001 vest as follows: 45% of each such New Option
is eligible to become exercisable, subject to each optionees continued employment with TransDigm or Holdings, on the first anniversary of the grant date of such New Option and the remaining 55% of each such New Option is eligible to become
exercisable, subject to each optionees continued employment with TransDigm or Holdings, upon the earlier of (i) the date which is seven years and nine months after such grant date, or (ii) a change in control, if any, on or prior
to September 30, 2004, pursuant to which certain investor return targets are satisfied.





None of the options to
purchase Common Stock (including the New Options and the Rollover Options) are exercisable more than ten years after the date the options were granted.





A summary of the status of the Companys stock option plans as of September 30, 2002, 2001, and 2000 and changes during the years then ended is presented below:





2002

2001

2000Shares


Weighted- Average Exercise Price

Shares


Weighted- Average Exercise Price

Shares


Weighted- Average Exercise PriceOutstanding at beginning of year

30,781


$
668

29,531


$
634

30,399


$
623Granted

1,975



1,490

1,570



1,400

1,695



1,180Exercised/cancelled

(1,050
)


1,307

(320
)


1,128

(2,563
)


864Outstanding at end of year

31,706



698

30,781



668

29,531



634Exercisable at end of year

21,475



481

21,428



477

16,516



300





The following table summarizes information about stock options
outstanding at September 30, 2002:





Exercise Prices

Options OutstandingNumber Outstanding

Weighted-Average Remaining Contractual Life

Number Exercisable$    100

7,002

1.2

7,002154

172

2.5

172200

1,245

3.5

1,245335

6,297

4.7

6,2971,040

12,850

6.6

5,7841,180

1,295

7.8

5831,400

870

8.7

3921,490

1,975

9.4

31,706



21,475





At September 30, 2002, 1,910 remaining options were available for
award under the Companys stock option plans. In addition, 8,114 of the exercisable stock options at September 30, 2002, with exercise prices of $100 (2,992 options), $335 (3,097 options), and $1,040 (2,025 options), provide the holder a right
under certain conditions, to require the Company to purchase, at fair value, 80% of the shares that can be acquired from the exercise of the options.





The Company applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its stock option plans. No compensation cost has been recognized for the Companys
stock option plans because the exercise price of the options issued equaled the fair value of the common stock on the grant date. Had




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compensation cost for the Companys stock option plans been determined based on the fair value at the grant dates
for awards under those plans consistent with the method specified in Statement No. 123 of the Financial Accounting Standards Board (FASB), the Companys net income for the year ended September 30, 2002 would have been reduced by
approximately $523,000; the Companys net income for the year ended September 30, 2001 would have been reduced by approximately $1,730,000; and the Companys net income for the year ended September 30, 2000 would have been reduced by
$509,000.





The weighted average fair value of options granted during the years ended September 30, 2002, 2001, and
2000 was $351, $411, and $399, respectively. The fair value of the options granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: risk-free interest rates ranging from 3.5% to 5.4%,
expected life of approximately seven years, expected volatility and dividend yield of 0%.





Warrants to Purchase
Common Stock - At September 30, 2002, warrants to purchase 1,381.87 shares of Holdings common stock were issued and outstanding. The warrants were issued in connection with the acquisition of Champion Aviation (see Note 2) and were
recorded at their estimated fair value at the date of issuance. The warrants are exercisable through May 2011 at an exercise price per share of $0.01.





Cumulative Redeemable Preferred Stock -The authorized preferred stock of Holdings consists of 75,000 shares of 16% cumulative redeemable preferred stock with a par value of $.01 per share. As
of September 30, 2002, 17,496 shares of the preferred stock were issued and outstanding. The preferred stock has a stated liquidation preference of $1,000 per share. Dividends accrue and accumulate at 16% per annum, based on the liquidation
preference amount, and are payable semi-annually in cash or delivery of additional shares of preferred stock. The recorded value of the preferred stock includes $0.9 million of accrued dividends that will be paid-in-kind and is net of remaining,
unamortized original issuance discount and issuance costs of $2.3 million. The preferred stock, including all accumulated and unpaid dividends, is also subject to mandatory redemption in 2010. Prior to the date of mandatory redemption, under certain
circumstances (including a change in control), the preferred stock is subject to optional redemption. The terms of the preferred stock require the Company to comply with certain covenants, including covenants that limit (1) acquisition indebtedness,
(2) restricted payments, (3) distributions by subsidiaries, (4) transactions with affiliates, (5) dividend and other payment restrictions and (6) mergers or consolidations.





|14. |  | LEASES
|--- |  | ------




The Company leases office space for its corporate headquarters and two of its divisions. The Company also leases a manufacturing facility. The office space lease requires rental payments of approximately $200,000 per year through
2004. TransDigm may also be required to share in the operating costs of the facility under certain conditions. The facility lease requires annual rental payments ranging from $540,000 to $780,000 through December 2012. TransDigm also has commitments
under operating leases for vehicles and equipment. Rental expense was $1,257,000 in 2002, $1,106,000 in 2001, and $978,000 in 2000. Future, minimum rental commitments at September 30, 2002 under operating leases having initial or remaining
non-cancelable lease terms exceeding one year are $1,336,000 in 2003, $1,283,000 in 2004, $1,178,000 in 2005, $990,000 in 2006, $707,000 in 2007, and $3,837,000 thereafter.





|15. |  | FAIR VALUE OF FINANCIAL INSTRUMENTS
|--- |  | -----------------------------------




The Company has various financial instruments, including cash and cash equivalents, accounts receivable and payable, accrued liabilities and long-term debt. The carrying value of the Companys
cash and cash equivalents, accounts receivable and payable, and accrued liabilities approximates their fair value due to the short-term maturities of these assets and liabilities. The Company also believes that the aggregate fair value of its term
loans approximates its carrying amount because the interest rates on the debt are reset on a frequent basis to reflect current market rates. The fair value of the Companys Senior Subordinated Notes approximated $205 million at September 30,
2002 based upon quoted market prices. A determination of the fair value of the Holdings PIK Notes and cumulative redeemable preferred stock is not considered practicable because they are not publicly traded.




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|16. |  | CONTINGENCIES
|--- |  | -------------




Environmental - The Company has been addressing contaminated soil and groundwater beneath its facility in Waco, Texas. Although there can be no assurance that material expenditures will not be required in the future to address
currently unidentified contamination or to satisfy further requirements of the Texas Natural Resources Conservation Commission (TNRCC), the Company believes, based upon information currently available, that the current soil and
groundwater remediation at the Waco facility will not require the incurrence of material expenditures in excess of the escrow fund created in August 1997.





In connection with the Companys acquisition of Marathon, a $2 million escrow was created to cover the cost of remediation that TNRCC might require at the facility. During September 1998, the
former owner of Marathon filed a lawsuit against the Company to release the environmental escrow alleging that the Company had violated the requirements of the stock purchase agreement relating to the investigation of the presence of certain
contaminants at the Waco, Texas facility. The Company has filed counter claims against the seller and cannot presently determine the ultimate outcome of this matter. Current estimates indicate the $2.0 million escrow is adequate to cover any costs
that may be required to meet TNRCC requirements.





Put Options -During fiscal 2002, a put option
(put) became exercisable enabling the holder to require the Company to purchase up to 80% of his Common Stock (including shares acquired through the exercise of stock options and held at least six months) at fair value, subject to
certain restrictions under the Companys long-term debt agreements and his continued service as Chairman of the Board of Holdings and TransDigm. As of September 30, 2002, there were no outstanding shares of Common Stock subject to the put;
however, 8,114 shares of Common Stock that can be acquired under exercisable stock options at September 30, 2002 are subject to the put. The estimated fair value of the 6,491 shares that the Chairman of the Board could require Holdings to purchase,
net of the exercise price of the related stock options, totaled approximately $15.0 million at September 30, 2002. An additional 2,475 shares of Common Stock that are issuable in the future if certain stock options become exercisable upon the
occurrence of certain events (change in control, achievement of certain earnings targets, etc.) or certain specified dates in the option agreements are also subject to the put. The estimated fair value of 80% of the additional 2,475 shares, net of
the exercise price of the related stock options, totaled approximately $3.0 million at September 30, 2002. Also, the Chairman of the Board and other members of management hold put rights that may become exercisable in the future with respect to
other shares of common stock, including shares of common stock subject to options.





Other - During the
ordinary course of business, the Company is from time to time threatened with, or may become a party to, legal actions and other proceedings. While the Company is currently involved in some legal proceedings, it believes the results of these
proceedings will not have a material adverse effect on its financial condition, results of operations, or cash flows. The Company believes that its potential exposure to such legal actions is adequately covered by its aviation product and general
liability insurance.




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|17. |  | QUARTERLY FINANCIAL DATA (UNAUDITED)
|--- |  | ------------------------------------




First Quarter

Second Quarter

Third Quarter

Fourth Quarter(In Thousands)Year Ended September 30, 2002Net sales

$
57,725

$
59,888

$
63,045

$
68,144Gross profit


26,027


27,438


30,594


30,168Net income


5,703


6,586


8,575


9,765Year Ended September 30, 2001Net sales

$
35,780

$
42,084

$
54,201

$
68,708Gross profit


15,787


19,257


21,088


26,116Net income


1,986


3,929


3,582


4,861





|18. |  | NEW ACCOUNTING STANDARDS
|--- |  | ------------------------




In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assetswhich became effective for the Company on October 1, 2002. Under the provisions of SFAS No. 142 amortization of goodwill ceased effective October 1, 2002. The adoption of this statement will result in the elimination of approximately $5 million
of annual goodwill amortization expense beginning in fiscal 2003. Goodwill amortization will be replaced with the requirement to test goodwill at least annually for impairment. The initial impairment test must be completed within six months of
adoption of the new standard. The Company has not determined the impact, if any, that the impairment test will have on its consolidated financial position or results of operations.





In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. This statement requires entities to record the fair value of a liability for
an asset retirement obligation in the period in which it is incurred. The amount recorded as a liability will be capitalized by increasing the carrying amount of the related long-lived asset. Subsequent to initial measurement, the liability is
accreted to the ultimate amount anticipated to be paid and is also adjusted for revisions to the timing of the amount of estimated cash flows. The capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The provisions of this statement became effective for the Companys fiscal year ending September 30, 2003. The Company has not
determined the impact, if any, that this statement will have on its consolidated financial position or results of operations.





In August 2001, the FASB issued SFAS No. 144, Accounting for Impairment or Disposals of Long-Lived Assets. This statement specifies the accounting model to be used for long-lived assets to be disposed of by sale (whether
previously held and used or newly acquired) and by broadening the presentation of discontinued operations to include more disposal transactions. The provisions of this statement became effective for the Companys fiscal year ending September
30, 2003. The Company has not determined the impact that this statement will have on its consolidated financial position or results of operations.




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In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, which changes the accounting for costs such as lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or
other exit or disposal activity initiated after December 31, 2002. The statement requires companies to recognize the fair value of costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an
exit or disposal plan. The Company anticipates that the adoption of this statement will not have a material effect on its financial position or results of operations.





|19. |  | SUPPLEMENTAL GUARANTOR INFORMATION
|--- |  | ----------------------------------




TransDigms Senior Subordinated Notes, including the additional notes issued on June 7, 2002 (see Note 9), are unconditionally guaranteed by Holdings and all direct and indirect subsidiaries of
TransDigm (other than one wholly-owned, non-guarantor subsidiary that has inconsequential assets, liabilities and equity) on a senior subordinated basis. The Holdings guarantee of the Senior Subordinated Notes is subordinated to Holdings
obligations under the Holdings PIK Notes, as well as the Holdings guarantee of TransDigms borrowings under its Senior Credit Facility. The following supplemental consolidating condensed financial information presents the balance sheets
of the Company as of September 30, 2002 and 2001 and its statements of income and cash flows for the years ended September 30, 2002, 2001 and 2000.




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##### Table of Contents




TRANSDIGM HOLDING COMPANY





CONDENSED CONSOLIDATING BALANCE SHEET


AS OF SEPTEMBER 30, 2002


(In Thousands of Dollars)





Holdings


TransDigm

Subsidiary Guarantors


Eliminations


Total ConsolidatedASSETSCURRENT ASSETS:Cash and cash equivalents





$
50,866

$
(1,660
)





$
49,206Accounts receivable, net






13,636


23,705







37,341Inventories






20,131


31,298







51,429Deferred income taxes






9,959










9,959Prepaid expenses and other






299


416







715Total current assets






94,891


53,759







148,650INVESTMENT IN SUBSIDIARIES AND INTERCOMPANY BALANCES

$
(144,430
)


377,723


(123,047
)

$
(110,246
)PROPERTY, PLANT AND EQUIPMENT - Net






9,568


29,624







39,192INTANGIBLE ASSETS - Net






22,665


177,358







200,023DEBT ISSUE COSTS - Net


209



11,413










11,622DEFERRED INCOME TAXES AND OTHER






2,739










2,739TOTAL ASSETS

$
(144,221
)

$
518,999

$
137,694


$
(110,246
)

$
402,226LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIENCY)CURRENT LIABILITIES:Current portion of long-term liabilities





$
7,084









$
7,084Accounts payable






5,551

$
6,284







11,835Accrued liabilities






17,413


13,283







30,696Total current liabilities






30,048


19,567







49,615LONG-TERM DEBT - Less current portion

$
31,256



373,212










404,468OTHER NON-CURRENT LIABILITIES






4,981


1,287







6,268Total liabilities


31,256



408,241


20,854







460,351CUMULATIVE REDEEMABLE PREFERRED STOCK


16,124














16,124REDEEMABLE COMMON STOCK


2,907














2,907STOCKHOLDERS EQUITY (DEFICIENCY)


(194,508
)


110,758


116,840


$
(110,246
)


(77,156
)TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIENCY)

$
(144,221
)

$
518,999

$
137,694


$
(110,246
)

$
402,226







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##### Table of Contents




TRANSDIGM HOLDING COMPANY


CONDENSED CONSOLIDATING BALANCE SHEET


AS OF SEPTEMBER 30, 2001


(In Thousands of Dollars)





Holdings


TransDigm

Subsidiary Guarantors


Eliminations


Total ConsolidatedASSETSCURRENT ASSETS:Cash and cash equivalents





$
12,294

$
(1,073
)





$
11,221Accounts receivable - net






17,481


22,734







40,215Inventories






19,353


28,519







47,872Deferred income taxes






9,749










9,749Prepaid expenses and other






132


315







447Total current assets






59,009


50,495







109,504INVESTMENTS IN SUBSIDIARIES AND INTERCOMPANY BALANCES

$
(144,774
)


395,987


(141,163
)

$
(110,050
)PROPERTY, PLANT AND EQUIPMENT - Net






10,954


31,141







42,095INTANGIBLE ASSETS - Net






19,384


184,474







203,858DEBT ISSUE COSTS- Net


255



12,239










12,494DEFERRED INCOME TAXES AND OTHER






4,947










4,947TOTAL ASSETS

$
(144,519
)

$
502,520

$
124,947


$
(110,050
)

$
372,898LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIENCY)CURRENT LIABILITIES:Current portion of long-term liabilities





$
15,822









$
15,822Accounts payable






4,909

$
4,272







9,181Accrued liabilities






17,836


10,993







28,829Total current liabilities






38,567


15,265







53,832LONG-TERM DEBT - Less current portion

$
27,597



371,990










399,587OTHER NON-CURRENT LIABILITIES






6,671


1,362







8,033Total liabilities


27,597



417,228


16,627







461,452CUMULATIVE REDEEMABLE PREFERRED STOCK


13,222














13,222REDEEMABLE COMMON STOCK


1,612














1,612STOCKHOLDERS EQUITY (DEFICIENCY)


(186,950
)


85,292


108,320


$
(110,050
)


(103,388
)TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIENCY)

$
(144,519
)

$
502,520

$
124,947


$
(110,050
)

$
372,898




F-22




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##### Table of Contents




TRANSDIGM HOLDING COMPANY





CONDENSED CONSOLIDATING STATEMENT OF INCOME


FOR THE YEAR ENDED SEPTEMBER 30,
2002


(In Thousands of Dollars)





Holdings


TransDigm

Subsidiary Guarantors

Eliminations

Total ConsolidatedNET SALES





$
115,367

$
133,435




$
248,802COST OF SALES






55,108


79,467





134,575GROSS PROFIT






60,259


53,968





114,227OPERATING EXPENSES:Selling and administrative






12,823


9,082





21,905Amortization of intangibles






1,137


5,157





6,294Research and development






1,616


441





2,057Total operating expenses






15,576


14,680





30,256INCOME FROM OPERATIONS






44,683


39,288





83,971INTEREST EXPENSE - Net

$
3,706



23,291


9,541





36,538INCOME (LOSS) BEFORE INCOME TAXES


(3,706
)


21,392


29,747





47,433INCOME TAX PROVISION (BENEFIT)


(1,313
)


7,578


10,539





16,804NET INCOME (LOSS)

$
(2,393
)

$
13,814

$
19,208

$


$
30,629







F-23




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##### Table of Contents




TRANSDIGM HOLDING COMPANY





CONDENSED CONSOLIDATING STATEMENT OF INCOME


FOR THE YEAR ENDED SEPTEMBER 30,
2001


(In Thousands of Dollars)





Holdings


TransDigm

Subsidiary Guarantors

Eliminations

Total ConsolidatedNET SALES





$
108,650

$
92,123




$
200,773COST OF SALES






61,554


56,971





118,525GROSS PROFIT






47,096


35,152





82,248OPERATING EXPENSES:Selling and administrative






14,867


5,802





20,669Amortization of intangibles






480


2,486





2,966Research and development






1,983


960





2,943Total operating expenses






17,330


9,248





26,578INCOME FROM OPERATIONS






29,766


25,904





55,670INTEREST EXPENSE - Net

$
2,988



24,656


4,282





31,926INCOME (LOSS) BEFORE INCOME TAXES


(2,988
)


5,110


21,622





23,744INCOME TAX PROVISION (BENEFIT)


(1,181
)


2,020


8,547





9,386NET INCOME (LOSS)

$
(1,807
)

$
3,090

$
13,075

$


$
14,358




F-24




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##### Table of Contents




TRANSDIGM HOLDING COMPANY





CONDENSED CONSOLIDATING STATEMENT OF INCOME


FOR THE YEAR ENDED SEPTEMBER 30,
2000


(In Thousands of Dollars)





Holdings


TransDigm

Subsidiary Guarantors


Eliminations

Total ConsolidatedNET SALES





$
88,824

$
61,633





$
150,457COST OF SALES






46,125


36,068






82,193GROSS PROFIT






42,699


25,565






68,264OPERATING EXPENSES:Selling and administrative






12,120


4,679






16,799Amortization of intangibles






450


1,393






1,843Research and development






1,550


758






2,308Total operating expenses






14,120


6,830






20,950INCOME FROM OPERATIONS






28,579


18,735






47,314INTEREST EXPENSE - Net

$
2,670



25,925


(32
)





28,563INCOME (LOSS) BEFORE INCOME TAXES


(2,670
)


2,654


18,767






18,751INCOME TAX PROVISION (BENEFIT)


(1,135
)


1,131


7,976






7,972NET INCOME (LOSS)

$
(1,535
)

$
1,523

$
10,791


$


$
10,779







F-25




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##### Table of Contents




TRANSDIGM HOLDING COMPANY





CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS


FOR THE YEAR ENDED SEPTEMBER
30, 2002


(In Thousands of Dollars)





Holdings


TransDigm


Subsidiary Guarantors


Eliminations

Total ConsolidatedOPERATING ACTIVITIES:Net income (loss)

$
(2,393
)

$
13,814


$
19,208





$
30,629Adjustments to reconcile net income (loss) to net cash provided by operating activities


3,766



12,259



7,998






24,023Net cash provided by operating activities


1,373



26,073



27,206






54,652INVESTING ACTIVITIES:Capital expenditures






(1,719
)


(2,097
)





(3,816
)Other






(1,623
)









(1,623
)Net cash used in investing activities






(3,342
)


(2,097
)





(5,439
)FINANCING ACTIVITIES:Changes in intercompany activities


(1,336
)


27,032



(25,696
)





Proceeds from senior subordinated notes






73,629










73,629Repayment of term loans






(84,820
)









(84,820
)Purchase of capital stock


(37
)













(37
)Net cash provided by (used in) financing activities


(1,373
)


15,841



(25,696
)





(11,228
)INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS






38,572



(587
)





37,985CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD






12,294



(1,073
)





11,221CASH AND CASH EQUIVALENTS, END OF PERIOD

$



$
50,866


$
(1,660
)

$


$
49,206







F-26




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##### Table of Contents




CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS


FOR THE YEAR ENDED SEPTEMBER 30, 2001


(In Thousands of Dollars)





Holdings


TransDigm


Subsidiary Guarantors


Eliminations

Total ConsolidatedOPERATING ACTIVITIES:Net income (loss)

$
(1,807
)

$
3,090


$
13,075





$
14,358Adjustments to reconcile net income (loss) to net cash provided by operating activities


2,988



5,869



(454
)





8,403Net cash provided by operating activities


1,181



8,959



12,621






22,761INVESTING ACTIVITIES:Capital expenditures






(919
)


(3,567
)





(4,486
)Business acquisitions






(169,102
)









(169,102
)Net cash used in investing activities






(170,021
)


(3,567
)





(173,588
)FINANCING ACTIVITIES:Changes in intercompany activities


(15,309
)


25,191



(9,882
)





Borrowings under credit facility






157,560










157,560Proceeds from issuance of cumulative redeemable preferred stock and warrants


14,267














14,267Repayment of amounts borrowed under credit facility






(13,949
)









(13,949
)Purchase of common stock, including redeemable common stock


(139
)













(139
)Net cash provided by (used in) financing activities


(1,181
)


168,802



(9,882
)





157,739INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS






7,740



(828
)





6,912CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD






4,554



(245
)





4,309CASH AND CASH EQUIVALENTS, END OF PERIOD

$



$
12,294


$
(1,073
)

$


$
11,221





|
|






F-27




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##### Table of Contents




CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS


FOR THE YEAR ENDED SEPTEMBER 30, 2000


(In Thousands of Dollars)





Holdings


TransDigm


Subsidiary Guarantors


Eliminations

Total ConsolidatedOPERATING ACTIVITIES:Net income (loss)

$
(1,535
)

$
1,523


$
10,791





$
10,779Adjustments to reconcile net income (loss) to net cash provided by operating activities


2,670



3,431



(575
)





5,526Net cash provided by operating activities


1,135



4,954



10,216






16,305INVESTING ACTIVITIES:Capital expenditures






(1,781
)


(2,587
)





(4,368
)Business acquisitions






(752
)









(752
)Net cash used in investing activities






(2,533
)


(2,587
)





(5,120
)FINANCING ACTIVITIES:Changes in intercompany activities


875



7,510



(8,385
)





Proceeds from exercise of stock options


295














295Repayment of amounts borrowed under credit facility






(7,595
)









(7,595
)Purchase of common stock, including redeemable common stock


(2,305
)













(2,305
)Net cash used in financing activities


(1,135
)


(85
)


(8,385
)





(9,605
)INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS






2,336



(756
)





1,580CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD






2,218



511






2,729CASH AND CASH EQUIVALENTS, END OF PERIOD

$



$
4,554


$
(245
)

$


$
4,309





|
|




* * * * * *







F-28




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##### Table of Contents




INDEPENDENT AUDITORS REPORT





To the Shareholders and Board of Directors of


TransDigm Holding Company





We have audited the consolidated balance sheets of TransDigm Holding Company and subsidiaries (the Company) as of September 30, 2002 and 2001,
and the related consolidated statements of income, changes in stockholders deficiency and cash flows for each of the three years in the period ended September 30, 2002 and have issued our report thereon dated December 2, 2002; such
consolidated financial statements and report are included on pages F-1 through F-28 of this Form 10-K. Our audits also included the consolidated financial statement schedule of the Company, shown on page F-30. This consolidated financial statement
schedule is the responsibility of the Companys management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.





DELOITTE &
TOUCHE LLP





Cleveland, Ohio


December 2, 2002




F-29




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##### Table of Contents




TRANSDIGM HOLDING COMPANYVALUATION AND QUALIFYING ACCOUNTSFOR THE YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000 (in
thousands)Column A

Column B

Column C

Column D

Column EAdditionsDescription

Balance at Beginning of
Period

Charged to Costs and
Expenses

Christie Acquisition

Champion Aviation Acquisition

Honeywell Acquisition

Deductions from Reserve (1)

Balance at End of
PeriodYear Ended September 30, 2002:Allowance for doubtful accounts

$
1,156

$
953










$
804

$
1,305Reserve for excess and obsolete inventory


7,295


2,007











2,187


7,115Sales returns and repairs


3,363


3,442











2,556


4,249Year Ended September 30, 2001:Allowance for doubtful accounts


371


839











54


1,156Reserve for excess and obsolete inventory


6,431


504




$
841

$
350


831


7,295Sales returns and repairs


1,870


1,096





1,676





1,279


3,363Year Ended September 30, 2000:Allowance for doubtful accounts


441


60

$
20








150


371Reserve for excess and obsolete inventory


7,110


684


100








1,463


6,431Sales returns and repairs


2,163


14


100








407


1,870





|(1) |  | For the allowance for doubtful accounts and reserve for excess and obsolete inventory, the amounts in this column represent charge-offs net of recoveries. For
the sales returns and repairs accrued liabilities, the amounts primarily represent expenditures charged against liabilities.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-30




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##### Table of Contents




EXHIBIT INDEX


TO FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 2002





EXHIBIT NO.

DESCRIPTION10.3

First Amendment to the Management Stockholders Agreement10.9

TransDigm Inc. Executives Retirement Savings Plan10.10

1994 Stock Incentive Plan of TransDigm Holding Company10.11

1998 Stock Option Plan of TransDigm Holding Company10.12

1999 Stock Purchase Plan of TransDigm Holding Company12.1

Computation of Ratio of Earnings to Fixed Charges12.2

Ratio of EBITDA (As Defined) to Interest Expense12.3

Ratio of EBITDA (As Defined) to Interest Expense (As Defined)12.4

Ratio of Total Debt to EBITDA (As Defined)21.1

Subsidiaries of TransDigm Holding Company







F-31