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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended September 30, 2003

For the transition period from              to             

Commission File Number 333-71397

Registrants’ Telephone Number, Including Area Code: (216) 289-4939

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

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229,405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrants are accelerated filers (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrants as of September 30, 2003, based upon the last sale price of such voting and non-voting common stock on that date was $0.

The number of shares outstanding of TransDigm Inc.’s common stock, par value $.01 per share, was 100 as of September 30, 2003.

The number of shares outstanding of TransDigm Holding Company’s common stock, par value $.01 per share, was 100 as of September 30, 2003.

Documents incorporated by reference: None

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Special Note Regarding Forward-Looking Statements

This Report on Form 10-K (this “Report”) contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 27A of the Securities Act of 1933, as amended (the “Securities Act”). Discussions containing such forward-looking statements may be found in Items 1, 3, and 7 hereof, as well as within this Report generally. In addition, when used in this Report, the words “believes,” “anticipates,” “expects” and similar expressions are intended to identify forward-looking statements. Although the Company believes that its plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, such forward-looking statements are subject to a number of risks and uncertainties, and we can give no assurance that such plans, intentions or exceptions will be achieved. Important factors that could cause actual results to differ materially from the forward-looking statements made in this Report are set forth under the caption “Risk Factors” and elsewhere in this Report. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements.

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

In this Report, the term “TransDigm” refers to TransDigm Inc. and its subsidiaries. The term “Holdings” refers to TransDigm Holding Company, which holds all of the outstanding capital stock of TransDigm. The term “Company” refers to Holdings, together with TransDigm and its subsidiaries. References to “fiscal year” mean the year ending or ended September 30. For example, “fiscal year 2003” or “fiscal 2003” means the period from October 1, 2002 to September 30, 2003, which includes the periods before and after the Mergers (as defined below).

PART I

The Company

TransDigm Inc. was formed in July 1993 as NovaDigm Acquisition, Inc., a Delaware corporation, in connection with the acquisition of certain companies from IMO Industries Inc. Holdings, a Delaware corporation, was formed in September 1993. On July 22, 2003, TD Acquisition Corporation (“TD Acquisition”), a corporation formed at the direction of Warburg Pincus Private Equity VIII, L.P. (“Warburg Pincus”), merged with and into Holdings, with Holdings continuing as the surviving corporation and a wholly owned subsidiary of a newly formed corporation, TD Holding Corporation (“TD Holding”). Concurrently with the merger, TD Funding Corporation (“TD Funding”), a wholly owned subsidiary of TD Acquisition, merged with and into TransDigm Inc., with TransDigm Inc. continuing as the surviving corporation. Such mergers are referred to herein as the “Mergers.” The total amount paid in the merger of TD Acquisition with and into Holdings, including the amounts related to repayment of all of TransDigm Inc.’s then existing long-term indebtedness, the payment of the merger consideration to Holdings’ then existing stockholders (including holders of in-the-money stock options and the holder of a warrant to purchase Holdings’ common stock), and the payment of transaction expenses and fees, was approximately $1.2 billion. To finance the Mergers and related transactions in part, TransDigm Inc. entered into new senior secured credit facilities providing for senior secured financing of up to $395 million and sold $400 million aggregate principal amount of 8 ³/8% Senior Subordinated Notes due 2011, or the 8 ³/8% Senior Subordinated Notes. The senior secured credit facilities and the 8 ³/8% Senior Subordinated Notes are guaranteed by Holdings and the direct and indirect domestic restricted subsidiaries of TransDigm Inc. In addition, in connection with the consummation of the Mergers, Warburg Pincus and a limited number of other institutional investors purchased securities of TD Holding for an aggregate purchase price of $471.3 million, which amount was ultimately contributed to TransDigm Inc. as equity.

TransDigm is a leading global supplier of highly engineered aircraft components for use on nearly all commercial and military aircraft in service today. The Company estimates that approximately 95% of its net sales for the year ended September 30, 2003 were generated by proprietary products for which it owns the design. These items are generally

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approved and certified by airframe manufacturers, government agencies, the Federal Aviation Administration, or the FAA, or similar entities. During the same period, the Company estimates that it generated approximately 80% of its net sales from products for which it is the sole source provider. Once TransDigm parts are designated as original equipment on an aircraft, the Company generates net sales from recurring aftermarket parts sales over the life of that aircraft. As a result, the Company estimates that approximately 70% of its net sales for the year ended September 30, 2003 were generated from the commercial and military aftermarkets. These aftermarket revenues have historically produced a higher gross margin and been more stable than original equipment manufacturer, or OEM, sales.

TransDigm provides components for a large, diverse installed base of aircraft. In the commercial sector, which generated approximately 72% of the Company’s net sales for the year ended September 30, 2003, the Company sells to distributors of aftermarket components, as well as directly to commercial airlines, aircraft maintenance facilities, and aircraft and engine original equipment manufacturers, or OEMs. For the year ended September 30, 2003, the Company generated approximately 28% of its net sales primarily from the defense sector. Net sales to the defense sector are sold primarily to the United States and foreign militaries and defense OEMs. For the year ended September 30, 2003, the Company generated net sales of approximately $293.3 million.

TransDigm’s business strategy includes three core value drivers: (1) pricing each of its products to fairly reflect the unique value provided by that product; (2) obtaining profitable new business by proactively working with customers to apply its technical capabilities to solve specific customer problems; and (3) striving to continually improve productivity. Successful execution of these value drivers has enabled TransDigm to consistently deliver solid financial performance even in difficult economic environments.

Competitive Strengths

Management believes TransDigm’s key competitive strengths are:

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Business Strategy

Key elements of TransDigm’s business strategy are:

Provide Value Added Products and Reliable Service to Customers. TransDigm focuses on engineering, manufacturing and marketing highly engineered products to customers that place a premium on our capabilities. TransDigm has been effective in communicating to aircraft operators the value of its products in terms of increased value generated by their reliability and performance, as well as reduced maintenance requirements. TransDigm’s customers often recognize that the indirect cost of a flight delay because of poor performance or an unavailable product greatly outweighs the underlying direct cost of our products. TransDigm’s product quality and customer support has allowed it to share the value generated by its products. TransDigm intends to continue to develop and market high value added products that provide significant benefits to its customers.

Generate Profitable New Business Initiatives. TransDigm is successful in identifying and commercializing new business opportunities in the OEM and aftermarket segments to drive revenue growth. TransDigm is effective in creating aftermarket opportunities by developing superior products to retrofit aircraft already in service. TransDigm’s works closely with airlines to identify components that repeatedly cause flight delays or otherwise fail to meet the airlines’ performance standards. TransDigm designs and certifies new parts with improved performance characteristics, for which its customers are typically willing to pay a premium. Importantly, TransDigm often invests in developing and certifying a new part with the support of an airline sponsor. This support tends to significantly improve the probability of commercial success. TransDigm intends to pursue growth opportunities through its new business initiatives.

Realize Productivity Savings. TransDigm will continue to focus on improving operating margins through steady improvements to its cost structure and increases in employee productivity. TransDigm has achieved significant increases in employee productivity since its formation in 1993 and has continually rationalized its manufacturing facilities and redesigned its manufacturing and other business practices to maximize efficiency. For example, TransDigm encourages its employees through performance incentives to learn to operate multiple manufacturing stations in order to minimize overall labor costs. This initiative and others like it have enabled TransDigm to consistently increase sales without corresponding increases in its cost structure.

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Pursue Strategic Acquisitions. TransDigm continues to pursue acquisitions where it believes that the company can enhance value, reduce costs and develop new business. The aircraft component industry is highly fragmented, with many of the companies in the industry being small operators or small non-core operations of larger businesses. Management believes the industry may experience consolidation due to customer requirements that favor larger, more capable suppliers who can provide engineering as well as production capability. TransDigm’s management team has successfully integrated seven acquisitions since its formation in 1993. In each case, TransDigm has significantly improved customer service and delivery reliability and achieved enhanced financial performance

Products

TransDigm focuses on developing highly customized products to solve specific problems for aircraft operators and manufacturers. TransDigm differentiates itself based on engineering and manufacturing capabilities, and TransDigm typically chooses not to compete for non-proprietary “build to print” business, in which price is the primary competitive driver and which usually offers lower margins. TransDigm’s products have strong brand names within the industry and the Company has a reputation for high quality, reliability and customer support. TransDigm categorizes its products into two groupings: power system components and airframe system components.

Power system components generated approximately 61% of TransDigm’s net sales for the year ended September 30, 2003. The major power system components products are (1) ignition system components such as igniters, exciters and spark plugs used to start and spark turbine and reciprocating aircraft engines; (2) gear pumps used primarily in lubrication and fuel applications; (3) mechanical/electromechanical controls used in numerous actuation applications; (4) batteries/chargers used to provide starting and back-up power; and (5) rods and locking devices used to hold open panels to allow access to engines for maintenance.

Airframe system components generated approximately 39% of TransDigm’s net sales for the year ended September 30, 2003. The major airframe system components products are: (1) engineered connectors used in fuel, pneumatic and hydraulic applications; (2) engineered latching and locking devices used in various bin, security and other applications; and (3) lavatory hardware and components.

The major end users of TransDigm’s products include most of the world’s airlines, the United States and foreign militaries, and leading engine and airframe OEMs such as Boeing, Airbus, General Electric, United Technologies, Rolls-Royce, Honeywell, Bombardier, Embraer, Cessna, Gulfstream, Raytheon, Northrop Grumman and Lockheed Martin. TransDigm sells its products directly to these end users and also through the industry’s leading distributors such as Aviall, Satair and AAR.

Sales and Marketing

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

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

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

Backlog

Management believes that sales order backlog (i.e., orders for products that have not yet been shipped) is a useful indicator of future sales. As of September 30, 2003, the Company estimated its sales order backlog at $121.1 million compared to an estimated $124.7 million as of September 30, 2002. This $3.6 million decrease in backlog is primarily comprised of an $11.0 million decline in orders for the Airbus cockpit door security mechanism as the retrofit program nears completion and an aggregate $2.4 million decrease in the backlog pertaining to other product lines offset by a $9.8 million increase in backlog resulting from the acquisition of the Norco, Inc. (“Norco”) business (see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations”). The majority of the purchase orders outstanding as of September 30, 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 September 30, 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. The Company’s direct sales to foreign customers were approximately $87.8 million, $59.4 million and $54.8 million for the years ended September 30, 2003, 2002 and 2001, respectively. The significant increase in foreign sales for the fiscal year ended September 30, 2003 is primarily due to new business with Airbus relating to the sale of certain cockpit security door mechanisms. Sales to foreign customers are subject to numerous additional risks, including the impact of foreign government regulations, currency fluctuations, political uncertainties and differences in business practices. There can be no assurance that foreign governments will not adopt regulations or take other action that would have a direct or indirect adverse impact on the business or market opportunities of the Company within such governments’ countries. Furthermore, there can be no assurance that the political, cultural and economic climate outside the United States will be favorable to the Company’s operations and growth strategy.

Manufacturing and Engineering

TransDigm maintains five principal manufacturing facilities. Each facility serves its respective product lines and comprises manufacturing, distribution and engineering as well as administrative functions, including management, sales and finance. The facilities encompass approximately 105,000, 44,000, 150,000, 50,000 and 169,000 square feet of manufacturing space in Los Angeles, California; Cleveland, Ohio; Waco, Texas; Fullerton, California; and Liberty, South Carolina, respectively. In addition, as a result of the Norco acquisition (see Note 2 of the Notes to the Consolidated Financial Statements) the Company assumed a lease of a 28,000 square foot facility in Ridgefield, Connecticut. However, during the fourth quarter of the fiscal year ended September 30, 2003, the Company relocated Norco’s manufacturing operations from the Connecticut facility to its Waco, Texas facility and cancelled its lease in Connecticut. The Company continually takes various steps to improve productivity and reduce costs, including consolidating operations, developing improved control systems that allow for accurate product line profit and loss accounting, investing in equipment and tooling, installing modern information systems and implementing broad-based employee training programs. Management believes that TransDigm’s manufacturing systems and equipment contribute to its ability to compete by permitting it to meet the rigorous tolerances and cost sensitive price structure of aircraft customers. The Company focuses its manufacturing activities by product line, alternating its equipment among designs as demand requires.

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

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

Customers

TransDigm’s customers include: (1) distributors of aerospace components, (2) worldwide commercial airlines, including national and regional airlines, particularly for aftermarket maintenance, repair and overhaul components, (3) large commercial transport and regional and business aircraft OEMs, (4) various armed forces of the United States and friendly foreign governments, (5) defense OEMs, and (6) various other industrial customers. For the year ended September 30, 2003, the U.S. government accounted for approximately 14% of the Company’s sales and Aviall (a distributor of commercial aftermarket parts to airlines throughout the world) and Airbus each accounted for approximately 10% of the Company’s net sales. Products supplied to many of the Company’s customers, including the three largest customers, are used on multiple platforms.

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

Competition

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

Governmental Regulation

The commercial aircraft component industry is highly regulated by both the FAA in the United States and by the Joint Aviation Authorities in Europe and other agencies throughout the world, while the military aircraft component industry is governed by military quality specifications. TransDigm, and the components it manufactures, are required to be certified by one or more of these entities, and, in some cases, by individual OEMs, in order to engineer and service parts and components used in specific aircraft models.

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TransDigm must also satisfy the requirements of its customers, including OEMs and airlines that are subject to FAA regulations, and provide these customers with products and services that comply with the government regulations applicable to commercial flight operations. In addition, the FAA requires that various maintenance routines be performed on aircraft components, and TransDigm currently satisfies or exceeds these maintenance standards in its repair and overhaul services. Several of the Company’s operating divisions include FAA approved repair stations.

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

Raw Materials and Patents

TransDigm requires the use of various raw materials, including titanium, aluminum, nickel powder, nickel screen, stainless steel, iridium and cadmium, in its manufacturing processes. TransDigm also purchases a variety of manufactured component parts from various suppliers. At times, TransDigm’s operating units concentrate their orders among a few suppliers in order to strengthen their supplier relationships. Raw materials and component parts are generally available from multiple suppliers at competitive prices.

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

Environmental Matters

TransDigm’s operations and facilities are subject to federal, state and local environmental laws and regulations governing, among other matters, the emission, discharge, generation, management, transportation and disposal of hazardous materials, wastes and pollutants, the investigation and remediation of contaminated sites, and permits required in connection with its operations. Although management believes that TransDigm’s operations and facilities are in material compliance with applicable environmental laws, management cannot provide assurance that future changes in such laws, regulations or requirements thereunder or in the nature of TransDigm’s operations will not require TransDigm to make significant additional expenditures to ensure compliance in the future. Further, TransDigm could incur substantial costs, including cleanup costs, fines and sanctions, and third party property damage or personal injury claims as a result of violations of or liabilities under environmental laws, relevant common law, or the environmental permits required for its operations

Under some environmental laws, a current or previous owner or operator of a contaminated site may be held liable for the entire cost of investigation, removal or remediation of hazardous materials at such property, whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous materials. Persons who arrange for disposal or treatment of hazardous materials also may be liable for the costs of investigation, removal or remediation of those substances at a disposal or treatment site, regardless of whether the affected site is owned or operated by that person. Because TransDigm owns and/or operates a number of facilities that have a history of industrial or commercial use and because TransDigm arranges for the disposal of hazardous materials at many disposal sites, TransDigm may and does incur costs for investigation, removal and remediation. For example, the Company recently completed addressing certain issues relating to contaminated soil and groundwater beneath its facility in Waco, Texas. On October 15, 2003, the Texas Commission on Environmental Quality (“TCEQ”) issued a certificate of completion for such matter. The Company is also in the process of finalizing a proposed settlement of an ongoing litigation relating to the environmental escrow fund which was established in connection with the MarathonNorco Aerospace, Inc. (“Marathon”) acquisition to provide funds for certain remediation of the Waco, Texas facility. Under the terms of the proposed settlement, the Company expects to be reimbursed out of the escrow fund for certain amounts (which are not material) expended by it in connection with the remediation covered by the escrow. The balance of the escrow fund will then be used to pay the fees of the escrow agent and possibly the payment to certain third parties with the remainder released to the former owners of Marathon and such owners and the Company will each agree to dismiss the litigation. The Company has filed counterclaims against the former owners of Marathon and cannot predict the ultimate outcome of this matter. See Note 16 to the Notes to Consolidated Financial Statements. In addition the owner of TransDigm’s formerly leased facility in Ridgefield, Connecticut is currently conducting on-site groundwater remediation pursuant to an agreement with the State of Connecticut. TransDigm also

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receives inquiries and notices of potential liability with respect to offsite disposal facilities from time to time. Although TransDigm has not incurred any material investigation or cleanup costs to date, the discovery of additional contaminants or the imposition of additional cleanup obligations at these or other sites, or the failure of any other potentially liable party to meet its obligations, could result in significant liability.

Employees

As of September 30, 2003, TransDigm had approximately 900 employees. Approximately 11% of TransDigm’s employees were represented by the United Steelworkers Union, and approximately 6% were represented by the United Automobile, Aerospace and Agricultural Implement Workers of America. Collective bargaining agreements between TransDigm and these labor unions expire in April 2005 and November 2004, respectively. TransDigm considers its relationship with its employees generally to be satisfactory.

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 TransDigm’s management. In this subsection only, the words “TransDigm,” “we,” “us” and “our” refer to TransDigm Inc. and its 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, totaling $695.0 million at September 30, 2003.

The Company’s substantial indebtedness could have important consequences to investors. For example, it could:

In addition to the restrictive covenants contained in our senior secured credit facilities (the “Senior Credit Facility”) and the indenture governing the 8 ³/8% Senior Subordinated Notes (the “Indenture”), the Senior Credit Facility contains covenants that require us to meet certain financial ratios. Any failure to comply with these financial ratios or the other restrictions of the Senior Credit Facility or the 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.

Increases in interest rates could increase our interest expense.

For the fiscal year ended September 30, 2003, on a pro forma basis, assuming that the Mergers and related transactions and the tender and defeasance of $200 million of our outstanding 10 ³/8% senior subordinated notes due 2008 in connection with such transactions had occurred at the beginning of the year, our interest expense would have been approximately $49.7 million.

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We may be adversely affected by increases in interest rates. Our debt under the Senior Credit Facility, which includes a $295 million term loan facility and a revolving loan facility of $100 million, bears interest at floating rates, initially between adjusted LIBO rate plus 3.00% to 3.50% or the alternate base rate plus 2.00% to 2.50%. The alternate base rate is the higher of (i) Credit Suisse First Boston’s prime rate and (ii) the Federal Funds Effective Rate plus 0.50%. An increase in these variable interest rates could result in an increase in our interest expense.

Our substantial indebtedness could prevent us from fulfilling our obligations under our indebtedness. 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 substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due in respect of our indebtedness. Our ability to make payments on and to refinance our indebtedness 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.

We cannot assure you, 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 our Senior Credit Facility or otherwise in amounts sufficient to enable us to service our indebtedness. If we cannot service our debt, we will have to take actions such as reducing or delaying capital investments, selling assets, restructuring or refinancing our debt or seeking additional equity capital. We cannot assure you that any of these remedies could, if necessary, be effected on commercially reasonable terms, or at all. In addition, the Indenture and the Senior Credit Facility may restrict us from adopting any of these alternatives. Furthermore, neither Warburg Pincus, our principal shareholder, nor any of its affiliates has any continuing obligation to provide us with debt or equity financing. Because of these and other factors beyond our control, we may be unable to pay the principal, premium, if any, interest or other amounts on our outstanding indebtedness, which in turn could have a material adverse effect on our business.

Despite current indebtedness levels, we may still be able to incur substantially more debt.

Although the Indenture and the Senior Credit Facility contain restrictions on the incurrence of additional indebtedness by us, these restrictions are subject to a number of qualifications and restrictions, and the additional indebtedness permitted under these restrictions could be substantial. For example, $99.5 million of the $100 million revolving loan facility under our Senior Credit Facility was available as of September 30, 2003, but may be drawn at any time thereby increasing our overall indebtedness. Furthermore, the Indenture specifically allows us to incur up to $60 million of additional bank debt.

The terms of our Senior Credit Facility and the Indenture may restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.

Our Senior Credit Facility contains a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interests, including covenants restricting, among other things, our ability to:

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The Indenture also contains numerous operating and financial covenants including, among other things, restrictions on our ability to:

Our Senior Credit Facility also includes financial covenants, including requirements that we maintain:

A breach of any of these covenants or the inability to comply with the required financial ratios could result in a default under our Senior Credit Facility or the 8 ³/8% Senior Subordinated Notes. If any such default occurs, the lenders under our Senior Credit Facility and the holders of the 8 ³/8% Senior Subordinated Notes may elect to declare all outstanding borrowings, together with accrued interest and other amounts payable thereunder, to be immediately due and payable. The lenders under our Senior Credit Facility also have the right, if such default occurs, to terminate any commitments they have to provide further borrowings. In addition, following an event of default under our Senior Credit Facility, the lenders under the facility have the right to proceed against the collateral granted to them to secure the debt, which includes our available cash, and they also have the right to prevent us from making debt service payments on the 8 ³/8% Senior Subordinated Notes. If the debt under our Senior Credit Facility or the 8 ³/8% Senior Subordinated Notes were to be accelerated, we cannot provide assurance that our assets would be sufficient to repay in full the 8 ³/8% Senior Subordinated Notes and our other debt.

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Terrorism

Future terrorist attacks may have a material adverse impact on our business. Following the September 11, 2001 terrorist attacks, passenger traffic on commercial flights has been significantly lower than prior to the attacks and many commercial airlines reduced their operating schedules. Overall, the terrorist attacks resulted in billions of dollars in losses to the airline industry. Several airlines, including United Airlines and US Airways, filed for bankruptcy protection (although US Airways recently completed its Chapter 11 reorganization and emerged from bankruptcy). Any future acts of terrorism and any allied military response to such acts could result in further acts of terrorism and additional hostilities, including possible retaliatory attacks on sovereign nations, as well as financial, economic and political instability. While the precise effects of such instability on our industry and our business is difficult to determine, it could result in further reductions in the use of commercial aircraft. If demand for new aircraft and spare parts decreases, demand for certain of our products would also decrease.

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, among other factors, changes in the number of miles flown by paying customers of commercial airlines, which we refer to as revenue passenger miles, or RPMs, 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, RPMs declined primarily as a result of increased security concerns among airline customers following the events of September 11, 2001. 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 protection. If demand for new aircraft and spare parts decreases, there would be a decrease in demand for certain of our products. Therefore, any future decline in RPMs, 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 14% of our net sales in our fiscal year ended September 30, 2003, or fiscal 2003, 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, among other things. As a result of the events of September 11, 2001 and a weakened economy, many industry analysts expect aircraft deliveries to remain depressed relative to pre-September 11^th levels. Prior downturns have adversely affected our net sales, gross margin and net income. These and certain other factors that may cause a downturn in sales to manufacturers of large commercial aircraft in the future may have a material adverse effect on our business.

We rely heavily on certain customers for much of our sales.

Our three largest customers for fiscal 2003, were the U.S. government, Airbus and Aviall (a distributor of commercial aftermarket parts to airlines throughout the world). These customers accounted for approximately 14%, 10% and 10%, respectively, of our net sales in fiscal 2003. Our top ten customers for fiscal 2003 accounted for approximately 60% of our net sales. The loss of, or any significant decrease in our sales to, any one or more of these key customers could have a material adverse effect on our business.

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We generally do not have guaranteed future sales of our products. Further, we enter into 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 generally have long-term contracts with most of our aftermarket customers and therefore do not have guaranteed future sales. Although we 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 OEM customers, where we have agreed to perform the work for a fixed price and, accordingly, realize all the benefit or detriment resulting from any decreases or increases in the costs for making these products. Sometimes we accept a fixed-price contract for a product that 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.

A decline in the U.S. defense budget or the defense budget of foreign governments may adversely affect our sales of parts used in military aircraft.

Approximately 24% of our net sales in fiscal 2003 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 of 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. A reduction in expenditures by the U.S. or foreign governments for aircraft using our products or lower margins resulting from increasingly competitive procurement policies would have an adverse effect on our results of operations.

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 14% of our net sales in fiscal 2003 were to the U.S. government. Any unexpected termination of a significant government contract would have an adverse effect on our business.

Our business may be adversely affected if we lost our government or industry approvals or if more onerous government regulations were enacted or industry oversight increased.

The aerospace 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 FAA, 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. In addition, 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 U.S. 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.

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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 highly engineered, 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, 2003, approximately 11% 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 satisfactory, we cannot assure you 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.

If we lose our senior management, our business may be adversely affected.

Our success is dependent upon the efforts of our senior management, as well as on our ability to attract and retain senior management. 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, fill new positions or vacancies created by expansion or turnover, or attract additional qualified senior management personnel. We have not entered into employment agreements with any of our key executive officers, other than our President and Chief Executive Officer, W. Nicholas Howley. The loss of any of our key executive officers could have a material adverse effect on our business.

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 (such as the destruction of our suppliers’ facilities or their distribution infrastructure, a work stoppage or strike by our suppliers’ employees or the failure of our suppliers to provide materials of the requisite quality), or by increased costs of such raw materials or components if we were 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 were 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 processes associated with aerospace products could prevent efficient replacement of a supplier, raw material or component part and could have a material adverse effect on our business.

We could incur substantial costs as a result of violations of or liabilities under environmental laws.

Our operations and facilities are subject to a number of federal, state and local environmental laws and regulations that govern, among other things, discharges of pollutants into the air and water and the handling, storage and disposal of hazardous materials. We could incur substantial costs, including clean-up costs, fines and sanctions and third party property damage or personal injury claims, as a result of violations of or liabilities under environmental laws, relevant common law or the environmental permits required for our operations.

Pursuant to certain environmental laws, a current or previous owner or operator of a contaminated site may be held liable for the entire cost of investigation, removal or remediation of hazardous materials at such property, whether or not the owner or operator knew of, or was responsible for, the presence of any hazardous materials. Persons who arrange for the disposal or treatment of hazardous materials also may be held liable for such costs at a disposal or treatment site, regardless of whether the affected site is owned or operated by them. Contaminants have been detected

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at some of our present and former sites, principally in connection with historical operations, and investigations and/or clean-ups have been undertaken by us or by former owners of the sites. We also receive inquiries and notices of potential liability with respect to offsite disposal facilities from time to time. Although we are not aware of any sites for which material obligations exist, the discovery of additional contaminants or the imposition of additional clean-up obligations could result in significant liability.

Although compliance and clean-up costs have not been material in the past and are not expected to be material in the future, the imposition of additional or more stringent requirements or unexpected investigations and clean-up obligations could result in significant costs and could have a material adverse effect on our business, results of operations or financial condition.

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, we purchase some of the components that we use in our products from foreign suppliers. In addition, our direct sales to foreign customers were approximately $87.8 million, $59.4 million and $54.8 million in fiscal 2003, fiscal 2002 and fiscal 2001, 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 currency fluctuations, differing protection of intellectual property, foreign customs and tariffs, 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.

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.

A significant portion of our growth has occurred through acquisitions. Any future growth through acquisitions will be partially dependent upon the continued availability of suitable acquisition candidates at favorable prices and upon advantageous terms and conditions. We intend to pursue acquisitions that we believe will present opportunities consistent with our value generation strategy. We may pay for future acquisitions from internally generated funds, bank borrowings, public or private securities offerings, or some combination of these methods. However, we may not be able to find suitable acquisition candidates to purchase or may be unable to acquire desired businesses or assets on economically acceptable terms. In addition, we may not be able to raise the money necessary to complete future acquisitions. In the event we are unable to complete future strategic acquisitions, we may not grow in accordance with our expectations. In addition, acquisitions involve risks that the businesses acquired will not perform in accordance with expectations and that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove incorrect.

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 and amortization expenses or periodic impairment charges related to goodwill and other intangible assets as well as significant charges relating to integration costs, which could have a material adverse effect on our results of operations or financial condition.

In addition, we cannot guarantee that we will be able to successfully integrate any business we acquire into our existing business or that any acquired businesses will be profitable. The successful integration of new businesses depends on our ability to manage these new businesses and cut excess costs. The successful integration of future acquisitions may also require substantial attention from our senior management and the management of the acquired business, which could decrease the time that they have to service and attract customers and develop new products and services. In addition, because we may actively pursue a number of opportunities simultaneously, we may encounter unforeseen expenses, complications and delays, including difficulties in employing sufficient staff and maintaining operational and management oversight. Our inability to complete the integration of new businesses in a timely and orderly manner could have a material adverse effect on our results of operations and financial condition.

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We have recorded a significant amount of intangible assets, which may never generate the returns we expect.

Our acquisitions have resulted in significant increases in identifiable intangible assets and goodwill. Identifiable intangible assets, which include trademarks, trade names and trade secrets, license agreements and technology acquired in acquisitions or recognized in the accounting for the Mergers (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments”), were approximately $235.8 million at September 30, 2003, representing approximately 18% of our total assets. Goodwill, which relates to the excess of TD Holding’s investment in Holdings over the fair value of the net assets of the Company on the date the Mergers were consummated, was approximately $807.7 million at September 30, 2003, representing approximately 61% of our total assets.

Goodwill and identifiable intangible assets were recorded at fair value on the date of the Mergers and, under Financial Accounting Standards Board Statement No. 142, “Goodwill and Other Intangible Assets,” are reviewed at least annually for impairment. Impairment may result from, among other things, deterioration in the performance of the business, adverse market conditions, adverse changes in applicable laws or regulations, including changes that restrict the activities of the business, and a variety of other circumstances. The amount of any impairment must be written off. We may never realize the full value of our intangible assets. Any future determination requiring the write-off of a significant portion of intangible assets would have an adverse effect on our financial condition and results of operations.

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 resources than us, and therefore may be able to adapt more quickly to new or emerging technologies and changes in customer requirements, or devote greater resources to the promotion and sale of their products than we can. Competitors in our product lines are both U.S. and foreign companies and range in size from divisions of large public corporations to small privately held entities. We believe that our ability to compete depends on high product performance, consistent high quality, short lead-time and timely delivery, competitive pricing, superior customer service and support and continued certification under customer quality requirements and assurance programs. We may have to adjust the prices of some of our products to stay competitive. Our inability to compete successfully with respect to these or other factors may materially adversely affect our business and financial condition.

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 such 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.

Warburg Pincus controls us.

As of September 30, 2003, Warburg Pincus beneficially owned, as defined in the Exchange Act, approximately 70% of the outstanding common stock of TD Holding, the parent company of Holdings. Warburg Pincus can elect a majority of the members of Holdings’ and TransDigm’s boards of directors, appoint new management and approve any action requiring the approval of our stockholders, including amendment of our certificate of incorporation and mergers or

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sales of substantially all of our assets. The directors elected by Warburg Pincus are authorized to make decisions affecting our capital structure, including decisions to issue additional capital stock, implement stock repurchase programs and declare dividends. The interests of Warburg Pincus and its affiliates could conflict with the interests of our other stakeholders. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, Warburg Pincus’ interests might conflict with the interests of our other stakeholders. In addition, Warburg Pincus may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in its judgment, could enhance its equity investment, even though such transactions might involve risks to other stakeholders. Furthermore, Warburg Pincus may in the future own businesses that directly compete with ours.

TransDigm owns and operates a 130,000 square foot facility in Los Angeles, California, a 44,000 square foot facility in Cleveland, Ohio, a 219,000 square foot facility in Waco, Texas and a 219,000 square foot facility in Liberty, South Carolina. In addition, TransDigm leases and operates a 100,000 square foot facility in Fullerton, California and approximately 19,000 square feet in Richmond Heights, Ohio, which is also its headquarters. TransDigm also leases certain of its other non-material facilities, which included an approximately 28,000 square foot facility in Ridgefield, Connecticut obtained in connection with the Norco acquisition. During the fourth quarter of fiscal 2003, TransDigm relocated Norco’s manufacturing operations from the Connecticut facility to its Waco, Texas facility and cancelled its lease in Connecticut. Management believes that the Company’s machinery, plants and offices are in satisfactory operating condition and that it will have sufficient capacity to meet foreseeable future needs without incurring significant additional capital expenditures.

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

During the fourth quarter of the fiscal year ended September 30, 2003, in connection with the consummation of the Mergers and the related transactions, the stockholders of Holdings, and Holdings as the sole stockholder of TransDigm Inc., authorized and approved the respective Mergers and the related transactions by unanimous written consents, dated July 22, 2003.

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PART II

Market Information

There is no established public trading market for the common stock of Holdings or TransDigm Inc.

Holders

As of September 30, 2003, TD Holding is the sole shareholder of Holdings’ common stock. Holdings is the sole shareholder of TransDigm Inc.’s common stock.

Dividends

There have been no cash dividends declared on any class of common equity of Holdings or TransDigm Inc. for the two most recent fiscal years. Neither Holdings nor TransDigm Inc. anticipates paying in the foreseeable future any dividends on their common equity. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and Note 9 to the Notes to the Consolidated Financial Statements appearing elsewhere in this Report for restrictions on Holdings’ ability to pay dividends and TransDigm’s ability to transfer funds to Holdings.

Securities Authorized for Issuance under Equity Compensation Plans

As of September 30, 2003, neither Holdings’ nor TransDigm Inc.’s common stock was authorized for issuance under any compensation plan. See “Security Ownership of Certain Beneficial Owners and Management.”

Transfers of Unregistered Equity Securities

On July 22, 2003, in connection with the consummation of the merger of TD Acquisition with and into Holdings, all of the outstanding equity of Holdings was cancelled in exchange for a cash payment and each outstanding share of common stock of TD Acquisition was converted into one share of common stock of Holdings. In connection with such conversion, the common stock of Holdings was issued without registration pursuant to Section 4(2) of the Securities Act.

The following table sets forth selected historical consolidated financial and other data of Holdings for each of the four fiscal years ended September 30, 1999 through 2002 and the periods October 1, 2002 through July 22, 2003 and July 23, 2003 through September 30, 2003 which have been derived from Holdings’ audited consolidated financial statements. The Company’s consolidated financial statements for the period subsequent to the Mergers (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments”) reflect a new basis of accounting incorporating the fair value adjustments made in recording the Mergers while the periods prior to the Mergers reflect the historical cost basis of the Company. Accordingly, the accompanying selected historical consolidated financial and other data as of dates and for periods prior to the Mergers are labeled as “Predecessor”.

Separate historical financial information of TransDigm is not presented since the 8 ³/8% Senior Subordinated Notes are guaranteed by Holdings and all direct and indirect domestic restricted subsidiaries of TransDigm and since Holdings has no operations or assets separate from its investment in TransDigm.

In December 1998, the Company consummated a recapitalization (the “Recapitalization”), which had no impact on the historical basis of Holdings’ consolidated assets and liabilities but resulted in the majority of the consideration paid in connection with the transaction being charged directly to Holdings’ equity creating a stockholders’ deficiency.

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TransDigm acquired ZMP, Inc. and its wholly-owned subsidiary, Adams Rite Aerospace, Inc., on April 23, 1999 and Christie Electric Corp. on March 8, 2000. On March 26, 2001, TransDigm acquired an exclusive, worldwide license to produce and sell products composed of a lubrication and scavenge pump product line along with certain related equipment and inventory. On May 31, 2001, TransDigm (through Champion Aerospace, Inc. (“Champion Aerospace”), a subsidiary of TransDigm Inc.) acquired substantially all of the assets and certain liabilities of the Champion Aviation Products business (“Champion Aviation”) from Federal Mogul Ignition Company, a wholly-owned subsidiary of Federal-Mogul Corporation. On February 24, 2003, TransDigm acquired certain assets and assumed certain liabilities of Norco from TransTechnology Corporation. All of the acquisitions were accounted for as purchases. The results of operations of Norco, Champion Aerospace, Christie Electric Corp., ZMP, Inc., Adams Rite Aerospace, Inc. and the acquired product line are included in Holdings’ consolidated financial statements from the date of each of the acquisitions.

The information presented below should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and accompanying notes included elsewhere herein.

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The following discussion of the Company’s financial condition and results of operations should be read together with “Selected Historical Consolidated Financial Data,” and Holdings’ consolidated financial statements and the related notes included elsewhere in this Report. References in this section to “TransDigm,” “we,” “us” or “our” are to TransDigm Inc., together with 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. Financial information presented herein as of dates and for the periods through the merger of TD Acquisition Corporation into Holdings and TD Funding Corporation into TransDigm Inc. on July 22, 2003 (see “—Recent Developments”) is presented as “Predecessor” financial information. The Company’s consolidated financial statements for the period subsequent to the Mergers reflects a new basis of accounting incorporating the fair value adjustments made in recording the Mergers while prior periods are presented using the historical cost basis of the Company.

Overview

TransDigm is a leading global supplier of highly engineered aircraft components for use on nearly all commercial and military aircraft in service today. Most of the Company’s products share four common characteristics: (1) highly engineered and proprietary; (2) significant aftermarket content; (3) sole source provider; and (4) large share of niche markets.

TransDigm’s customers include distributors of aerospace components, commercial airlines, aircraft maintenance facilities, aircraft and engine OEMs, various armed forces of the United States and foreign governments, and defense OEMs. 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, meaning that, in most cases, TransDigm is the only certified provider of these parts in the aftermarket. Aftermarket parts sales are driven by the size and usage of the worldwide aircraft fleet, are historically relatively stable and generate recurring revenues over the life of an aircraft that are many times the size of the original OEM purchases. TransDigm has over 40 years of experience in most of its product lines, which allows it to benefit from a large and growing installed base of aircraft.

Recent Developments

On July 22, 2003, Holdings and TransDigm Inc, consummated the Mergers (see “Business – The Company”). In connection with the Mergers, TransDigm Inc. completed a tender offer for its outstanding 10 ³/8% Senior Subordinated Notes due 2008 (the “10 ³/8% Senior Subordinated Notes”). Of the $200 million aggregate principal amount of outstanding 10 ³/8% Senior Subordinated Notes, a total of approximately $197.8 million aggregate principal amount of 10 ³/8% Senior Subordinated Notes were validly tendered and the remaining $2.2 million aggregate principal amount of 10 ³/8% Senior Subordinated Notes were defeased pursuant to the terms of the indenture governing the 10 ³/8% Senior Subordinated Notes. In December 2003, TransDigm Inc. redeemed the 10 ³/8% Senior Subordinated Notes that were previously defeased. In addition, as a result of the consummation of the Mergers, the outstanding balance under TransDigm Inc.’s then existing senior credit facility became due. The cash merger consideration of $759.7 million paid to Holdings’ common and preferred stockholders, holders of in-the-money stock options and the holder of the warrant to purchase Holdings’ common stock (including merger related expenses of approximately $29.1 million borne by the then existing equity holders of Holdings and excluding the $35.7 million fair value of stock options rolled over in connection with the Holdings’ merger), transaction fees and expenses of approximately $34.7 million, and repayment of all of TransDigm Inc.’s then existing indebtedness in connection with the consummation of the Mergers was financed through: (1) an investment of approximately $471.3 million in TD Holding by Warburg Pincus and certain other institutional investors which was ultimately contributed as equity to TD Funding Corporation which merged with and into TransDigm Inc., (2) $295.0 million of borrowings under a new secured term loan facility, (3) $400.0 million of proceeds from the issuance of new 8 ³/8% Senior Subordinated Notes due 2011 and (4) the use of existing cash balances. The 8 ³/8% Senior

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Subordinated Notes are guaranteed, on a senior subordinated basis, by Holdings and each domestic restricted subsidiary of TransDigm Inc. Following the Mergers, Warburg Pincus controls a majority of the outstanding common stock of TD Holding. See “Security Ownership of Certain Beneficial Owners and Management.”

A one-time charge of approximately $176.0 million ($111.8 million after tax) was recorded during the period ended July 22, 2003 as a result of the Mergers, consisting primarily of the following (in thousands:)

On February 24, 2003, a wholly-owned subsidiary of TransDigm Inc. acquired certain assets and assumed certain liabilities of the Norco business from TransTechnology Corporation (“TransTechnology”) for $51.0 million in cash. In addition, TransDigm was required to pay approximately $1.0 million of asset transfer tax payments in accordance with the purchase agreement. During August 2003, TransTechnology refunded approximately $1.1 million of the purchase price to TransDigm in settlement of the purchase price adjustment provisions of the purchase agreement. Norco designs, manufactures and supplies engine hold-open mechanisms and specialty connecting devices. The Norco business generated approximately $18.1 million in net sales and $6.5 million of operating income (excluding costs of approximately $2.7 million associated with the integration of Norco into TransDigm) for the fiscal year ended September 30, 2003. As a result of the acquisition, the Company reviewed its operations in order to identify areas of overlap and potential cost savings and eliminated approximately 45 positions in connection with the relocation of Norco’s operations into its existing Waco, Texas facility. Severance payments to the employees eliminated in the head count reduction totaled approximately $0.6 million and retention bonuses paid to certain employees retained during the relocation process, which was completed in August 2003, totaled approximately $0.3 million.

The following table sets forth the calculation of EBITDA and EBITDA, As Defined. EBITDA represents earnings before interest, taxes, depreciation and amortization. EBITDA, As Defined, represents EBITDA, plus inventory purchase accounting adjustments, certain other non-recurring merger expenses and non-cash compensation and deferred compensation charges and acquisition integration costs, as applicable. Management believes that the presentation of EBITDA and EBITDA, As Defined, will enhance an investor’s understanding of the Company’s operating performance. EBITDA and EBITDA, As Defined are also the measures used by TransDigm’s senior management to evaluate the performance of TransDigm’s various lines of business and for other required or discretionary purposes, such as measuring performance under our employee incentive programs. Credit agreement requires the Company to comply with certain financial ratios, including a leverage ratio, fixed charged coverage ratio and interest coverage ratio. Leverage ratio is defined in credit agreement, as of any date, as the ratio of the total indebtedness of the Company on a consolidated basis on such date to Consolidated EBITDA (as defined in the credit agreement) for the period of four consecutive fiscal quarters most recently ended on or prior to such date. Fixed charge coverage ratio is defined in the credit agreement as, for any period, the ratio of (a) Consolidated EBITDA for such period to (b) consolidated fixed charges for such period. Interest coverage ratio is defined as, for any period, the ratio of (a) Consolidated EBITDA for such period to (b) consolidated interest expense for such period. The failure to comply with the financial covenants in the credit agreement could result in an event of default thereunder (and, in turn, an event of default under the credit agreement could result in an event of default under the indenture governing the 8 ³/8% Senior Subordinated Notes). The credit agreement defines Consolidated EBITDA in a manner equal to how we define EBITDA, As Defined. Neither EBITDA nor EBITDA, As Defined, is a measurement of financial performance under

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U.S. generally accepted accounting principles, or GAAP and neither should be considered as an alternative to (1) net income determined in accordance with GAAP or (2) operating cash flows determined in accordance with GAAP. Management’s calculation of EBITDA and EBITDA, As Defined, may not be comparable to the calculation of similarly titled measures reported by other companies.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with GAAP which often requires the judgment of management in the selection and application of certain accounting principles and methods. Management believes that the quality and reasonableness of our most critical policies enable the fair presentation of our financial position and results of operations. However, investors are cautioned that the sensitivity of financial statements to these methods, assumptions and estimates could create materially different results under different conditions or using different assumptions.

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In response to the Securities and Exchange Commission’s, or SEC’s, Release No. 33-8040, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies,” and Release No. 33-8098, “ Proposed Rule: Disclosure in Management’s Discussion and Analysis about the Application of Critical Accounting Policies,” we have identified the following as the most critical accounting policies upon which our financial status depends. These critical policies were determined by considering accounting policies that involve the most complex or subjective decisions or assessments. Our most critical accounting policies are as follows:

Revenue Recognition and Related Allowances: Revenues are recognized based upon shipment of products to the customer, at which time title and risk of loss passes to the customer. Substantially all sales are made pursuant to firm, fixed-price purchase orders received from customers. Provisions for returns, estimated contract losses, uncollectible accounts and the cost of repairs under contract warranty provisions are provided for in the same period as the related revenues are recorded and are principally based on historical results modified, as appropriate, by the most current information available. We have a history of making reasonably dependable estimates of such allowances; however, due to uncertainties inherent in the estimation process, it is possible that actual results may vary from the estimates and the differences could be material.

Management estimates the allowance for doubtful accounts based on the aging of the accounts receivable and customer creditworthiness. The allowance also incorporates a provision for the estimated impact of disputes with customers. Management’s estimate of the allowance amounts that are necessary includes amounts for specifically identified losses and a general amount for estimated losses. The determination of the amount of the allowance for doubtful accounts is subject to significant levels of judgment and estimation by management. If circumstances change or economic conditions deteriorate, management may need to increase the allowance for doubtful accounts.

The Company provides limited warranties in connection with the sale of its products. The warranty period for products sold varies throughout the Company’s operations, ranging from ninety days to five years; however, the warranty period for the majority of the Company’s sales generally does not exceed one year. In addition, certain contracts with distributors contain right of return provisions. The Company accrues for estimated returns and warranty claims based on knowledge of product performance issues and excess inventories provided by its customers and industry sources and also provides a general amount based on historical results. Actual product returns and warranty claims have not differed materially from the estimates originally established. During fiscal 2003, the Company’s total charges incurred for warranty claims and product returns approximated $3.5 million.

Although the majority of the Company’s sales, particularly sales into the aftermarket, are made pursuant to firm, fixed-price purchase orders received from customers without long-term agreements, the Company has executed long-term supply agreements with certain original equipment manufacturers, which cover particular products and require the Company to supply all the amounts ordered by the customers during the term (generally three to five years) of the agreements at specified prices. The Company expects to incur losses under some of the contracts. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are identified, based on estimated future shipment quantities provided by customers or industry sources and other factors. The cumulative effect of revisions to estimated future contract revenue and completion costs is recorded in the accounting period in which the amounts become known and can be reasonably estimated. Such revisions could occur any time there are changes to estimated future revenues or costs, and the effects could be material.

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. Because the Company sells products that are installed on airframes that can be in-service for twenty or more years, it must keep a supply of such products on hand while the airframes are in use. Provision for potentially obsolete or slow-moving inventory is made based on our analysis of inventory levels, past usage and future sales forecasts. Although management believes that the Company’s estimates of obsolete and slow-moving inventory are reasonable, actual results may differ materially from the estimates and additional provisions may be required in the future. In addition, in accordance with industry practice, all inventories are classified as current assets as all inventories are available and necessary to support current sales, even though a portion of the inventories may not be sold within one year.

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Intangible Assets: Our acquisitions have resulted in significant increases in identifiable intangible assets and goodwill. Intangible assets other than goodwill are recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed or exchanged, regardless of the Company’s intent to do so. Goodwill and identifiable intangible assets are recorded at fair value on the date of acquisition and, under Financial Accounting Standards Board Statement No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), are reviewed at least annually for impairment based on cash flow projections and fair value estimates. The determination of undiscounted cash flows is based on the Company’s strategic plans and long-range planning forecasts. The revenue growth rates included in the plans are based on industry and Company specific data. The profit margin assumptions included in the plans are projected based on the current cost structure and anticipated cost changes. If different assumptions were used in these plans, the related undiscounted cash flows used in measuring impairment could be different and the recognition of an impairment loss might be required. Intangible assets, such as goodwill, that have an indefinite useful life are not amortized. All other intangible assets are amortized over their estimated useful lives.

Stock Options and Deferred Compensation Plans: Prior to the Mergers, the Company applied Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, and related interpretations in accounting for its stock option plans. No compensation cost was recognized for Holdings’ stock option plans because the exercise price of the options issued equaled the fair value of the common stock on the grant date.

Effective with the consummation of the Mergers and the issuance of the TD Holding stock options (see “Executive Compensation—New Stock Option Plan”), the Company adopted the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”, which requires the measurement of compensation expense under the stock option plan to be based on the estimated fair values of the awards under the plan on the grant dates and amortizes the expense over the options’ vesting periods. In addition, the Company accounts for the cost of the deferred compensation plans of TD Holding in accordance with Opinion No. 12 of the Accounting Principles Board, which requires the cost of deferred compensation arrangements to be accrued over the service period of the related employees in a systematic and rational manner.

Because the stock options and deferred compensation plan interests issued to Company employees in conjunction with, or subsequent to, the Mergers relate to the stock and employee benefit plans of TD Holding, the cost of such compensation arrangements is pushed-down to the Company and recognized as an expense and capital contribution from TD Holding.

Purchase Accounting and Pending Purchase Price Adjustment: The Mergers (see “—Recent Developments”) were accounted for as a purchase and preliminary fair value adjustments to the Company’s assets and liabilities were recorded. The Company is in the process of obtaining third-party valuations of certain tangible and intangible assets; thus, the final allocation of TD Holding’s investment in the Company to its assets and liabilities could result in adjustments to recorded tangible and intangible assets, including related depreciation and amortization expense. Because the financial statements of the Company as of dates and for periods prior to the Mergers reflect the Company’s historical cost basis of accounting, rather than the new basis of accounting applied in accounting for the Mergers described above, such financial statements are labeled as “Predecessor” financial statements.

On February 24, 2003, Marathon acquired certain assets and assumed certain liabilities of Norco from TransTechnology 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 purchase agreement. During August 2003, a $1.1 million purchase price adjustment was received by the Company based on a final determination of working capital as of the closing of the Norco acquisition.

The Company accounted for the Norco 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 and could result in adjustments to recorded tangible and intangible assets, including related depreciation and amortization expense.

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During fiscal 2001, the Company entered into a series of agreements with Honeywell International, Inc. (“Honeywell”) which granted the Company an exclusive, worldwide license to produce and sell products comprising Honeywell’s lube pump product line for at least forty years and enabled the Company to acquire approximately $5.9 million of inventory pertaining to the product line, along with certain related assets. The purchase price of the inventory acquired from Honeywell, which has not been determined, is subject to adjustment based upon a final determination of the value acquired, as defined. The impact of the ultimate resolution of this matter will be recorded in the accounting period in which resolution occurs.

Results of Operations

The following table sets forth, for the periods indicated, certain operating data of the Company, including presentation of the amounts as a percentage of net sales, (dollars in thousands):

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Changes in Results of Operations

Fiscal year ended September 30, 2003 compared with fiscal year ended September 30, 2002

Net Sales. Net sales increased by $44.5 million, or 17.9%, to $293.3 million for the fiscal year ended September 30, 2003 from $248.8 million for the fiscal year ended September 30, 2002. This increase is primarily due to $24.1 million of new business with Airbus relating to the sale of certain cockpit security door mechanisms, $11.2 million of increased military sales and $10.6 million of increased sales due to the acquisition of Norco, offset by a $1.4 million overall decline in sales in other areas of the Company’s business.

Gross Profit. Gross profit (net sales less cost of sales) increased by $12.1 million, or 10.6%, to $126.3 million for the fiscal year ended September 30, 2003 from $114.2 million for the fiscal year ended September 30, 2002. This increase is attributable to the higher sales discussed above and was partially offset by $12.9 million, or 4.4% of sales, of non-cash charges in 2003 resulting from inventory purchase price accounting charges pertaining to the Mergers and the Norco acquisition and $2.7 million, or 0.9% of sales, of non-recurring integration costs pertaining to the Norco acquisition. Gross profit as a percentage of net sales decreased to 43% for the fiscal year ended September 30, 2003 from 46% for the fiscal year ended September 30, 2002, principally due to the $15.6 million, or 5.3% of sales, of non-cash and non-recurring charges recorded in fiscal 2003 discussed above. This decrease in gross profit as a percentage of net sales was partially offset by the following factors: (i) higher volume on a reduced cost structure implemented subsequent to the September 11, 2001 terrorist attacks, (ii) favorable product mix and (iii) the strength of the Company’s proprietary products and market positions.

Selling and Administrative Expenses. Selling and administrative expenses increased by $1.7 million, or 7.5%, to $23.6 million for the fiscal year ended September 30, 2003 from $21.9 million for the fiscal year ended September 30, 2002. The Norco acquisition increased selling and administrative expenses approximately $1.5 million in fiscal 2003. In addition, selling and administrative expenses in fiscal 2003 include $0.9 million of deferred compensation plan expenses that were pushed down to the Company from TD Holding, which were incurred by Company employees who participate in two deferred compensation plans of TD Holding established contemporaneously with the Mergers. These increases were partially offset by continuing cost control measures implemented after the September 11, 2001 terrorist attacks. Selling and administrative expenses as a percentage of net sales decreased from 9% for the fiscal year ended September 30, 2002 to 8% for the fiscal year ended September 30, 2003 primarily due to the increased sales discussed above and continuing cost control measures implemented after the September 11, 2001 terrorist attacks.

Amortization of Intangibles. Amortization of intangibles decreased by $3.4 million, or 53.6%, to $2.9 million for the fiscal year ended September 30, 2003 from $6.3 million for the fiscal year ended September 30, 2002 primarily 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 as of October 1, 2002, resulting in a decrease in amortization of $4.9 million. Goodwill amortization was replaced with the requirement to test goodwill for impairment upon adoption of SFAS 142 and at least annually thereafter. The decrease in goodwill amortization was partially offset by an increase in the amortization of other intangible assets of $1.5 million primarily resulting from additional identifiable intangible assets recognized in accounting for the Mergers.

Research and Development Expenses. Research and development expenses decreased $0.3 million, or 11.8%, to $1.8 million for the fiscal year ended September 30, 2003 from $2.1 million for the fiscal year ended September 30, 2002. Research and development expenses as a percentage of net sales was consistent at 1% for each of the years ended September 30, 2003 and September 30, 2002.

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Merger Expenses. Expenses of the Mergers represent a one-time charge that was recorded as a result of the Mergers and consist primarily of the following:

Income/(Loss) from Operations. The Company recognized a $77.9 million loss from operations during the fiscal year ended September 30, 2003 compared to $84.0 million of operating income for the fiscal year ended September 30, 2002. This loss was primarily due to the expenses of the Mergers partially offset by the increase in net sales and other factors described previously.

Interest Expense. Interest expense increased by $1.3 million, or 3.4%, to $37.8 million for the fiscal year ended September 30, 2003 from $36.5 million for the fiscal year ended September 30, 2002. This increase was primarily caused by $7.7 million of additional interest expense that resulted from the issuance of $75 million 10 ³/8% Senior Subordinated Notes in June 2002 to repay borrowings under the Company’s then existing senior credit facility and the issuance of $400 million 8 ³/8% Senior Subordinated Notes in July 2003 in connection with the Mergers. This increase was partially offset by: (i) a $3.1 million reduction in interest charges under the Company’s former senior credit facility resulting from a decrease in the average level of borrowings outstanding under the former credit facility and an overall decline in interest rates, (ii) the write-off of $1.8 million of debt issue costs during fiscal 2002 associated with the borrowings under the Company’s former senior credit facility that were repaid with the proceeds of the additional issuance of 10 ³/8% Senior Subordinated Notes and (iii) a $1.9 million decrease in interest charges resulting from the February 2003 repayment of all of Holdings’ outstanding 12% PIK Notes totaling $32.8 million.

Income Taxes. Income tax expense (benefit) as a percentage of income (loss) before income taxes was 37.1% for the fiscal year ended September 30, 2003 compared to 35.4% for the fiscal year ended September 30, 2002. The higher estimated annual effective tax rate was primarily due to the recognition of approximately $10.9 million of nondeductible expenses of the Mergers (3.5% of the loss before income taxes) and a decline in research and development tax credits as a percentage of income/(loss) before income taxes of 2.2% in fiscal 2003. This increase in the effective annual tax rate caused by these factors was partially offset by declines in the following items as a percentage of income/(loss) before income taxes: (i) nondeductible goodwill and interest expense—1.7%, (ii) state and local income taxes—.6%, (iii) tax benefits from foreign sales—.9% and (iv) other factors—.8% .

The Company has filed amended income tax returns for fiscal years 1997 through 2000 with the Internal Revenue Service and submitted claims to certain state taxing authorities requesting refunds totaling approximately $2.1 million, primarily for research and development tax credits that had not been claimed on previously filed tax returns for these years. Because these income tax returns and claims are currently being audited or reviewed by the appropriate taxing authority, the Company has not recorded the potential tax refunds that could be received.

Net Income (Loss). The Company incurred a net loss of $72.8 million for the fiscal year ended September 30, 2003 compared to earnings of $30.6 million for the fiscal year ended September 30, 2002 primarily as a result of the factors referred to above.

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Fiscal year ended September 30, 2002 compared with fiscal year ended September 30, 2001

Net Sales. Net sales increased by $48.0 million, or 23.9%, to $248.8 million for the fiscal year ended September 30, 2002 from $200.8 million for the fiscal year ended September 30, 2001. The Champion Aerospace and product line acquisitions generated approximately $60.6 million of the increase in sales. In addition, $10.6 million of new business with Airbus was recorded during fiscal 2002 from the sale of certain cockpit security door mechanisms. These increases in sales were offset by a $23.2 million overall decline in sales in other areas of the Company’s business resulting primarily from industry events triggered in part by the September 11, 2001 terrorist attacks.

Gross Profit. Gross profit (net sales less cost of sales) increased by $32.0 million, or 38.9%, to $114.2 million for the fiscal year ended September 30, 2002 from $82.2 million for the fiscal year ended September 30, 2001. This increase is attributable to higher sales discussed above and $6.6 million, or 3.3% of sales, of non-cash charges in 2001 resulting from inventory purchase price accounting adjustments pertaining to the Champion Aerospace and product line acquisitions. Partially offsetting the increase in gross profit were incremental charges recorded in fiscal 2002 for excess and obsolete inventory and sales returns and warranty repairs of $1.5 million and $2.3 million, respectively, triggered by the increased sales volume resulting from the acquisitions and new business with Airbus. Gross profit as a percentage of net sales increased to 46% for the fiscal year ended September 30, 2002 from 41% for the fiscal year ended September 30, 2001, principally due to the 2001 non-cash charges discussed above, cost saving actions taken after the September 11, 2001 terrorist attacks, and the strength of the Company’s proprietary products and market positions.

Selling and Administrative Expenses. Selling and administrative expenses increased by $1.2 million, or 6.0%, to $21.9 million for the fiscal year ended September 30, 2002 from $20.7 million for the fiscal year ended September 30, 2001. The Champion Aerospace acquisition increased selling and administrative expenses by $2.3 million during 2002. This increase was partially offset by cost saving actions taken after the September 11, 2001 terrorist attacks. Selling and administrative expenses as a percentage of net sales decreased slightly from 10% for the fiscal year ended September 30, 2001 to 9% for the fiscal year ended September 30, 2002 due to increased selling and administrative efficiencies as a result of the Champion Aerospace acquisition and September 11th related cost reductions.

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

Research and Development Expenses. Research and development expenses decreased $0.8 million, or 30.1%, to $2.1 million for the fiscal year ended September 30, 2002 from $2.9 million for the fiscal year ended September 30, 2001, primarily due to September 11th related cost reductions. Research and development expenses as a percentage of net sales was consistent at 1% for each of the years ended September 30, 2002 and September 30, 2001.

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

Interest Expense. Interest expense increased by $4.6 million, or 14.4%, to $36.5 million for the fiscal year ended September 30, 2002 from $31.9 million for the fiscal year ended September 30, 2001. Additional interest expense in fiscal 2002 of $5.3 million and $4.0 million resulted from additional borrowings necessitated by the Champion Aerospace acquisition and the issuance of $75 million in aggregate principal amount of additional 10 ³/8% Senior Subordinated Notes in June 2002 (including the write-off of debt issue costs associated with the borrowings under the Company’s existing credit facility that were repaid with the proceeds of the additional 10 ³/8% Senior Subordinated Notes), respectively. These increases were partially offset by a $4.7 million reduction in interest charges under the Company’s credit facility resulting from a decrease in the average level of borrowings outstanding under the credit facility (excluding the borrowings related to the Champion Aerospace acquisition) and an overall decline in interest rates.

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Income Taxes. Income tax expense as a percentage of income before income taxes was 35.4% for the fiscal year ended September 30, 2002 compared to 39.5% for the fiscal year ended September 30, 2001. The lower estimated annual effective tax rate was due to the recognition of approximately $1.3 million of research and development tax credits in fiscal 2002 and a decline in non-deductible goodwill amortization and interest expense as a percentage of income before income taxes from 9% to 4.8%. The reduction in the effective annual tax rate caused by these factors was partially offset by a $2.1 million increase in state and local income taxes.

Net Income. The Company earned $30.6 million for the fiscal year ended September 30, 2002 compared to $14.4 million for the fiscal year ended September 30, 2001 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 September 30, 2003, the Company estimated its sales order backlog at $121.1 million compared to an estimated $124.7 million as of September 30, 2002. This $3.6 million decrease in backlog is primarily comprised of an $11.0 million decline in orders for the Airbus cockpit door security mechanism as the retrofit program nears completion and an aggregate $2.4 million decrease in the backlog pertaining to other product lines offset by a $9.8 million increase in backlog resulting from the acquisition of the Norco business. The majority of the purchase orders outstanding as of September 30, 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 September 30, 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. The Company’s direct sales to foreign customers were approximately $87.8 million, $59.4 million and $54.8 million in fiscal 2003, 2002 and 2001, respectively. The significant increase in foreign sales in fiscal 2003 is primarily due to new business with Airbus relating to the sale of certain cockpit security door mechanisms. Sales to foreign customers are subject to numerous additional risks, including the impact of foreign government regulations, currency fluctuations, political uncertainties and differences in business practices. There can be no assurance that foreign governments will not adopt regulations or take other action that would have a direct or indirect adverse impact on the business or market opportunities of the Company within such governments’ countries. Furthermore, there can be no assurance that the political, cultural and economic climate outside the United States will be favorable to the Company’s operations and growth strategy.

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 fiscal years 2003, 2002 and 2001 were not significant.

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Liquidity and Capital Resources

Historical Liquidity and Capital Resources

The following table sets forth, for the periods indicated, certain information regarding the cash flows of the Company (in thousands):