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WASHINGTON, D. C. 20549

FORM 10-Q

For the transition period from __________________ to _________________

Commission File Number 333-71397

    (216) 289-4939    
(Registrants’ telephone number, including area code)

                                                                                                                                                
(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

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

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INDEX

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TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
(Unaudited)

See notes to consolidated financial statements.

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TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN AND THIRTY-NINE WEEK PERIODS ENDED
JUNE 29, 2002 AND JUNE 30, 2001
(In Thousands of Dollars)
(Unaudited)

See notes to consolidated financial statements.

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TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
FOR THE THIRTY-NINE WEEK PERIOD ENDED JUNE 29, 2002
(In Thousands of Dollars)
(Unaudited)

See notes to consolidated financial statements.

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TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEK PERIODS ENDED
JUNE 29, 2002 AND JUNE 30, 2001
(In Thousands of Dollars)
(Unaudited)

See notes to consolidated financial statements.

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TRANSDIGM HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN AND THIRTY-NINE WEEK PERIODS ENDED
JUNE 29, 2002 AND JUNE 30, 2001
(Unaudited)

1.     DESCRIPTION OF THE BUSINESS

TransDigm Holding Company (“Holdings”), through its wholly-owned operating subsidiary, TransDigm Inc. (“TransDigm”), is a leading supplier of highly 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 category include ignition system components, fuel and lube pumps, mechanical actuators and controls, and batteries and chargers. Major product offerings in the Airframe System Components category include engineered connectors, engineered latches, and lavatory hardware and components.

2.     UNAUDITED INTERIM FINANCIAL INFORMATION

The 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 the Company’s financial position and results of operations and cash flows for the interim periods presented. The September 30, 2001 condensed consolidated balance sheet was derived from the Company’s audited financial statements. The results of operations for the thirteen and thirty-nine week periods ended June 29, 2002 are not necessarily indicative of the results to be expected for the full year.

3.     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. Inventories consist of the following (in thousands):

______________

4.     SENIOR SUBORDINATED NOTES AND AMENDMENT TO SENIOR CREDIT FACILITY

On June 7, 2002, the Company issued $75 million in aggregate principal amount of additional 10 3/8% Senior Subordinated Notes, due December 1, 2008, at a premium of approximately $2 million. The proceeds of the Senior Subordinated 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). In conjunction with the issuance of the Senior Subordinated Notes, TransDigm’s Senior Credit Facility was amended to, among other things, permit

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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 waives any mandatory prepayment of amounts owed under the Senior Credit Facility from excess cash flow, if any, generated by TransDigm during fiscal 2002.

5.     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 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 the ultimate outcome of this matter cannot presently be determined.

Put Options - During the thirteen-week period ended March 30, 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 that may be 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 June 29, 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 June 29, 2002 are subject to the put. The estimated fair value of such shares, net of the exercise price of the related stock options, totaled approximately $8.6 million at June 29, 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 such shares, net of the exercise price of the related stock options, totaled approximately $1.1 million at June 29, 2002. Also, the Chairman of the Board of Holdings and TransDigm 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.

6.     ACQUISITION

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 Aerospace”) 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 Aerospace 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.

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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 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 percent Cumulative Redeemable Preferred Stock and warrants to purchase 1,381.87 shares of Holdings’ common stock, 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.

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 a determination of estimated fair values at the date of the Acquisition and resulted in goodwill and other intangible assets of approximately $134 million being recorded on the Company’s consolidated balance sheet. The goodwill and other intangible assets are being amortized on a straight-line basis ranging from 30 to 40 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 thirty-nine week period ended June 30, 2001 (in thousands):

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 period presented and is not intended to be a projection of future results.

7.     SUPPLEMENTAL GUARANTOR INFORMATION

The Company’s Senior Subordinated Notes, including the additional notes issued on June 7, 2002 (see Note 4), are unconditionally guaranteed by Holdings and all direct and indirect subsidiaries of TransDigm (other than two wholly-owned, non-guarantor subsidiaries that have inconsequential assets, liabilities and equity, and whose only operations are the result of intercompany activity which is immediately dividended back to TransDigm) 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 June 29, 2002 and September 30, 2001 and its statements of operations and cash flows for the thirty-nine week periods ended June 29, 2002 and June 30, 2001.

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TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 29, 2002
(In Thousands of Dollars)

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TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF SEPTEMBER 30, 2001
(In Thousands of Dollars)

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TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THIRTY-NINE WEEK PERIOD ENDED JUNE 29, 2002
(In Thousands of Dollars)

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TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THIRTY-NINE WEEK PERIOD ENDED JUNE 30, 2001
(In Thousands of Dollars)

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TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THIRTY-NINE WEEK PERIOD ENDED JUNE 29, 2002
(In Thousands of Dollars)

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TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THIRTY-NINE WEEK PERIOD ENDED JUNE 30, 2001
(In Thousands of Dollars)

* * * * *

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References in this section to “TransDigm” are to TransDigm Inc. References to “Holdings” are to TransDigm Holding Company, which owns all of the outstanding capital stock of TransDigm. References to the “Company” are to Holdings, together with TransDigm and its subsidiaries.

This Quarterly Statement 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, including, in particular, the statements about the Company’s plans, strategies and prospects under this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section. Although the Company believes that its plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, the Company can give no assurance that such plans, intentions or expectations will be achieved. Important factors that could cause actual results to differ materially from the forward-looking statements made in this Quarterly Statement are set forth under the caption “Risk Factors” and elsewhere in this Quarterly Statement. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by those cautionary statements.

Overview

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 of the worldwide aircraft fleet, are 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, therefore it benefits from a large and growing installed base of aircraft.

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 promptly developed a near term market forecast to use as a basis for fiscal 2002 planning. Based on this forecast, which the Company believed to be conservative, 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 early October 2001.

It still appears that the overall market forecast the Company used for planning purposes was somewhat conservative. Although the Company continues to experience a significant downturn in the commercial aerospace markets, air travel has begun to recover at a faster pace than the Company initially anticipated. Although there are some recent indications of a flattening in revenue passenger miles, the Company still expects the aftermarket sector to recover over the next four to eight quarters as air traffic slowly increases. The Company expects commercial transport OEM production rates to continue to decline for the next few years as new transport delivery schedules are canceled or extended. The Company also expects regional and business jet operations and production rates to be negatively impacted to a lesser degree.

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Inventory adjustments throughout the industry have adversely impacted both commercial OEM and aftermarket shipments. Military activity is difficult to predict, but based upon the Company’s broad base of applications, the Company anticipates a modest increase in military orders over the near term.

Net sales, operating income and EBITDA during the first nine months of fiscal year 2002 were higher than the Company anticipated compared to its near term market forecast immediately following September 11th. The Company generated net sales, operating income and EBITDA of $180.7 million, $61.6 million and $71.7 million, respectively for the thirty-nine week period ended June 29, 2002, and $63.0 million, $23.1 million and $26.6 million for the thirteen week period ended June 29, 2002. As disclosed in the Company’s Registration Statement on Form S-4, dated June 28, 2002, the pro forma net sales, operating income, and EBITDA, As Defined were $252.3 million, $70.9 million, and $90.2 million, respectively, for the twelve months ended March 30, 2002. Absent any further disruptive events, the Company expects that for fiscal year 2002 net sales will be slightly below, and operating income and EBITDA, As Defined will exceed, the corresponding amounts for the twelve months ended March 30, 2002.

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.

During fiscal year 2002, the Company was selected by Airbus to provide certain cockpit door security mechanisms. The Company has received orders for approximately $13 million as of June 29, 2002 and anticipates receiving additional orders in the fourth quarter of fiscal 2002 and in fiscal 2003. Shipments through June 29, 2002 have been modest but will increase through the balance of fiscal 2002 and into fiscal 2003.

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 it believes it can generate value. The following is a summary of a significant acquisition during 2001.

On May 31, 2001, TransDigm (through a newly-formed, wholly-owned subsidiary, Champion Aerospace Inc.) acquired substantially all of the assets and certain liabilities of the Champion Aviation Products business 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. The Champion Aviation Products (“Champion Aerospace”) business 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, exciters; for turbine and piston aircraft applications as well as other aerospace engine and industrial applications.

Significant Accounting Policies

The Company’s 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 the consolidated financial statements included with the Company’s Form 10-K for the fiscal year ended September 30, 2001.

Accounting estimates are an integral part of the 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 the Company’s consolidated financial statements for the 2001 fiscal year and the thirteen and thirty-nine

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week periods ended June 29, 2002 and June 30, 2001 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 preliminary allocations of purchase prices for business combinations along with the pending purchase price adjustment amounts.

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 Assets (“SFAS No. 142”). SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Amortization of goodwill, including goodwill recorded as a result of past business combinations, will cease upon adoption of this statement, which must occur no later than the first quarter of our year ending September 30, 2003. In addition, upon implementation of this statement, the carrying amounts of intangible assets recorded in connection with past business combinations that do not meet the criteria in SFAS No. 141, Business Combinations, for recognition apart from goodwill, must be reclassified to goodwill when SFAS No. 142 is implemented. We have not determined the impact that this statement will have on our 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 become effective for our fiscal year ending September 30, 2003. We have not determined the impact, if any, that this statement will have on our financial statements.

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 become effective for our fiscal year ending September 30, 2003. We have not determined the impact that this statement will have on our consolidated financial position or results of operations.

Results of Operations

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