##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act
of 1934
 For the quarterly period ended April 29, 2006,
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
 For the transition period from  to.
 Commission file number 333-38223
 ARGO-TECH CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
(State or other jurisdiction of
incorporation or organization)
    
    31-1521125
(I.R.S. employer
identification no.)23555 Euclid Avenue
Cleveland, Ohio
(Address of principal executive offices)
    
    44117
(Zip code)(216) 692-6000
(Registrants telephone number, including area code)
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. YES þ NO o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer or non-accelerated filer.
 Large accelerated filero
    
    Accelerated filero
    
    Non-accelerated filerþ
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). YES o NO þ
 All of the outstanding capital stock of the registrant is held by AT Holdings
Corporation.
 As of June 1, 2006, 1 share of the registrants common stock, $.01 par value, was
outstanding.




---



##### 



INDEX
 Page No.PART I  FINANCIAL INFORMATIONItem 1  Financial StatementsConsolidated Balance Sheets as of April 29, 2006 and October 29, 2005
    
    
    3Consolidated Statements of Operations for the 26 week period
and 13 week period ended April 29, 2006 and April 30, 2005 (Predecessor)
    
    
    4Consolidated Statements of Cash Flows for the 26 week period ended
April 29, 2006 and April 30, 2005 (Predecessor)
    
    
    5Notes to Consolidated Financial Statements
    
    
    6 - 11Item 2  Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    11 - 17Item 3  Quantitative and Qualitative Disclosure about Market Risk
    
    
    17Item 4  Controls and Procedures
    
    
    17PART II  OTHER INFORMATIONItem 6  Exhibits
    
    
    18Signature
    
    
    19Certifications
    
    
    20 - 22EX-31.1 CertificationEX-31.2 CertificationEX-32 Certification
  2




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1.
 ARGO-TECH CORPORATION AND SUBSIDIARIES
(A Wholly-Owned Subsidiary of AT Holdings Corporation)
 
 CONSOLIDATED BALANCE SHEETS
 April 29, 2006 and October 29, 2005
(In thousands, except share data)
 2006
    
    
    2005(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    3,587
    
    
    $
    13,889Receivables, net
    
    
    45,172
    
    
    
    40,319Income tax receivable
    
    
    
    
    
    
    3,630Inventories, net
    
    
    36,505
    
    
    
    70,965Prepaid expenses
    
    
    2,395
    
    
    
    1,688Deferred income taxes
    
    
    8,811
    
    
    
    Total current assets
    
    
    96,470
    
    
    
    130,491PROPERTY AND EQUIPMENT, net of accumulated depreciation
    
    
    40,603
    
    
    
    41,970GOODWILL
    
    
    200,152
    
    
    
    200,152INTANGIBLE ASSETS, net of accumulated amortization
    
    
    208,527
    
    
    
    214,440OTHER ASSETS
    
    
    1,310
    
    
    
    1,453Total Assets
    
    $
    547,062
    
    
    $
    588,506LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Current portion of long-term debt
    
    $
    750
    
    
    $
    750Accounts payable
    
    
    8,073
    
    
    
    8,736Accrued liabilities
    
    
    31,205
    
    
    
    47,681Total current liabilities
    
    
    40,028
    
    
    
    57,167LONG-TERM DEBT, net of current maturities
    
    
    277,042
    
    
    
    278,312DEFERRED INCOME TAXES
    
    
    72,723
    
    
    
    75,120OTHER NONCURRENT LIABILITIES
    
    
    17,854
    
    
    
    17,111Total liabilities
    
    
    407,647
    
    
    
    427,710SHAREHOLDERS EQUITY:Common Stock, $.01 par value, authorized 3,000 shares;
1 share issued and outstanding
    
    
    
    
    
    
    Paid-in capital
    
    
    158,418
    
    
    
    160,796Accumulated other comprehensive loss
    
    
    (16
    )
    
    
    Accumulated equity / (deficit)
    
    
    (18,987
    )
    
    
    Total shareholders equity
    
    
    139,415
    
    
    
    160,796Total Liabilities and Shareholders Equity
    
    $
    547,062
    
    
    $
    588,506
  3




---



##### Table of Contents



ARGO-TECH CORPORATION AND SUBSIDIARIES
(A Wholly-Owned Subsidiary of AT Holdings Corporation)
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 26 week periods ended
    
    
    13 week periods ended(In thousands)
    
    April 29, 2006
    
    
    April 30, 2005
    
    
    April 29, 2006
    
    
    April 30, 2005UNAUDITED
    
    
    
    
    
    Predecessor
    
    
    
    
    
    
    PredecessorNet revenues
    
    $
    111,921
    
    
    $
    99,601
    
    
    $
    59,712
    
    
    $
    52,207Cost of revenues (Including inventory
purchase
accounting charges of $37,615 and $11,132
for
the 26 week and 13 week period ended
April 29, 2006)
    
    
    103,803
    
    
    
    56,638
    
    
    
    45,623
    
    
    
    29,830Gross profit
    
    
    8,118
    
    
    
    42,963
    
    
    
    14,089
    
    
    
    22,377Selling, general and administrative
    
    
    15,836
    
    
    
    16,799
    
    
    
    8,393
    
    
    
    9,973Research and development
    
    
    6,111
    
    
    
    6,533
    
    
    
    3,207
    
    
    
    3,807Amortization of intangible assets
    
    
    5,913
    
    
    
    1,707
    
    
    
    2,956
    
    
    
    853Operating expenses
    
    
    27,860
    
    
    
    25,039
    
    
    
    14,556
    
    
    
    14,633Income / (loss) from operations
    
    
    (19,742
    )
    
    
    17,924
    
    
    
    (467
    )
    
    
    7,744Interest expense
    
    
    11,874
    
    
    
    12,570
    
    
    
    5,954
    
    
    
    6,293Other, net
    
    
    (20
    )
    
    
    (25
    )
    
    
    (34
    )
    
    
    (49
    )Income / (loss) before income taxes
    
    
    (31,596
    )
    
    
    5,379
    
    
    
    (6,387
    )
    
    
    1,500Income tax (benefit) / provision
    
    
    (12,609
    )
    
    
    1,467
    
    
    
    (2,260
    )
    
    
    407Net income / (loss)
    
    $
    (18,987
    )
    
    $
    3,912
    
    
    $
    (4,127
    )
    
    $
    1,093
  4




---



##### Table of Contents



ARGO-TECH CORPORATION AND SUBSIDIARIES
(A Wholly-Owned Subsidiary of AT Holdings Corporation)
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the 26 Week Periods Ending April 29, 2006 and April 30, 2005
 (In thousands)
    
    
    
    
    
    PredecessorUNAUDITED
    
    2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net income/(loss)
    
    $
    (18,987
    )
    
    $
    3,912Adjustments to reconcile net income/(loss) to net cash used in
operating activities:Depreciation
    
    
    2,186
    
    
    
    1,762Amortization of intangible assets and deferred financing costs
    
    
    6,071
    
    
    
    2,285Amortization of senior note fair value step-up
    
    
    (896
    )
    
    
    Compensation expense recognized in connection with
employee stock ownership plan (ESOP)
    
    
    
    
    
    
    2,520Compensation expense recognized in connection with ESOP excess
benefit plan
    
    
    
    
    
    
    150Amortization of inventory fair value step-up
    
    
    37,615
    
    
    
    Deferred income taxes
    
    
    (18,073
    )
    
    
    (1,945
    )Changes in operating assets and liabilities:Receivables
    
    
    (1,223
    )
    
    
    (5,350
    )Inventories
    
    
    (3,155
    )
    
    
    (7,246
    )Prepaid expenses
    
    
    (712
    )
    
    
    (977
    )Accounts payable
    
    
    (623
    )
    
    
    (347
    )Accrued and other liabilities
    
    
    (8,869
    )
    
    
    3,591Other, net
    
    
    (16
    )
    
    
    32Net cash used in operating activities
    
    
    (6,682
    )
    
    
    (1,613
    )CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (819
    )
    
    
    (1,771
    )Net cash used in investing activities
    
    
    (819
    )
    
    
    (1,771
    )CASH FLOWS FROM FINANCING ACTIVITIES:Borrowing of long-term debt
    
    
    12,000
    
    
    
    Repayment of long-term debt
    
    
    (12,375
    )
    
    
    (375
    )Payment of financing related fees
    
    
    (48
    )
    
    
    Intercompany activity with Parent
    
    
    (2,061
    )
    
    
    Purchase of AT Holdings stock from former ESOP participants
    
    
    
    
    
    
    (3,795
    )Dividend to AT Holdings
    
    
    (317
    )
    
    
    (1,696
    )Net cash used in financing activities
    
    
    (2,801
    )
    
    
    (5,866
    )CASH AND CASH EQUIVALENTS:Net decrease for the period
    
    
    (10,302
    )
    
    
    (9,250
    )Balance, beginning of period
    
    
    13,889
    
    
    
    15,857Balance, end of period
    
    $
    3,587
    
    
    $
    6,607
  5




---



##### Table of Contents



ARGO-TECH CORPORATION AND SUBSIDIARIES
(A Wholly-Owned Subsidiary of AT Holdings Corporation)
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE 26 WEEK PERIODS ENDED APRIL 29, 2006 AND APRIL 30, 2005 (Predecessor) (Unaudited)
 1.
    
    BASIS OF PRESENTATIONThe principal operations of Argo-Tech Corporation (a wholly-owned subsidiary of AT Holdings
Corporation (Holdings)) and its subsidiaries (Argo-Tech or the Company) include the
design, manufacture and distribution of aviation products, primarily aircraft fuel pumps. In
addition, Argo-Tech leases a portion of its Cleveland, Ohio manufacturing facility to other
parties. Argo-Techs fiscal year ends on the last Saturday in October.On October 28, 2005, Holdings consummated a merger with Vaughn Merger Sub, Inc. (Vaughn) in
which Vaughn merged with and into Holdings (the Merger), with Holdings surviving as a wholly
owned subsidiary of V.G.A.T Investors, LLC. The Merger was accounted for as a purchase and
preliminary fair value adjustments to the Companys assets and liabilities were recorded as of
the date of the Merger. The Company is in the process of obtaining third-party valuations of
certain tangible and intangible assets; thus, the allocation of the purchase price to the
Companys assets and liabilities is subject to adjustment.Argo-Tech Corporation is a parent holding company and all of its domestic subsidiaries guarantee
Argo-Techs senior notes issued in June 2004. Argo-Tech also has two wholly-owned,
non-guarantor foreign subsidiaries which have inconsequential assets, liabilities and equity.
Argo-Tech has no outside assets, liabilities or operations apart from its wholly-owned
subsidiaries. The senior notes are fully, unconditionally, jointly and severally guaranteed by
the guarantor subsidiaries, and therefore, separate financial statements of the guarantor
subsidiaries will not be presented. Management has determined that the information presented by
such separate financial statements is not material to investors.2.
    
    UNAUDITED FINANCIAL INFORMATIONThe financial information included herein is unaudited; however, the information reflects all
adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of
management, necessary for a fair presentation of Argo-Techs financial position, results of
operations and cash flows for the interim periods presented. These financial statements and
notes should be read in conjunction with the financial statements and related notes included in
Argo-Techs Annual Report on Form 10-K for the year ended October 29, 2005. The results of
operations for the 13 and 26 week periods ended April 29, 2006 are not necessarily indicative of
the results to be expected for the full year.3.
    
    INVENTORIESInventories are stated at standard cost which approximates the costs which would be determined
using the first-in, first-out (FIFO) method. The recorded value of inventories is not in excess
of market value. The balance at April 29, 2006 and October 29, 2005 includes $2.5 million and
$40.3 million, respectively, of purchase price accounting adjustments recorded in conjunction
with the Merger. Inventories consist of the following (in thousands):
 6




---



##### Table of Contents



April 29
    
    
    October 29,2006
    
    
    2005Finished goods
    
    $
    2,732
    
    
    $
    5,401Work-in-process and purchased parts
    
    
    37,029
    
    
    
    68,895Raw materials and supplies
    
    
    971
    
    
    
    706Total
    
    
    40,732
    
    
    
    75,002Reserve for excess and obsolete inventory
    
    
    (4,227
    )
    
    
    (4,037
    )Inventories  net
    
    $
    36,505
    
    
    $
    70,965
 4.
    
    INTANGIBLE ASSETSThe following is a summary of intangible assets, other than goodwill (in thousands):
 April 29, 2006
    
    
    October 29, 2005Gross
    
    
    Accumulated
    
    
    Gross
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationIntangible assets:Contracts
    
    $
    20,870
    
    
    $
    1,044
    
    
    $
    20,870
    
    
    $
    Customer relationships
    
    
    193,090
    
    
    
    4,828
    
    
    
    193,090
    
    
    
    Patents
    
    
    480
    
    
    
    41
    
    
    
    480
    
    
    
    Total
    
    $
    214,440
    
    
    $
    5,913
    
    
    $
    214,440
    
    
    $
    
 Amortization expense recorded on the intangible assets for the 13 week periods ended April 29,
2006 and April 30, 2005 (Predecessor) was $2.9 million and $0.9 million, respectively, and for
the 26 week periods ended April 29, 2006 and April 30, 2005 (Predecessor) was $5.9 million and
$1.7 million, respectively. The estimated amortization expense for each of fiscal years 2006
through 2010 is $11.8 million. The weighted-average amortization period for contracts is 10
years, customer relationships is 20 years and patents is 9 years.5.
    
    PRODUCT WARRANTYArgo-Tech accrues for warranty obligations for products sold based on management estimates of
the amount that may be required to settle such potential obligations. These estimates are
prepared with support from our sales, engineering, quality and legal functions. This accrual,
which is reviewed in detail on a regular basis, is based on several factors: past experience,
current claims, production changes and various other considerations. The following table
presents a reconciliation of changes in the product warranty liability for the 26 week periods
ended April 29, 2006 and April 30, 2005 (in thousands):
 Predecessor2006
    
    
    2005Beginning balance
    
    $
    2,073
    
    
    $
    2,084Accruals for warranties issued
    
    
    25Accruals for pre-existing warranties
(including changes in estimate)
    
    
    542
    
    
    
    453Warranty claims settled
    
    
    (485
    )
    
    
    (323
    )Ending balance
    
    $
    2,155
    
    
    $
    2,214
 7




---



##### Table of Contents



6.
    
    EMPLOYEE BENEFIT PLANSThe Company has two noncontributory defined benefit pension plans, one for qualifying hourly
employees and a second for qualifying salaried employees. The salaried employee plan provides
pension benefits that are based on the employees compensation and years of service. The
future accrual of benefits under this plan was terminated in connection with the formation of
the Employee Stock Ownership Plan (ESOP). The hourly employee plan provides benefits of stated
amounts for each year of service. The Companys funding policy is to contribute actuarially
determined amounts allowable under Internal Revenue Service regulations.A summary of the components of net periodic benefit cost for the two pension plans is as
follows (in thousands):
 26 week
    
    
    26 week
    
    
    13 week
    
    
    13 weekperiod ended
    
    
    period ended
    
    
    period ended
    
    
    period endedApril 29, 2006
    
    
    April 30, 2005
    
    
    April 29, 2006
    
    
    April 30, 2005(Predecessor)
    
    
    
    
    
    
    (Predecessor)Service cost
    
    $
    192
    
    
    $
    183
    
    
    $
    100
    
    
    $
    94Interest cost
    
    
    733
    
    
    
    685
    
    
    
    365
    
    
    
    342Expected return on
plan assets
    
    
    (982
    )
    
    
    (930
    )
    
    
    (490
    )
    
    
    (465
    )Net amortization
and deferral
    
    
    
    
    
    
    215
    
    
    
    
    
    
    
    104Curtailment charge
    
    
    
    
    
    
    369
    
    
    
    
    
    
    
    369Termination benefits
    
    
    
    
    
    
    58
    
    
    
    
    
    
    
    58Net periodic
pension cost
(benefit)
    
    $
    (57
    )
    
    $
    580
    
    
    $
    (25
    )
    
    $
    502
 Argo-Tech expects to contribute $1,030,000 to the hourly employee pension plan in 2006. As of
April 29, 2006, no contributions have been made.In addition, the Company provides certain postretirement health care benefits to qualifying
hourly retirees and their dependents. This benefit is not funded. A summary of the components
of net periodic benefit cost for the postretirement benefit is as follows (in thousands):
 26 week
    
    
    26 week
    
    
    13 week
    
    
    13 weekperiod ended
    
    
    period ended
    
    
    period ended
    
    
    period endedApril 29, 2006
    
    
    April 30, 2005
    
    
    April 29, 2006
    
    
    April 30, 2005(Predecessor)
    
    
    
    
    
    
    (Predecessor)Service cost
    
    $
    253
    
    
    $
    121
    
    
    $
    180
    
    
    $
    71Interest cost
    
    
    568
    
    
    
    441
    
    
    
    305
    
    
    
    218Net amortization and deferral
    
    
    
    
    
    
    70
    
    
    
    
    
    
    
    27Net periodic postretirement
benefit cost
    
    $
    821
    
    
    $
    632
    
    
    $
    485
    
    
    $
    316
 7.
    
    CONTINGENCIESEnvironmental Matters  The soil and groundwater at Argo-Techs Euclid, Ohio facility and Costa
Mesa, California facility contain elevated levels of certain contaminants which are currently in
the process of being removed and/or remediated. Because Argo-Tech has certain indemnification
rights from former owners of the facilities for liabilities arising from these or other
environmental matters, in the opinion of
 8




---



##### Table of Contents



Argo-Techs management, the ultimate outcome is not
expected to materially affect its financial condition, results of operations or liquidity.Other Matters  Argo-Tech is subject to various legal actions and other contingencies arising in
the ordinary course of business. In the opinion of Argo-Techs management, after reviewing the
information
which is currently available with respect to such matters and consulting with Argo-Techs legal
counsel, any liability which may ultimately be incurred with respect to these matters is not
expected to materially affect Argo-Techs financial condition, results of operations or
liquidity.8.
    
    SEGMENT INFORMATIONArgo-Tech operates in two business segments: Aerospace and Industrial. The Aerospace segment
includes the design, manufacture, distribution, and maintenance, repair and overhaul (MRO)
of aviation products, consisting of aircraft fuel pumps, fuel flow related products found
on a planes airframe, and aerial refueling pumps and related equipment. The Industrial
segment includes the design, manufacture and distribution of ground fueling valves and
related components, specialty industrial hose, cryogenic pumps and nozzles for transferring
liquefied natural gas and operation of a business park in Cleveland, Ohio where we maintain
our headquarters and one of our production facilities. Corporate primarily includes
expenses not specifically identified or charged to the operating business segments for
measurement of operating performance. These expenses include, but are not limited to,
certain depreciation, early retirement expenses, stock option compensation and stock
appreciation rights expense.Argo-Tech evaluates the performance of its segments based primarily on operating profit before
amortization of inventory fair value step-up, amortization of deferred financing fees and other
identified intangibles, interest expense, interest income, other miscellaneous fees and income
taxes.The following table presents revenues and other financial information by business segment (in
thousands):
 13 Week Period Ended April 29, 2006
 Aerospace
    
    
    Industrial
    
    
    Corporate
    
    
    ConsolidatedNet revenues
    
    $
    43,916
    
    
    $
    15,796
    
    
    $
    
    
    
    $
    59,712Operating profit (loss)
    
    
    12,669
    
    
    
    1,237
    
    
    
    (285
    )
    
    
    13,621Amortization of fair value
inventory step-up
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,132Amortization of intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,956Loss from operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (467
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,954Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )Loss before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (6,387
    )Capital expenditures
    
    
    312
    
    
    
    186
    
    
    
    
    
    
    
    498Depreciation
    
    
    511
    
    
    
    320
    
    
    
    262
    
    
    
    1,093
 9




---



##### Table of Contents



13 Week Period Ended April 30, 2005 (Predecessor)
 Aerospace
    
    
    Industrial
    
    
    Corporate
    
    
    ConsolidatedNet revenues
    
    $
    38,189
    
    
    $
    14,018
    
    
    $
    
    
    
    $
    52,207Operating profit (loss)
    
    
    9,115
    
    
    
    1,471
    
    
    
    (1,989
    )
    
    
    8,597Amortization of intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    853Income from operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,744Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,293Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,500Capital expenditures
    
    
    676
    
    
    
    354
    
    
    
    
    
    
    
    1,030Depreciation
    
    
    502
    
    
    
    297
    
    
    
    92
    
    
    
    891Compensation expense recognized
in connection with employee
stock ownership plan
    
    
    1,165
    
    
    
    95
    
    
    
    
    
    
    
    1,260
 26 Week Period Ended April 29, 2006
 Aerospace
    
    
    Industrial
    
    
    Corporate
    
    
    ConsolidatedNet revenues
    
    $
    83,212
    
    
    $
    28,709
    
    
    $
    
    
    
    $
    111,921Operating profit (loss)
    
    
    23,307
    
    
    
    1,028
    
    
    
    (549
    )
    
    
    23,786Amortization of fair value
inventory step-up
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,615Amortization of intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,913Loss from operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,742
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,874Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )Loss before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (31,596
    )Capital expenditures
    
    
    546
    
    
    
    273
    
    
    
    
    
    
    
    819Depreciation
    
    
    1,019
    
    
    
    655
    
    
    
    512
    
    
    
    2,186
 26 Week Period Ended April 30, 2005 (Predecessor)
 Aerospace
    
    
    Industrial
    
    
    Corporate
    
    
    ConsolidatedNet revenues
    
    $
    74,623
    
    
    $
    24,978
    
    
    $
    
    
    
    $
    99,601Operating profit (loss)
    
    
    19,099
    
    
    
    2,587
    
    
    
    (2,055
    )
    
    
    19,631Amortization of intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,707Income from operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,924Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,570Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,379Capital expenditures
    
    
    1,109
    
    
    
    662
    
    
    
    
    
    
    
    1,771Depreciation
    
    
    993
    
    
    
    586
    
    
    
    183
    
    
    
    1,762Compensation expense recognized
in connection with employee
stock ownership plan
    
    
    2,331
    
    
    
    189
    
    
    
    
    
    
    
    2,520
 10




---



##### Table of Contents



9.
    
    OTHER COMPREHENSIVE INCOMEThe following table presents other comprehensive income, which includes foreign currency
translation adjustments (in thousands):
 26 week
    
    
    26 week
    
    
    13 week
    
    
    13 weekperiod ended
    
    
    period ended
    
    
    period ended
    
    
    period endedApril 29, 2006
    
    
    April 30, 2005
    
    

April
29, 2006
    
    
    April 30, 2005(Predecessor)
    
    
    
    
    
    
    (Predecessor)Net income (loss)
    
    $
    (18,987
    )
    
    $
    3,912
    
    
    $
    (4,127
    )
    
    $
    1,093Other comprehensive income (loss):Foreign currency translation adjustment
    
    
    (16
    )
    
    
    39
    
    
    
    (9
    )
    
    
    (21
    )Other comprehensive income (loss)
before tax
    
    
    (16
    )
    
    
    39
    
    
    
    (9
    )
    
    
    (21
    )Income tax benefit related to other
comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other comprehensive income (loss), net
of tax
    
    
    (16
    )
    
    
    39
    
    
    
    (9
    )
    
    
    (21
    )Comprehensive income (loss)
    
    $
    (19,003
    )
    
    $
    3,951
    
    
    $
    (4,136
    )
    
    $
    1,072
 10.
    
    NEW ACCOUNTING PRONOUNCEMENTSIn December 2004, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standard (SFAS) No. 123(R), Share Based Payment, which requires all
share-based payments to employees, including grants of employee stock options, to be recognized
in the financial statements based on their fair values. The Company will adopt the provisions
of this statement for the Companys fiscal year beginning October 29, 2006 using the modified
prospective method. Management has not determined the effect the adoption of this statement
will have on Argo-Techs consolidated financial position or results of operations.In March 2005, the FASB issued Interpretation No. 47, Accounting for Conditional Asset
Retirementsan interpretation of SFAS No. 143 (FIN 47). FIN 47 clarifies that uncertainty
about the timing and (or) method of settlement of a conditional asset retirement obligation
should be factored into the measurement of the liability when sufficient information exists to
make a reasonable estimate of the fair value of the obligation. The provisions of this
interpretation are effective for the Companys fiscal year ending October 28, 2006. Management
has not determined the impact, if any, that this interpretation will have on the Companys
consolidated financial statements.
 
 ITEM 2.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
  11




---



##### Table of Contents



Export Sales
  Critical Accounting Policies
  Fluctuations of Operating Results; Limitation of Quarterly Comparisons
  Results of Operations for the 13 Week Period Ended April 29, 2006 Compared With the 13 Week
Period Ended April 30, 2005
  12




---



##### Table of Contents



13




---



##### Table of Contents



Results of Operations for the 26 Week Period Ended April 29, 2006 Compared With the 26 Week
Period Ended April 30, 2005
    14




---



##### Table of Contents



Liquidity and Capital Resources
     15




---



##### Table of Contents



2011 and2006 (1)
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    
    TotalTerm loan facility
    
    $
    0.4
    
    
    $
    0.8
    
    
    $
    3.6
    
    
    $
    14.0
    
    
    $
    
    
    
    $
    
    
    
    $
    18.89-1/4% senior notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250.0
    
    
    
    250.0Operating leases
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.6Other long-term
obligations (2)
    
    
    12.3
    
    
    
    26.1
    
    
    
    26.2
    
    
    
    25.6
    
    
    
    25.0
    
    
    
    37.4
    
    
    
    152.6Total contractual cash
obligations
    
    $
    12.9
    
    
    $
    27.1
    
    
    $
    29.9
    
    
    $
    39.7
    
    
    $
    25.0
    
    
    $
    287.4
    
    
    $
    422.0
 
 (1)
    
     Contractual obligations for the remainder of fiscal 2006.(2)
    
     Represents interest payments on the senior notes and the term loans, estimated funding
for retirement and other post-employment benefits and other long-term commitments.  Certain Factors That May Affect Future Results
  
    
    changes and/or cyclicality in the aerospace industry;
    
    governmental regulation and oversight in the aerospace industry;
    
    levels of competition in the aerospace industry;
    
    the impact of terrorism and war on airline travel and the airline industry;
    
    our ability to meet future capital requirements;
    
    loss of a significant customer;
    
    risks associated with fixed-price contracts;
    
    costs associated with product liability and warranty claims;
 16




---



##### Table of Contents




    
    risks associated with our international operations;
    
    changes in environmental or other applicable governmental regulations;
    
    reduction in military and/or defense spending and risks associated with
government contracts;
    
    changes in our relationship with our employees;
    
    availability of essential materials used in our products;
    
    risks associated with protection of our intellectual property rights;
    
    the other factors described in Argo-Techs annual report on Form 10-K for the
year ended October 29, 2005; and
    
    other unforeseen circumstances.
 
 ITEM 3.
 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  
 ITEM 4.
 CONTROLS AND PROCEDURES
    17




---



##### Table of Contents



PART II  OTHER INFORMATION
 
  (a)
    
    Exhibit 31.1  Certification by Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.(b)
    
    Exhibit 31.2  Certification by Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.(c)
    
    Exhibit 32  Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 18




---



##### Table of Contents



SIGNATURE
  Date: June 13, 2006
    
    ARGO-TECH CORPORATIONBy:
    
    /s/ John S. GloverJohn S. GloverVice President and Chief Financial Officer(Duly Authorized Officer)By:
    
    /s/ Paul A. SkladPaul A. SkladController(Principal Accounting Officer)
 19