TRANSDIGM HOLDING CO - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 29, 2003.

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		333-71397

TransDigm Inc.

(Exact name of registrant as specified in its charter)

Delaware

(State or other Jurisdiction of incorporation or organization)

34-1750032

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

TransDigm Holding Company

(Exact name of registrant as specified in its charter)

Delaware

(State or other Jurisdiction of incorporation or organization)

13-3733378

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

26380 Curtiss Wright Parkway, Richmond Heights, Ohio		44143

(Address of principal executive offices)		(Zip Code)

(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 each of the co-registrants (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 co-registrants 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 by check mark whether the co-registrants are accelerated filers (as defined in Rule 12b-2 of the Exchange Act).

Yes o

No x

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 March 29, 2003)


Class A Common Stock (Non-Voting) of TransDigm Holding Company, $0.01 Par Value		-0-

(Class)		(Outstanding at March 29, 2003)

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

INDEX

			Page

Part I		FINANCIAL INFORMATION

	Item 1	Financial Statements

		Condensed Consolidated Balance Sheets – March 29, 2003 and September 30, 2002	1

		Condensed Consolidated Statements of Income – Thirteen and Twenty-Six Week Periods Ended March 29, 2003 and March 30, 2002	2

		Condensed Consolidated Statement of Changes in Stockholders’ Deficiency – Twenty-Six Week Period Ended March 29, 2003	3

		Condensed Consolidated Statements of Cash Flows – Twenty-Six Week Periods Ended March 29, 2003 and March 30, 2002	4

		Notes to Condensed Consolidated Financial Statements	5

	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

	Item 3	Quantitative and Qualitative Disclosure About Market Risk	28

	Item 4	Controls and Procedures	28

Part II:		OTHER INFORMATION

	Item 6	Exhibits and Reports on Form 8-K	29

SIGNATURES			29

PART I:	FINANCIAL INFORMATION
ITEM 1

TRANSDIGM HOLDING COMPANY

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

	March 29, 2003			September 30, 2002

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	11,759		$	49,206
Accounts receivable, net		46,625			37,341
Inventories, net (Note 5)		58,762			51,429
Deferred income taxes		9,959			9,959
Prepaid expenses and other		1,266			715

Total current assets		128,371			148,650
PROPERTY, PLANT AND EQUIPMENT - Net		39,985			39,192
GOODWILL - Net		203,421			158,453
OTHER INTANGIBLE ASSETS - Net		41,699			41,570
DEBT ISSUE COSTS - Net		10,173			11,622
DEFERRED INCOME TAXES AND OTHER		489			2,739

TOTAL ASSETS	$	424,138		$	402,226

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
CURRENT LIABILITIES:
Current portion of long-term liabilities	$	11,564		$	7,084
Accounts payable		14,335			11,835
Accrued liabilities		31,915			30,696

Total current liabilities		57,814			49,615
LONG-TERM DEBT - Less current portion		392,589			404,468
DEFERRED INCOME TAXES		1,817			—
OTHER NON-CURRENT LIABILITIES		4,270			6,268

Total liabilities		456,490			460,351

CUMULATIVE REDEEMABLE PREFERRED STOCK		17,737			16,124
REDEEMABLE COMMON STOCK (Note 6)		2,907			2,907
STOCKHOLDERS’ DEFICIENCY:
Common stock		102,080			102,080
Warrants		1,934			1,934
Retained deficit		(156,333	)		(180,506	)
Accumulated other comprehensive loss		(677	)		(664	)

Total stockholders’ deficiency		(52,996	)		(77,156	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY	$	424,138		$	402,226

See notes to condensed consolidated financial statements.

TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN AND TWENTY-SIX WEEK PERIODS ENDED
MARCH 29, 2003 AND MARCH 30, 2002
(In Thousands of Dollars)
(Unaudited)

	Thirteen Week Periods Ended				Twenty-Six Week Periods Ended

	March 29, 2003		March 30, 2002		March 29, 2003		March 30, 2002

NET SALES	$	79,616	$	59,888	$	149,421	$	117,613
COST OF SALES		42,691		32,450		78,186		64,148

GROSS PROFIT		36,925		27,438		71,235		53,465
OPERATING EXPENSES:
Selling and administrative		5,290		5,135		10,265		10,475
Amortization of intangibles		287		1,774		571		3,167
Research and development		708		692		1,422		1,372

Total operating expenses		6,285		7,601		12,258		15,014

INCOME FROM OPERATIONS		30,640		19,837		58,977		38,451
INTEREST EXPENSE - Net		9,043		8,281		17,982		16,885

INCOME BEFORE INCOME TAXES		21,597		11,556		40,995		21,566
INCOME TAX PROVISON		7,929		4,970		15,209		9,277

NET INCOME	$	13,668	$	6,586	$	25,786	$	12,289

See notes to condensed consolidated financial statements.

TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS’ DEFICIENCY
FOR THE TWENTY-SIX WEEK PERIOD ENDED MARCH 29, 2003
(In Thousands of Dollars)
(Unaudited)

	Common Stock		Warrants		Retained Deficit			Accumulated Other Comprehensive Loss			Total

BALANCE, OCTOBER 1, 2002	$	102,080	$	1,934	$	(180,506	)	$	(664	)	$	(77,156	)
Comprehensive income:
Net income						25,786						25,786
Other comprehensive loss									(13	)		(13	)

Comprehensive income												25,773
Cumulative redeemable preferred stock:
Dividends accrued						(1,474	)					(1,474	)
Accretion for original issue discount						(139	)					(139	)

BALANCE, MARCH 29, 2003	$	102,080	$	1,934	$	(156,333	)	$	(677	)	$	(52,996	)

See notes to condensed consolidated financial statements.

TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEK PERIODS ENDED MARCH 29, 2003 AND MARCH 30, 2002
(In Thousands of Dollars)
(Unaudited)

	Twenty-Six Week Periods Ended

	March 29, 2003			March 30, 2002

OPERATING ACTIVITIES:
Net income	$	25,786		$	12,289
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		3,352			3,474
Amortization of intangibles		571			3,167
Amortization/write-off of debt issue costs and note premium		1,404			1,264
Interest deferral on Holdings PIK Notes		1,546			1,626
Changes in assets/liabilities, net of effects from acquisition of business (Note 4):
Accounts receivable		(7,435	)		7,679
Inventories		(1,345	)		(1,728	)
Prepaid expenses and other assets		1,210			(1,177	)
Accounts payable		1,681			(1,320	)
Accrued and other liabilities		2,631			1,982

Net cash provided by operating activities		29,401			27,256

INVESTING ACTIVITIES:
Acquisition of Norco, Inc. net assets (Note 4)		(52,954	)
Capital expenditures		(2,703	)		(1,056	)

Net cash used in investing activities		(55,657	)		(1,056	)

FINANCING ACTIVITIES:
Borrowings under credit facility, net of fees of $200		24,800
Repayment of Holdings PIK Notes		(32,802	)
Repayment of amounts borrowed under credit facility		(1,989	)		(6,631	)
Payment of Honeywell license obligation		(1,200	)		(1,800	)
Purchase of redeemable common stock					(15	)

Net cash used in financing activities		(11,191	)		(8,446	)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(37,447	)		17,754
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		49,206			11,221

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	11,759		$	28,975

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	14,222		$	13,891

Cash paid during the period for income taxes	$	11,180		$	8,574

See notes to condensed consolidated financial statements.

TRANSDIGM HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN AND TWENTY-SIX WEEK PERIODS ENDED MARCH 29, 2003 AND MARCH 30, 2002
(UNAUDITED)

1.	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 category include ignition system components, fuel and lube pumps, mechanical controls and actuators, batteries and chargers, engine hold open mechanisms and specialty connecting devices. 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. These financial statements and notes should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2002. The September 30, 2002 condensed consolidated balance sheet was derived from the Company’s audited financial statements. The results of operations for the thirteen and twenty-six week periods ended March 29, 2003 are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to the fiscal 2002 financial statements and related notes to conform to the classifications used in 2003.

3.	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 142”), which became effective for the Company on October 1, 2002. Under the provisions of SFAS 142, amortization of goodwill and certain other intangible assets ceased effective October 1, 2002. The adoption of this statement will result in the elimination of approximately $5 million of annual goodwill amortization expense during fiscal 2003. Goodwill amortization was replaced with the requirement to test goodwill for impairment upon adoption of SFAS 142 and at least annually thereafter. The Company’s initial impairment test as of October 1, 2002 had no effect on its consolidated financial position or results of operations. The Company’s annual impairment test will be performed as of its fiscal year end.

	A reconciliation of net income reported by the Company for the thirteen and twenty-six week periods ended March 29, 2003 and March 30, 2002 to the net income which would have been reported had the provisions of SFAS 142 been applied at the beginning of the periods ended March 29, 2002 is as follows (in thousands):

	Thirteen Week Periods Ended				Twenty-Six Week Periods Ended

	March 29, 2003		March 30, 2002		March 29, 2003		March 30, 2002

Reported net income	$	13,668	$	6,586	$	25,786	$	12,289
Add back goodwill amortization (net of income taxes)		—		912		—		1,817

Adjusted net income	$	13,668	$	7,498	$	25,786	$	14,106

	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 adoption of this statement had no effect on the Company’s consolidated financial position or results of operations.

	In December 2002, the FASB issued Interpretation (“FIN”) No. 45, Guarantor’s Accounting and Disclosure Requirements (“FIN 45”), which requires the disclosure of any guarantees in place prior to December 31, 2002 and the recognition of a liability for the fair value of any guarantees entered into or modified after that date. The Company is not a guarantor in arrangements that require the recognition of a liability or disclosure under FIN No. 45. The adoption of this statement had no effect on the Company’s consolidated financial position or results of operations.

	In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation --Transition and Disclosure (“SFAS 148”), an amendment of SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”). SFAS 148 amends SFAS 123, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.

	The Company applies Accounting Principles Board Opinion No. 25 (“APB 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 dates. Had 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 SFAS 123, the Company’s reported net income would have been reduced. Information concerning reported and pro forma stock-based employee compensation costs and net income is provided below (in thousands) to illustrate the difference between accounting for the stock option plans under APB 25 and SFAS 123.

	Thirteen Week Periods Ended				Twenty-Six Week Periods Ended

	March 29, 2003		March 30, 2002		March 29, 2003		March 30, 2002

Net income reported	$	13,668	$	6,586	$	25,786	$	12,289
Stock-based employee compensation cost (net of income taxes) if fair value based method had been used		146		131		291		261

Pro forma net income as if the fair value based method had been used	$	13,522	$	6,455	$	25,495	$	12,028

During January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest Entities (“FIN 46”), which requires existing, unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among the parties involved. Variable interest entities are defined as having one or both of the following characteristics:
	•	The equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties.

	•	The equity investors lack one or more of the essential characteristics of a controlling financial interest.

The Company has determined that it is not reasonably possible that it will be required to consolidate or disclose information about a variable interest entity upon implementation of FIN 46 in the fourth quarter of fiscal 2003.

4.	ACQUISITION

	On February 24, 2003, Marathon acquired certain assets and assumed certain liabilities of the Norco, Inc. business (the “Acquisition”) from TransTechnology Corporation for $51.0 million in cash. In addition, the Company was required to pay approximately $1.0 million of asset transfer tax payments in accordance with the agreement. The purchase price is subject to adjustment based on a final determination of working capital as of the closing of the Acquisition. Norco, Inc. (“Norco”) is a leading aerospace component manufacturer of proprietary engine hold open mechanisms and specialty connecting devices. Norco’s proprietary aerospace components, significant aftermarket content and strong niche market position fit well into the Company’s overall business and strategic direction. As a result of the Acquisition, Marathon expects to reduce costs through the relocation of the Norco manufacturing process into its existing Waco, Texas facility.

	The purchase price consideration of $51.0 million in cash, $1.0 million tax payment and $1.0 million of costs associated with the Acquisition were funded through the use of $28.2 million of the Company’s existing cash balances and $24.8 million (net of fees of $0.2 million) of new borrowings added to the Company’s Tranche C Facility maturing in May 2007 under its existing Senior Credit Facility.

	The Company accounted for the Acquisition as a purchase and included the results of operations of the acquired business in its consolidated financial statements from the effective date of the Acquisition. The Company is in the process of obtaining third-party valuations of certain tangible and intangible assets; thus, the allocation of the purchase price is subject to refinement. The Company expects substantially all of the goodwill will be deductible for income tax purposes. The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed at the date of Acquisition (in thousands).

	At February 24, 2003

Current assets	$	7,896
Property, plant and equipment		1,442
Goodwill		44,978
Intangible assets		51

Total assets acquired		54,367

Current liabilities		1,413

Total liabilities assumed		1,413

Net assets acquired	$	52,954

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 periods ended (in thousands):

	Thirteen Week Periods Ended				Twenty-Six Week Periods Ended

	March 29, 2003		March 30, 2002		March 29, 2003		March 30, 2002

Net sales	$	81,923	$	66,118	$	156,921	$	130,052
Operating income		31,456		22,370		61,302		42,958
Net income		14,054		7,990		26,931		14,744

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

5.	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):

	March 29, 2003			September 30, 2002

Work-in-progress and finished goods	$	33,884		$	28,534
Raw materials and purchased component parts		32,411			30,010

Total		66,295			58,544
Reserve for excess and obsolete inventory		(7,533	)		(7,115	)

Inventories - net	$	58,762		$	51,429

6.	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 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 March 29, 2003, 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 March 29, 2003 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 million at March 29, 2003. 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 million at March 29, 2003. 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 certain 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.

7.	SUPPLEMENTAL GUARANTOR INFORMATION

	TransDigm’s 10 3/8% Senior Subordinated Notes due 2008 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’ 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 March 29, 2003 and September 30, 2002 and its statements of income and cash flows for the twenty-six week periods ended March 29, 2003 and March 30, 2002.

TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF MARCH 29, 2003
(In Thousands of Dollars)

	Holdings			TransDigm		Subsidiary Guarantors			Eliminations			Total Consolidated

ASSETS
CURRENT ASSETS:
Cash and cash equivalents				$	12,230	$	(471	)				$	11,759
Accounts receivable, net					15,161		31,464						46,625
Inventories, net					20,217		38,545						58,762
Deferred income taxes					9,959								9,959
Prepaid expenses and other					284		982						1,266

Total current assets					57,851		70,520						128,371
INVESTMENT IN SUBSIDIARIES AND INTERCOMPANY BALANCES	$	(177,232	)		476,036		(135,604	)	$	(163,200	)
PROPERTY, PLANT AND EQUIPMENT - Net					9,544		30,441						39,985
GOODWILL - Net					11,072		192,349						203,421
OTHER INTANGIBLE ASSETS - Net					11,278		30,421						41,699
DEBT ISSUE COSTS - Net					10,173								10,173
DEFERRED INCOME TAXES AND OTHER					489								489

TOTAL ASSETS	$	(177,232	)	$	576,443	$	188,127		$	(163,200	)	$	424,138

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Current portion of long-term liabilities				$	11,564							$	11,564
Accounts payable					5,007	$	9,328						14,335
Accrued liabilities					22,568		9,347						31,915

Total current liabilities					39,139		18,675						57,814
LONG-TERM DEBT - Less current portion					392,589								392,589
DEFERRED INCOME TAXES					1,817								1,817
OTHER NON-CURRENT LIABILITIES					2,983		1,287						4,270

Total liabilities					436,528		19,962						456,490

CUMULATIVE REDEEMABLE PREFERRED STOCK	$	17,737											17,737
REDEEMABLE COMMON STOCK		2,907											2,907
STOCKHOLDERS’ EQUITY (DEFICIENCY)		(197,876	)		139,915		168,165		$	(163,200	)		(52,996	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)	$	(177,232	)	$	576,443	$	188,127		$	(163,200	)	$	424,138

TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF SEPTEMBER 30, 2002
(In Thousands of Dollars)

	Holdings			TransDigm		Subsidiary Guarantors			Eliminations			Total Consolidated

ASSETS
CURRENT ASSETS:
Cash and cash equivalents				$	50,866	$	(1,660	)				$	49,206
Accounts receivable, net					13,636		23,705						37,341
Inventories, net					20,131		31,298						51,429
Deferred income taxes					9,959								9,959
Prepaid expenses and other					299		416						715

Total current assets					94,891		53,759						148,650
INVESTMENTS IN SUBSIDIARIES AND INTERCOMPANY BALANCES	$	(144,430	)		377,723		(123,047	)	$	(110,246	)
PROPERTY, PLANT AND EQUIPMENT - Net					9,568		29,624						39,192
GOODWILL - Net					11,085		147,368						158,453
OTHER INTANGIBLE ASSETS - Net					11,580		29,990						41,570
DEBT ISSUE COSTS - Net		209			11,413								11,622
DEFERRED INCOME TAXES AND OTHER					2,739								2,739

TOTAL ASSETS	$	(144,221	)	$	518,999	$	137,694		$	(110,246	)	$	402,226

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Current portion of long-term liabilities				$	7,084							$	7,084
Accounts payable					5,551	$	6,284						11,835
Accrued liabilities					17,413		13,283						30,696

Total current liabilities					30,048		19,567						49,615
LONG-TERM DEBT - Less current portion	$	31,256			373,212								404,468
OTHER NON-CURRENT LIABILITIES					4,981		1,287						6,268

Total liabilities		31,256			408,241		20,854						460,351

CUMULATIVE REDEEMABLE PREFERRED STOCK		16,124											16,124
REDEEMABLE COMMON STOCK		2,907											2,907
TOTAL STOCKHOLDERS’ 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

TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE TWENTY-SIX WEEK PERIOD ENDED MARCH 29, 2003
(In Thousands of Dollars)

	Holdings			TransDigm		Subsidiary Guarantors		Eliminations		Total Consolidated

NET SALES				$	59,624	$	89,797			$	149,421
COST OF SALES					25,828		52,358				78,186

GROSS PROFIT					33,796		37,439				71,235

OPERATING EXPENSES:
Selling and administrative					5,616		4,649				10,265
Amortization of intangibles					302		269				571
Research and development					774		648				1,422

Total operating expenses					6,692		5,566				12,258

INCOME FROM OPERATIONS					27,104		31,873				58,977
INTEREST EXPENSE - Net	$	1,755			12,045		4,182				17,982

INCOME (LOSS) BEFORE INCOME TAXES		(1,755	)		15,059		27,691				40,995
INCOME TAX PROVISION (BENEFIT)		(651	)		5,587		10,273				15,209

NET INCOME (LOSS)	$	(1,104	)	$	9,472	$	17,418	$	—	$	25,786

TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE TWENTY-SIX WEEK PERIOD ENDED MARCH 30, 2002
(In Thousands of Dollars)

	Holdings			TransDigm		Subsidiary Guarantors		Eliminations		Total Consolidated

NET SALES				$	56,422	$	61,191			$	117,613
COST OF SALES					28,626		35,522				64,148

GROSS PROFIT					27,796		25,669				53,465

OPERATING EXPENSES:
Selling and administrative					6,633		3,842				10,475
Amortization of intangibles					665		2,502				3,167
Research and development					826		546				1,372

Total operating expenses					8,124		6,890				15,014

INCOME FROM OPERATIONS					19,672		18,779				38,451
INTEREST EXPENSE - Net	$	1,641			10,188		5,056				16,885

INCOME (LOSS) BEFORE INCOME TAXES		(1,641	)		9,484		13,723				21,566
INCOME TAX PROVISION (BENEFIT)		(706	)		4,081		5,902				9,277

NET INCOME (LOSS)	$	(935	)	$	5,403	$	7,821	$	—	$	12,289

TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE TWENTY-SIX WEEK PERIOD ENDED MARCH 29, 2003
(In Thousands of Dollars)

	Holdings			TransDigm			Subsidiary Guarantors			Eliminations		Total Consolidated

OPERATING ACTIVITIES:
Net income (loss)	$	(1,104	)	$	9,472		$	17,418				$	25,786
Adjustments to reconcile net income (loss) to net cash provided by operating activities		1,755			10,227			(8,367	)				3,615

Net cash provided by operating activities		651			19,699			9,051					29,401

INVESTING ACTIVITIES:
Acquisition of Norco, Inc. net assets								(52,954	)				(52,954	)
Capital expenditures					(1,318	)		(1,385	)				(2,703	)

Net cash used by investing activities					(1,318	)		(54,339	)				(55,657	)

FINANCING ACTIVITIES:
Changes in intercompany activities		32,151			(78,628	)		46,477
Borrowings under credit facility, net of fees of $200					24,800								24,800
Repayment of Holdings PIK Notes		(32,802	)										(32,802	)
Payment of Honeywell license obligation					(1,200	)							(1,200	)
Repayment of amounts borrowed under credit facility					(1,989	)							(1,989	)

Net cash (used in) provided by financing activities		(651	)		(57,017	)		46,477					(11,191	)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS					(38,636	)		1,189					(37,447	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD					50,866			(1,660	)				49,206

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	12,230		$	(471	)	$	—	$	11,759

TRANSDIGM HOLDING COMPANY

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE TWENTY-SIX WEEK PERIOD ENDED MARCH 30, 2002
(In Thousands of Dollars)

	Holdings			TransDigm			Subsidiary Guarantors			Eliminations		Total Consolidated

OPERATING ACTIVITIES:
Net income (loss)	$	(935	)	$	5,403		$	7,821				$	12,289
Adjustments to reconcile net income (loss) to net cash provided by operating activities		1,641			13,146			180					14,967

Net cash provided by operating activities		706			18,549			8,001					27,256

INVESTING ACTIVITIES - Capital expenditures					(579	)		(477	)				(1,056	)

FINANCING ACTIVITIES:
Changes in intercompany activities		(706	)		8,598			(7,892	)
Repayment of amounts borrowed under credit facility					(6,631	)							(6,631	)
Payment of Honeywell license obligation					(1,800	)							(1,800	)
Purchase of redeemable common stock					(15	)							(15	)

Net cash provided by (used in) financing activities		(706	)		152			(7,892	)				(8,446	)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS					18,122			(368	)				17,754
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD					12,294			(1,073	)				11,221

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	30,416		$	(1,441	)	$	—	$	28,975

* * * * *

PART I:	FINANCIAL INFORMATION
ITEM 2

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

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

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.

Many such factors are outside the control of the Company. Consequently, such forward-looking statements should be regarded solely as its current plans, estimates and beliefs. The Company does not undertake and specifically declines 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, other than may be required under the securities law.

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 operating income 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 usually relatively stable (versus OEM sales) 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.

Recent Developments

On February 24, 2003, a wholly-owned subsidiary of the Company acquired certain assets and assumed certain liabilities of the Norco, Inc. business (“the Acquisition”) from TransTechnology Corporation, for $51.0 million in cash. In addition, the Company was required to pay approximately $1.0 million of asset transfer tax payments in accordance with the agreement. The purchase price is subject to adjustment based on a final determination in working capital as of the closing of the Acquisition. Norco, Inc. designs, manufactures and supplies engine hold open mechanisms and specialty connecting devices.

The purchase price consideration of $51.0 million in cash, $1.0 million tax payment and $1.0 million of costs associated with the Acquisition were funded through the use of $28.2 million of the Company’s existing cash balances and $24.8 million (net of fees of $0.2 million) of new borrowings added to the Company’s Tranche C Facility maturing in May 2007 under its existing Senior Credit Facility.

On February 28, 2003, the Company repaid all of the outstanding Holdings PIK Notes in the amount of $32.8 million using existing cash balances.

Significant Accounting Policies

The Company’s condensed 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 Company’s consolidated financial statements included with the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2002.

Effective October 1, 2002, the Company implemented the provisions of SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”), and ceased the amortization of its goodwill. The adoption of this statement will result in the elimination of approximately $5 million of annual goodwill amortization expense during fiscal 2003. Goodwill amortization was replaced with the requirement to test goodwill for impairment upon adoption of SFAS 142 and at least annually thereafter. The Company’s initial impairment test as of October 1, 2002 had no effect on its consolidated financial position or results of operations.

Accounting estimates are an integral part of the Company’s 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 2002 fiscal year and the thirteen and twenty-six week periods ended March 29, 2003 and March 30, 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.

Results of Operations

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

	Thirteen Week Periods Ended						Twenty-Six Week Periods Ended

	March 29, 2003			March 30, 2002			March 29, 2003			March 30, 2002

Net sales		100	%		100	%		100	%		100	%

Gross profit		46			46			48			45
Selling and administrative expenses		7			9			7			9
Amortization of intangibles		—			3			1			2
Research and development		1			1			1			1

Income from operations		38			33			39			33
Interest expense - net		11			14			12			14
Income tax provision		10			8			10			8

Net income		17	%		11	%		17	%		11	%

Changes in Results of Operations

Thirteen week period ended March 29, 2003 compared with the thirteen week period ended March 30, 2002.

•	Net Sales. Net sales increased by $19.7 million, or 32.9%, to $79.6 million for the quarter ended March 29, 2003, from $59.9 million for the comparable quarter last year. The increase is primarily due to new business with Airbus in the quarter ended March 29, 2003 relating to the sale of certain cockpit door security mechanisms and lower sales in the quarter ended March 30, 2002 resulting from the industry events triggered in part by the September 11, 2001 terrorist attacks. The increase in net sales was partially offset by a modest decline in OEM sales.

•	Gross Profit. Gross profit (net sales less cost of sales) increased by $9.5 million, or 34.6%, to $36.9 million for the quarter ended March 29, 2003 from $27.4 million from the comparable quarter last year. This increase is attributable to the higher sales discussed above. Gross profit as a percentage of sales was 46% for the thirteen week periods ended March 29, 2003 and March 30, 2002.

•	Selling and Administrative Expenses. Selling and administrative expenses increased slightly by $0.2 million, or 3.0%, to $5.3 million for the quarter ended March 29, 2003 from $5.1 million for the comparable quarter last year. Selling and administrative expenses decreased as a percentage of net sales to 6.6% for the current quarter from 8.6% for the comparable quarter last year due to the increase in net sales discussed above and continuing cost control measures implemented after the terrorist attacks described above.

•	Amortization of Intangibles. Amortization of intangibles decreased by $1.5 million, or 83.8%, to $0.3 million for the quarter ended March 29, 2003 from $1.8 million for the comparable quarter last year due to the implementation of SFAS 142 which became effective October 1, 2002. Under SFAS 142, the Company ceased the amortization of its goodwill effective October 1, 2002. Goodwill amortization was replaced with the requirement to test goodwill for impairment upon adoption of SFAS 142 and at least annually thereafter.

•	Research and Development. Research and development expense was $0.7 million for each of the quarters ended March 29, 2003 and March 30, 2002. Research and development expense, as a percentage of net sales, was approximately 1% for both quarters.

•	Income from Operations. Operating income increased by $10.8 million, or 54.5%, to $30.6 million for the quarter ended March 29, 2003 from $19.8 million for the comparable quarter last year, due to the factors discussed above.

•	Interest Expense. Interest expense increased $0.7 million, or 9.2%, to $9.0 million for the quarter ended March 29, 2003 from $8.3 million for the comparable quarter last year. This was principally caused by an increase in the Company’s weighted average interest rate on its long-term debt resulting from the issuance of an additional $75 million in aggregate principal amount of 10 3/8% Senior Subordinated Notes due 2008 (the “Senior Subordinated Notes”) in June 2002. The proceeds of the Senior Subordinated Notes, net of fees and expenses, were used to repay $74 million of the borrowings outstanding under the Company’s senior secured credit facility (the “Senior Credit Facility”) The interest rate on outstanding borrowings under the Senior Credit Facility at March 29, 2003 was 4.9%.

•	Income Taxes. Income tax expense as a percentage of income before income taxes was 37% for the quarter ended March 29, 2003 compared to the 43% effective tax rate for the comparable quarter last year. This lower estimated annual effective tax rate was due to increased tax benefits expected to result from higher foreign sales, research and development tax credits, and less non-deductible expenses as a percentage of income before taxes.

•	Net Income. The Company earned $13.7 million for the second quarter of fiscal 2003 compared to $6.6 million for the second quarter of fiscal 2002, primarily as a result of the factors referred to above.

Twenty-six week period ended March 29, 2003 compared with the twenty-six week period ended March 30, 2002.

•	Net Sales. Net sales increased by $31.8 million, or 27.0%, to $149.4 million for the twenty-six week period ended March 29, 2003, from $117.6 million for the comparable period last year. The increase is primarily due to new business with Airbus relating to the sale of certain cockpit door security mechanisms, lower sales in the twenty-six week period ended March 30, 2002 resulting from the industry events triggered in part by the September 11, 2001 terrorist attacks and an increase in military spending partially offset by a modest decrease in OEM sales.

•	Gross Profit. Gross profit (net sales less cost of sales) increased by $17.7 million, or 33.2%, to $71.2 million for the twenty-six week period ended March 29, 2003 from $53.5 million from the comparable period last year. This increase is attributable to the higher sales discussed above. Gross profit as a percentage of sales increased to 47.7% for the twenty-six week period ended March 29, 2003 from 45.5% for the comparable period last year principally as a result of the following factors: (1) higher volume on a reduced cost structure implemented subsequent to the 2001 terrorist attacks, (2) favorable product mix and (3) the strength of the Company’s proprietary products and market positions.

•	Selling and Administrative Expenses. Selling and administrative expenses decreased slightly by $0.2 million, or 2.0%, to $10.3 million for the twenty-six week period ended March 29, 2003 from $10.5 million for the comparable period last year. Selling and administrative expenses decreased as a percentage of net sales to 6.9% for the twenty-six week period ended March 29, 2003 from 8.9% for the comparable period last year due to the increase in net sales discussed above and continuing cost control measures implemented after the September 2001 terrorist attacks.

•	Amortization of Intangibles. Amortization of intangibles decreased by $2.6 million, or 82.0%, to $0.6 million for the twenty-six week period ended March 29, 2003 from $3.2 million for the comparable period last year due to the implementation of SFAS 142 which became effective October 1, 2002. Under SFAS 142, the Company ceased the amortization of its goodwill effective October 1, 2002. Goodwill amortization was replaced with the requirement to test goodwill for impairment upon adoption of SFAS 142 and at least annually thereafter.

•	Research and Development. Research and development expense was $1.4 million for each of the periods ended March 29, 2003 and March 30, 2002. Research and development expense, as a percentage of net sales, was approximately 1% for both periods.

•	Income from Operations. Operating income increased by $20.5 million, or 53.4%, to $59.0 million for the twenty-six week period ended March 29, 2003 from $38.5 million for the comparable period last year, due to the factors discussed above.

•	Interest Expense. Interest expense increased $1.1 million, or 6.5%, to $18.0 million for the twenty-six week period ended March 29, 2003 from $16.9 million for the comparable period last year. This was principally caused by an increase in the Company’s weighted average interest rate on its long-term debt resulting from the issuance of an additional $75 million in aggregate principal amount of 10 3/8% Senior Subordinated Notes in June 2002. The proceeds of the Senior Subordinated Notes, net of fees and expenses, were used to repay $74 million of the borrowings outstanding under the Company’s Senior Credit Facility. The interest rate on outstanding borrowings under the Senior Credit Facility at March 29, 2003 was 4.9%.

•	Income Taxes. Income tax expense as a percentage of income before income taxes was 37% for the twenty-six week period ended March 29, 2003 compared to the 43% effective tax rate for the comparable period last year. The lower estimated annual effective tax rate was due to increased tax benefits generated by higher foreign sales, research and development tax credits and a decline in non-deductible goodwill amortization and interest expense as a percentage of income before income taxes.

•	Net Income. The Company earned $25.8 million for the twenty-six week period ended March 29, 2003 compared to $12.3 million for the same period last year, primarily as a result of the factors referred to above.

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 March 29, 2003, the Company estimated its sales order backlog at $125.7 million compared to an estimated $117.0 million as of March 30, 2002. The increase in backlog is due to the acquisition of the Norco, Inc. net assets and an increase in orders for the Company’s lube pump product line partially offset by a decline in orders for the Airbus cockpit door security mechanisms. The majority of the purchase orders outstanding as of March 29, 2003 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 March 29, 2003 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 and a portion of the Company’s products are resold to foreign end-users. This activity is 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.

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 thirteen and twenty-six week periods ended March 29, 2003 and March 30, 2002 were not significant.

Liquidity and Capital Resources

The Company generated $29.4 million of cash from operating activities during the twenty-six weeks ended March 29, 2003 compared to $27.3 million generated during the twenty-six weeks ended March 30, 2002. The increase is primarily due to increased sales, the strength of the Company’s proprietary products and market positions and cost saving actions the Company undertook as a result of the September 11, 2001 terrorist attacks.

Cash used in investing activities increased to $55.7 million during the twenty-six weeks ended March 29, 2003 compared to $1.1 million used during the twenty-six weeks ended March 30, 2002. The increase is primarily a result of the acquisition of the net assets of Norco, Inc. discussed previously and an increase in capital expenditures. Capital expenditures during the twenty-six weeks ended March 30, 2002 were reduced due to the uncertainties caused by the September 11, 2001 terrorist attacks.

Cash used in financing activities during the twenty-six weeks ended March 29, 2003 increased to $11.2 million compared to $8.4 million during the twenty-six weeks ended March 30, 2002. The increase is due to the repayment of the Holdings PIK Notes of $32.8 million and repayment of amounts borrowed under Senior Credit Facility offset by the proceeds of new borrowings under the Senior Credit Facility relating to the acquisition of the net assets of Norco, Inc.

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 consisting of a $105.5 million Tranche B Facility maturing in May 2006 and a $140.0 million Tranche C Facility maturing in May 2007. The Tranche A facility was repaid in fiscal 2002. As of March 29, 2003, the outstanding balances of the Revolving Credit Facility and the Tranche B and C facilities were $0, $82.1 million and $116.7 million, respectively. No additional borrowings are currently available under the Tranche A, B and C facilities of the Term Loan Facility. In addition to amounts available under the Revolving Credit Facility, the Senior Credit Facility allows TransDigm to incur up to $125.0 million of additional bank borrowings or subordinated debt (although 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. The Senior Credit Facility also allows TransDigm to effect permitted acquisitions, with the aggregate amount paid for all such permitted acquisitions not to exceed $225.0 million (of which $52.0 million was paid in connection with the acquisition of the net assets of Norco, Inc.), and requires that at least $10.0 million must remain unused and available under the $30.0 million Revolving Credit Facility immediately following any acquisition.

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 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 indenture governing the Senior Subordinated Notes 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 Senior Subordinated Note indenture require the Company to meet certain financial ratios. Any failure to comply with the restrictions of the Senior Credit Facility, the Senior Subordinated Note indenture 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 Senior Subordinated Note indenture.

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 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 March 29, 2003, 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. million at March 29, 2003. 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 million at March 29, 2003. 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 Note 6 of the Notes to the condensed consolidated financial statements included elsewhere in this Report.

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

	2003 (1)		2004		2005		2006		2007		2008 and Thereafter		Total

Contractual Obligations:
Long-Term Debt (2)	$	2.6	$	13.4	$	37.0	$	61.2	$	84.6	$	200.0	$	398.8
Operating Leases		.7		1.4		1.2		.8		.8		3.9		8.8
Redeemable Preferred Stock (3)		—		—		—		—		—		59.9		59.9
Other Long-Term Liabilities Reflected on the Balance Sheet Under GAAP		1.4		2.2		2.2		—		—		—		5.8

Total Contractual Cash Obligations	$	4.7	$	17.0	$	40.4	$	62.0	$	85.4	$	263.8	$	473.3


	(1)	Beginning March 30, 2003.

	(2)	The Long-Term Debt amounts exclude a $1.8 million premium incurred in connection with the offering of $75 million in aggregate principal amount of additional Senior Subordinated Notes in fiscal 2002 which is being amortized over the term of the notes.

	(3)	Includes the accumulation of future dividends through the mandatory redemption date in 2010.

The Company’s primary future cash needs will consist of debt service 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 $2.7 million and $1.1 million during the twenty-six weeks ended March 29, 2003 and March 30, 2002, 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 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 acquisitions at this time, and there can be no assurance that the Company will be able to reach an 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 and absent any disruptive events, 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

New accounting standards are discussed in Note 3 of the notes to condensed consolidated financial statements included elsewhere in this Report.

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 March 29, 2003 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 16% Redeemable Preferred Stock with an aggregate liquidation preference of $19.9 million and (2) “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 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. Dividend accrual on the Holdings 16% Redeemable Preferred Stock during the thirteen weeks ended March 29, 2003 was $1.5 million. As of March 29, 2003, 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 million at March 29, 2003. 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 million at March 29, 2003. 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. 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.

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. TransDigm’s total indebtedness was $400.6 million at March 29, 2003. In addition, at March 29, 2003, the Company had a consolidated stockholders’ deficiency of $53.0 million, which resulted from the merger consideration paid in fiscal 1999 in conjunction with the recapitalization being charged directly to Holdings equity.

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 Credit Facility and the indenture governing the Senior Subordinated Notes, 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 Senior Subordinated Note indenture 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 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 $155 million, including $30 million under our Revolving Credit Facility and $125 million of uncommitted, additional bank borrowings. All of those borrowings would be senior to the Senior Subordinated 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. Military action in Iraq or anywhere else could increase this risk. 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.

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 affected 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.

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 stoppage could have a material adverse effect on our business.

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 we manufacture all of our 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.

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.

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.

PART I:	FINANCIAL INFORMATION
ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

At March 29, 2003, 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 $198.8 million of borrowings outstanding under the Senior Credit Facility at March 29, 2003 was 4.9%. 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 $ 2.0 million based on the amount of borrowings outstanding at March 29, 2003.

Also outstanding at March 29, 2003 was $200.0 million of Company indebtedness in the form of the Senior Subordinated Notes and Holdings 16% Redeemable Preferred Stock with an aggregate liquidation preference of $19.9 million. In addition, as of March 29, 2003, 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 million at March 29, 2003. 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 million at March 29, 2003. 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 rate on the Senior Subordinated Notes is fixed at 10 3/8 % per year, and the dividends accrue on the Holdings 16% Redeemable Preferred Stock at 16% annually. The fair value of the Senior Subordinated Notes was approximately $211 million at March 29, 2003, based upon quoted market prices. A determination of the fair value of the Holdings 16% Redeemable Preferred Stock is not considered practicable because it is 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.

ITEM 4.

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. Holdings’ and TransDigm’s Chief Executive Office and Holdings’ and TransDigm’s Chief Financial Officer have concluded that there are reasonable assurances that Holdings’ and TransDigm’s controls and procedures will achieve the desired control objectives.

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 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.

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.

PART II:		OTHER INFORMATION

ITEM 6		Exhibits and Reports on Form 8-K

	(a)	Exhibits

		2.1	Asset Purchase Agreement, dated as of January 24, 2003, among TransTechnology Corporation and Norco, Inc. and Marathon Power Technologies Company

		99.1	Certification of Chief Executive Officer of TransDigm Inc.

		99.2	Certification of Chief Financial Officer of TransDigm Inc.

		99.3	Certification of Chief Executive Officer of TransDigm Holding Company

		99.4	Certification of Chief Financial Officer of TransDigm Holding Company

		Exhibits 99.1 – 99.4 are being furnished solely to accompany this Report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

	(b)	Reports on Form 8-K

		On February 24, 2003, the Company filed a report on Form 8-K related to TransDigm Inc.’s press release announcing that its wholly-owned subsidiary completed the acquisition of the business of Norco, Inc. from TransTechnology Corporation.

		On March 4, 2003, the Company filed a report on Form 8-K related to TransDigm Inc.’s press release announcing its regularly scheduled quarterly conference call to discuss its first quarter results.

SIGNATURES

TRANSDIGM HOLDING COMPANY

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

SIGNATURE	TITLE	DATE

/s/ W. NICHOLAS HOWLEY	President and Chief Executive Officer	May 12, 2003
	(Principal Executive Officer) and Director
W. Nicholas Howley

/s/ G REGORY RUFUS	Chief Financial Officer (Principal Financial	May 12, 2003
	and Accounting Officer)
Gregory Rufus

TRANSDIGM INC.

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

SIGNATURE	TITLE	DATE

/s/ W. NICHOLAS HOWLEY	President and Chief Executive Officer	May 12, 2003
	(Principal Executive Officer) and Director
W. Nicholas Howley

/s/ GREGORY RUFUS	Chief Financial Officer (Principal Financial	May 12, 2003
	and Accounting Officer)
Gregory Rufus

CERTIFICATIONS

I, W. Nicholas Howley, certify that:

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

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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 quarterly 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 quarterly report (the “Evaluation Date”); and

c) Presented in this quarterly 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 quarterly 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: May 12, 2003	/s/ W. NICHOLAS HOWLEY

	W. Nicholas Howley President and Chief Executive Officer (Principal Executive Officer)

I, Gregory Rufus, certify that:

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

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 quarterly report (the “Evaluation Date”); and

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

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

Date: May 12, 2003	/s/ GREGORY RUFUS

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

I, W. Nicholas Howley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TransDigm Inc.;

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 quarterly report (the “Evaluation Date”); and

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

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

Date: May 12, 2003	/s/ W. NICHOLAS HOWLEY

	W. Nicholas Howley President and Chief Executive Officer (Principal Executive Officer)

I, Gregory Rufus, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TransDigm Inc.;

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 quarterly report (the “Evaluation Date”); and

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

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

Date: May 12, 2003	/s/ GREGORY RUFUS

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

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