1047837--1/26/2007--ARGO_TECH

related topics

{cost, operation, labor}

{regulation, government, change}

{cost, contract, operation}

{cost, regulation, environmental}

{customer, product, revenue}

{debt, indebtedness, cash}

{competitive, industry, competition}

{operation, international, foreign}

{personnel, key, retain}

{product, liability, claim}

{provision, law, control}

The aerospace industry is subject to significant government regulation and oversight and failure to comply with these regulations could increase the cost of operating our business. We compete with a number of established companies, virtually all of which have significantly greater financial, technological and marketing resources than we do. We may not be able to compete effectively with these companies, which could adversely affect our business and financial condition. If we are unable to meet future capital requirements or to continue our research and development activities, or recoup some of our capital and research and development expenditures, our competitive position may suffer. There are a limited number of customers for certain products, and the loss of a significant customer would reduce demand for our products and reduce our sales and cash flows. We have fixed-price contracts with some of our customers, and we bear the risk of costs in excess of our estimates. A significant portion of our sales is, and is expected to continue to be, from government contracts that are subject to reductions in defense spending, government regulation and risks particular to government contracts. The termination of any of our government contracts would reduce demand for our products and reduce our sales. A large and growing portion of our revenue is derived from international sources, which exposes us to additional uncertainty. Our level of indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry. Two majority holders control our parent company. We depend on the skill and experience of our senior management. Our operations depend on maintaining a skilled work force and any interruption in the work force at our facilities or those of OEMs and their suppliers could have a material adverse effect on our results of operations and financial condition. Our business and profitability is affected by the price and continuity of supply of certain necessary raw materials and component parts. We depend on our Cleveland, Ohio and Costa Mesa, California facilities. We have potential exposure resulting from environmental matters. We have a potential risk of product liability and warranty claims.

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1047837--1/26/2007--ARGO_TECH_CORP