UNITED ~~STATES~~ ~~SECURITIES AND EXCHANGE COMMISSION~~ STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

~~/x/~~ ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 ~~(FEE REQUIRED)~~

For the fiscal year ended: March 3129, ~~2001 OR~~ 2003

~~/ / TRANSITION REPORT PURSUANT TO SECTION 13~~ OR ~~15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)~~

~~For the~~o TRANSITION ~~transition~~REPORT ~~period~~PURSUANT ~~from to~~ TO SECTION 13 OR 15 (d) OF THE ~~Commission~~SECURITIES ~~file~~EXCHANGE ~~number:~~ACT ~~333-32207~~OF 1934

~~HCC~~For ~~INDUSTRIES~~the transition ~~INC. (Exact~~period ~~name of Registrant as specified in its charter)~~ from to

Commission file number: 333-32207

HCC INDUSTRIES INC.

(Exact name of Registrant as specified in its charter)

Delaware		95-2691666
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

4232 Temple City Blvd., Rosemead, California 91770 ~~(Address of principal executive offices)~~

(~~626)~~Address ~~443-8933 (Registrant's~~of ~~telephone~~principal executive ~~number, including area code~~offices)

(626) 443-8933

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12 (b) of the Act:

Title of each class		Name of each exchange on which registered
None		None

Securities registered pursuant to Section 12 (g) of the Act: ~~10 3/4% Senior Subordinated Notes Due 2007~~

~~Indicate by~~10 ~~check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12~~¾% ~~months~~Senior ~~(or~~Subordinated ~~for~~Notes ~~such~~Due ~~shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No~~ 2007

~~Registrant's~~Indicate by check mark whether the registrant: (1) has filed all reports required to be ~~Common~~filed ~~Stock,~~by ~~outstanding~~Section at13 ~~March~~or ~~31,~~15 ~~2001~~(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required ~~137,945~~to ~~shares~~file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes o No ý

Registrant’s Common Stock, outstanding at March 29, 2003 was 137,945 shares.

DOCUMENTS INCORPORATED BY REFERENCE:

~~Documents referenced on Exhibits Index, which begins on page 41~~ None

HCC INDUSTRIES INC. ~~INDEX TO ANNUAL REPORT ON FORM 10-K~~

Caption		Page
PART I
	Item 1. — BUSINESS	3
	Item 2. — PROPERTIES	10
	Item 3. — LEGAL PROCEEDINGS	10
	Item 4. — SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	13
PART II
	Item 5. — MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	13
	Item 6. — SELECTED FINANCIAL DATA	13
	Item 7. — MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	14
	Item 7a. — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RATE RISK	18
	Item 8. — FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA	18
	Item 9. — CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	33
PART III
	Item 10. — DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	33
	Item 11. — EXECUTIVE COMPENSATION	35
	Item 12. — SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	38
	Item 13. — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	40
PART IV
	Item 14. — EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K	41
SIGNATURES		45

INDEX TO ANNUAL REPORT ON FORM 10-K

PART I

	Item 1.	BUSINESS
	Item 2.	PROPERTIES
	Item 3.	LEGAL PROCEEDINGS
	Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


PART II

	Item 5	MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
	Item 6.	SELECTED FINANCIAL DATA
	Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	Item 7a.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RATE RISK
	Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
	Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

PART III

	Item 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
	Item 11.	EXECUTIVE COMPENSATION
	Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
	Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
	Item 14.	CONTROLS AND PROCEDURES

PART IV

	Item 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

SIGNATURES

PART I

Item 1— - Business

General

Except where the context indicates otherwise, the term "“Company"” means HCC Industries Inc. and its wholly owned subsidiaries Hermetic Seal Corporation, Glasseal Products, Inc., Sealtron, Inc., Norfolk Avon Realty Trust, HCC Industries International, HCC Machining Company, Inc. and HCC Foreign Sales Corporation.

The Company was incorporated in Delaware in 1985 and is one of the largest custom manufacturers of high precision hermetically sealed electronic connection devices in the ~~United~~ United States. High precision hermetic seals are used primarily to permit the flow of electricity across a barrier used to separate different atmospheric media (such as gas or liquid to air or vacuum) existing on opposite sides of the barrier. A hermetic seal is generally accomplished through the creation of a glass-to-metal seal ("“GTMS"”). The hermetic seals manufactured by the Company ~~generally~~ generally fall into four categories— - terminals, headers, connectors and microelectronics packages. A "“terminal" ” is a device characterized by having only a single contact pin, while a "“header~~" has~~” has multiple contact pins inserted in a frame. A "“connector"” is a type of terminal or header which can be mechanically coupled to or uncoupled from another connection. A "“microelectronic package"” is a container for thick and thin film substrates onto which hybrid circuitry has been etched. The Company operates in the premium segment of the market by providing high precision GTMS, custom designed to ~~meet~~ meet specific customer requirements. Each GTMS generally consists of a metal body or housing, metal contact pins, and an insulator fabricated from glass, ceramic or glass/ceramic mixtures. GTMS range in size from a two foot long, eight inch diameter cylindrical connector utilized for through-hull communication links for nuclear submarines, to a 40/1000 inch outside diameter (12/1000 inch inside diameter) implant to measure pressure in the heart chamber.

The ~~Company~~ Company believes that it has been an industry leader in the design and manufacture of GTMS since it developed its GTMS process in 1945. The Company has developed over 75,000 different configurations, primarily for the following industries: (1) automotive (for use in, for example, the initiators in airbags and seat belt pretensioners); (2) aerospace and military electronics (for use in, for example, gyro guidance devices, flight instrumentation, jet engine controls, and space suit controls); (3) test and measurement (for use in, for example, temperature and pressure transducers, infrared detection instrumentation, electro-optical devices and fuel injection monitoring devices); (4) medical electronics (for use in, for example, pacemakers, kidney dialysis machines and ~~devices~~ devices for monitoring vital life signs); (5) telecommunications (for use, in , for example, fiber optics); and (6) energy (for use in, for example, oil drilling equipment and downhole logging instrumentation and for conventional and nuclear electric power generating plants).

The demand for the Company'’s products is largely dependent on the ~~telecommunication,~~ automotive and aerospace industries. Sales to the Company'’s ~~two~~ten largest customers accounted for approximately 2637% ~~and 11%, respectively,~~ of ~~the Company's~~ consolidated sales for ~~the~~ fiscal year ~~ended March 31, 2001~~2003. ~~Sales to the Company's ten largest customers accounted for approximately 59% of~~ ~~consolidated sales during the 2001 fiscal year.~~ Approximately 7058% of the Company'’s consolidated sales for fiscal ~~2001~~ 2003 were to customers with which the Company had contractual agreements, sole ~~source~~ source relationships, letters of intent or long-term purchase orders. A substantial portion of these business relationships are informal and certain of the Company'’s contractual arrangements may be terminated at will. Sales Onto ~~January 16, 2001,~~ the Company’s ~~entered~~largest ~~into~~customer aaccounted ~~new~~for ~~12-month~~approximately ~~supply agreement with Special Devices, Inc. ("SDI"). The agreement implements an immediate 12~~8% ~~price decrease and~~ ~~contains~~of ~~provisions~~consolidated sales for ~~future~~the ~~price~~fiscal ~~decreases~~year ~~subject~~ended toMarch ~~implementation~~29, ~~of cost reduction initiatives and/or increased unit volumes~~2003.

Competitive Strengths

The Company believes that it has the following competitive strengths:

Long-Term Customer Relationships. Many of the Company'’s customers, ~~including SDI,~~ have been customers for over ~~ten~~ twenty years. The Company believes that both automotive and aerospace OEMs continue to seek long-term partnerships with fewer core suppliers. The Company'’s relationships are strengthened by the fact that many of its arrangements with its customers provide for the Company to act as the sole source of supply for the customer. The Company estimates that approximately 7058% of the Company'’s consolidated sales for fiscal year ~~2001~~2003 were from contractual agreements, sole source relationships, letters of intent or long-term purchase orders.

Market Leadership. A number of the Company'’s products hold leading market positions in their respective niche markets. The Company ~~currently~~focuses ~~believes~~on ~~based~~high margin ~~upon~~custom ~~internal estimates that it produces hermetically sealed~~ products ~~for approximately 50% of the airbag initiators produced~~ in ~~the~~a ~~United~~highly ~~States.~~fragmented ~~The~~supplier Company believes, based upon long-term relationships with SDI and other airbag initiator suppliers, that it is well positioned to continue to increase its market share, as well as expand its sales internationallybase.

Commitment to Quality and Service. The Company believes that its commitment to provide consistent, high quality products and services and flexible manufacturing and custom designed products at competitive prices, forms the basis for its strong and diversified customer relationships. The Company manufactures most of its parts to specific customer requirements. The Company utilizes Statistical Process Control, Design Failure Mode Effects Analysis, Process Failure Mode Analysis, and a strict adherence to complete manufacturing documentation in order to manufacture high quality products for internal use as well as external customer sales. The Company'’s ~~three~~four operating subsidiaries are registered to ISO 9001.

Proprietary Technology. The Company operates in the automotive, aerospace and general industrial technologies markets in which products typically require sophisticated engineering and production techniques. The Company designs and manufactures new products to fulfill customer needs, and has developed proprietary manufacturing technology since its founding in 1945. The Company believes that this proprietary technology helps enable it to attract and retain customers who require customized, high tolerance products. The Company estimates that it has produced over 75,000 different variations of GTMS.

Low Cost Operations. The Company believes that its extensive "“in-house"” capabilities and vertical integration ~~are~~ are competitive advantages that have allowed it to become a low cost producer. By controlling the tolerance of the component parts, the Company has been able to reduce scrap and to increase the yields of its products. Furthermore, the Company is continually developing and assessing its programs designed to increase efficiency and enhance economies of scale in order to further reduce costs.

Diverse Products and Customers. The Company has a diverse customer base, with sales of numerous product variations to to approximately 1,~~200~~000 customers in fiscal ~~2001~~2003. Over the past several years, the Company has recognized consistent long-term growth in sales of GTMS products to the telecommunication, automotive, aerospace and general industrial markets.

Business Strategy

The Company's strategy is to expand its business through:

Focusing on Core Strengths. The Company continues to focus on what it believes are its core strengths and to invest in those businesses that are consistent with those strengths and which exhibit

Business high growth potential. Core strengths include the timely custom design and manufacturing of high tolerance, high reliability components and the effective program management of long term contracts and supply agreements. Strategy

~~Leveraging Customer Relationships.~~ The Company ~~works closely with its customers to jointly develop and design new products and to improve the performance and lower the cost of the Company'~~’s ~~customers' products. The Company has sole source supply contracts, shares product development, and enters into other teaming~~ ~~arrangements~~strategy ~~with~~is ~~its key customers~~ to ~~further~~expand ~~strengthen and broaden~~ its ~~relationships. The Company believes that this strategy, together with the successful performance under existing contracts has led to additional long-term~~ business ~~from key existing customers and new customers.~~ through:

~~Pursuing~~ Focusing ~~Selective~~on Core ~~Acquisitions~~Strengths. The Company continues ~~intends~~ to ~~pursue~~focus ~~selective~~on ~~acquisitions~~what ~~and~~it tobelieves ~~add products and capabilities that~~ are ~~complementary to~~ its ~~existing~~core ~~operations.~~strengths ~~Priority~~and ~~is expected~~ to beinvest ~~given~~in those ~~to acquiring~~ businesses ~~whose~~that ~~products~~are ~~can~~consistent bewith ~~manufactured~~those instrengths ~~the~~and ~~Company's~~which ~~existing facilities~~exhibit ~~("fold-in"~~high ~~acquisitions)~~growth potential. Core ~~The~~strengths include ~~Company's~~the ~~operations~~timely ~~are~~custom ~~characterized~~design byand amanufacturing ~~relatively~~of high ~~level of operating leverage; therefore~~tolerance, ~~such fold-in acquisitions should allow the Company to allocate costs~~high ~~across~~reliability ~~broader~~components ~~synergistic product lines~~ and ~~represent additional volume through~~ the ~~Company's~~effective ~~existing~~program ~~facilities~~management ~~which~~of ~~should~~long ~~provide~~term contracts ~~opportunities~~and tosupply ~~improve profitability~~agreements.

~~Expanding~~ Leveraging Customer ~~Internationally~~Relationships. The Company isworks ~~considering~~closely with its customers to jointly develop and design new products and to improve the ~~expansion~~performance ofand ~~its~~lower ~~operations~~the incost ~~Europe.~~of the Company’s customers’ products. The ~~primary~~Company ~~motivation~~has insole asource ~~geographic~~supply ~~expansion~~contracts, ~~would~~shares ~~most~~product ~~likely~~development, beand toenters ~~service~~into ~~the~~other teaming ~~growth~~arrangements ofwith its ~~current~~key customers' ~~operations~~to asfurther ~~they~~strengthen ~~expand~~and ~~their~~broaden its ~~production~~relationships. The ~~operations~~Company ~~abroad.~~believes that this strategy, together with the successful performance under existing contracts has led to additional long-term business from key existing customers and new customers.

Pursuing Selective Acquisitions. The Company intends to pursue selective acquisitions and to add products and capabilities that are complementary to its existing operations. Priority is expected to be given to acquiring businesses whose products can be manufactured in the Company’s existing facilities (“fold-in” acquisitions). The Company’s operations are characterized by a relatively high level of operating leverage; therefore, such fold-in acquisitions should allow the Company to allocate costs across broader synergistic product lines and represent additional volume through the Company’s existing facilities which should provide opportunities to improve profitability.

Industries

The Company estimates the total size of the GTMS market to be $600 million, with approximately one-half estimated to be the specialized, high precision segments in which the Company competes. The Company believes based upon internal analysis that the market for high-end hermetically sealed products is extremely fragmented, with no other competitor offering the same breadth of products as the Company. The Company believes that its focus on the high-end, custom segment of the GTMS market enables it to achieve higher margins.

The Company sells its products to five principal industries: (i) the telecommunication industry for use in optical networking components,; (ii) the automotive parts industry for use in airbag initiators, seat belt pretensioners, climate control devices and anti-lock braking systems; (iii) the aerospace industry for use primarily in commercial and military aviation and electronics; (iv) general industry for use primarily in process control, and other industrial and medical applications; and (v) the petrochemical industry, for use primarily in oil and gas downhole ~~logging~~ logging equipment.

Telecommunication

The Company designs and manufactures highly engineered hermetic packaging used to facilitate the infrastructure outbuild of fiber optic telecommunications, supporting global internet communications. The Company has a strong position in the current OC-192 technology, as well as qualified designs for a variety of next generation products for increased speed and bandwidth.

Automotive

The Company provides GTMS products used in initiators for airbag devices. At present, each airbag device requires at least one initiator (the device that deploys the airbag). The automotive airbag industry has undergone dynamic growth over the recent past stemming from increased consumer demand for automotive safety devices and federal regulations requiring such devices. Regulations adopted by the National Highway Traffic Safety Administration require that airbags be the automatic

~~frontal crash protection system used for both the driver and front passenger in 100% of all passenger automobiles, light trucks and vans manufactured for sale in the United States.~~ Automotive

Although not mandated by law, initiator-based safety systems are also employed in automobiles produced and sold in Europe and Asia, although fewer than in the U. S. The systems utilized in Europe and Asia include airbag systems similar to those in use in the U. S. and seat-belt pretensioners that employ initiators. While the majority of airbag initiators manufactured for use in cars outside the U. S. employ plastic initiators, there is a trend toward using GTMS in such products due to their increased reliability.

Commercial and Military Aviation and Electronics

The Company provides hermetic seals that are used for a number of different applications in commercial and military aviation and electronics, primarily to protect guidance and sensor devices from the effects of changes in atmospheric conditions. The Company believes based upon internal estimates that GTMS products are utilized in almost every model of ~~commercial~~ commercial aircraft currently in production and its customers include essentially all major aerospace suppliers. The Company'’s sales to the aerospace industry are dependent to a certain extent on ~~new~~ new construction of commercial and military aircraft. The Company competes with a number of different suppliers in this market, based on quality, delivery and price.

General and Industrial

The Company provides GTMS used in pressure and temperature transducers (sensors), industrial process control equipment, capacitor end-seals for electronic devices and other industrial and medical applications. The Company believes that its ability to help customers develop products to meet demanding specifications ~~allow~~allows for significant opportunities within this market segment, including those customers not currently served by the Company'’s products. The Company also believes that the increased sophistication of equipment and increased level of automation being used in industrial applications will increase demand for GTMS products.

Petrochemical

The Company provides GTMS used for downhole logging equipment in the oil and gas industry primarily under long-term contracts to oil field equipment and ~~service~~ service companies. The Company'’s sales to this industry during any period are somewhat dependent on the current level of exploration and drilling in the oil and gas industry and current demand for and price of crude oil. The Company believes that it is one of only two significant providers of GTMS to this industry. The Company expects that the trend toward more sophisticated measurement-while-drilling equipment in the petrochemical industry is likely to lead to more demand for the Company'’s products.

Customers and Applications

The Company has approximately 1,200 active customers. The Company's ten largest customers accounted for approximately 59% of net sales for fiscal year 2001. The Company's largest customer, Special Devices, Inc. ("SDI") (a manufacturer of airbag initiators), represented approximately 26% of consolidated sales for the fiscal year ended March 31, 2001.

Approximately 70% of the Company's consolidated sales for fiscal year 2001 were to customers with which the Company had contractual agreements, sole source relationships, letters of intent or long-term purchase orders. The Company only begins to manufacture products upon receipt of a purchase order. The Company's relationship with SDI includes a contract expiring January 15, 2002 to produce approximately 85% of SDI's GTMS for its initiators provided the Company maintains pricing

Customers and ~~quality which are generally equivalent to or better than other suppliers. The Company believes that it currently provides nearly all of SDI's GTMS components.~~ Applications

The Company has ~~following~~approximately ~~table~~1,000 ~~sets~~active ~~forth~~customers. ~~the~~The Company'’s ~~principal~~ten ~~end-user~~largest ~~markets,~~customers accounted ~~certain~~for ~~applications~~approximately 37% of consolidated sales for ~~its~~fiscal ~~products~~year 2003. The ~~and~~Company’s ~~certain~~largest customer represented approximately 8% of consolidated sales for fiscal year 2003. Approximately 58% of the Company'’s consolidated ~~customers~~sales infor fiscal year ~~2001~~2003 were to customers with which the Company had contractual agreements, sole source relationships, letters of intent or long-term purchase orders. The Company only begins to manufacture products upon receipt of a purchase order.

End Markets	Telecommunication	Automotive	Aerospace	Industrial/Petrochemical
Applications:	Optical Switching DWDM Transport Optical Components Metro Access DWDM	Airbag Initiators Thermistors Airbag Pressure Switches ABS	Jet Engine Monitors Avionics Fuel Gauge Indicators Temperature Sensors De-icing Sensors Air Speed Indicators	Process Control Sensors Downhole Drilling Sensors Lithium Batteries
Customers*:	Agerea W J Communications MOEC Codeon Nortel JDS Uniphase	SDI NCS Pyrotechnie Keystone Takata	Honeywell Rosemount Aerospace Hamilton Sundstrand ITT Aerospace Ametek Aerospace	Druck, Ltd. Hawker Eternacel Invensys Schlumberger Halliburton Panametrics Kemet
Specific example of product application:	Modulator	Airbag Initiator	Temperature Sensors	High pressure electrical bulkheads for downhole use (oil exploration)
What the product does:	Optical shutter to create binary code for laser transmission along fiber.	Electric current flows from crash sensor through initiator to begin inflation of the airbag.	Passes electric current from sensors that detect excessive heat and/or fire in aircraft	Carries electrical signals between geological formation measurement tools and sensors.
Result:	Higher speed data transmission.	Airbag is inflated in approximately 6 to 14 milliseconds	Warning signal and automatic release of fire retardant	Allows precise measurement of geology while protecting sensitive equipment from extreme heat and pressure.

The following table sets forth the Company’s principal end-user markets and certain applications for its products.

End Markets	Automotive	Aerospace	Industrial/Petrochemical	Telecommunication

Applications:	Airbag Initiators Thermistors Airbag Pressure Switches ABS	Jet Engine Monitors Avionics Fuel Gauge Indicators Temperature Sensors De-icing Sensors Air Speed Indicators	Process Control Sensors Downhole Drilling Sensors Lithium Batteries	Optical Switching DWDM Transport Optical Components Metro Access DWDM

Specific example of product application:	Airbag initiator	Temperature Sensors	High pressure electrical bulkheads for downhole use (oil exploration)	Modulator

What the product does:	Electric current flows from crash sensor through initiator to begin inflation of the airbag.	Passes electric current from sensors that detect excessive heat and/or fire in aircraft	Carries electrical signals between geological formation measurement tools and sensors.	Optical shutter to create binary code for laser transmission along fiber.

Result:	Airbag is inflated in approximately 6 to 14 milliseconds	Warning signal and automatic release of fire retardant	Allows precise measurement of geology while protecting sensitive equipment from extreme heat and pressure.	Higher speed data transmission.

Manufacturing Process

A GTMS is made by assembling three sets of component parts (metal contacts or pins, glass bead(s) and an outer metal housing or shell) on a graphite fixture. This assembly is put through a controlled atmosphere furnace at approximately 1,800 degrees Fahrenheit until the glass becomes molten. The graphite fixture is used to hold the components in place while the glass is molten. As the assembly cools, a physical and /or chemical bond is formed between the glass and the shell as well as the glass and the pin, thus forming a hermetic seal.

The ~~Company~~ Company believes that its extensive "“in-house"” capabilities are a key competitive advantage that has allowed it to become a low cost producer. By specifically controlling the tolerance of the component parts, the Company believes that it is able to increase the end yields of its product. This attention to quality throughout the manufacturing process also helps to ensure the timely delivery of its products. It also enables the Company to respond very quickly to prototype and new product development opportunities.

The ~~Company~~ Company manufactures most of its parts to specific customer requirements. All three of the Company'’s operating subsidiaries use Computer Aided Design ("“CAD"”) to produce the drawings and specifications required by the customer. The Company estimates that it has produced over 75,000 different variations to GTMS since 1945. This extensive library of designs enables the Company to suggest design changes to its customers that reduce manufacturing costs without sacrificing quality and therefore reduce the cost to the customer (value engineering).

The Company has made a significant investment in Computer Numerically Controlled ("“CNC"”) machining ~~machine~~equipment ~~tools~~ in order to manufacture the metal shells and pins to demanding customer specifications. The Company also machines most of its own graphite fixtures thereby allowing it to maintain process quality. Many of the glass preforms used in the Company'’s products are manufactured internally as well. The Company has many proprietary formulas for glass and glass/ceramic mixtures that it has developed in over 50 55 years of manufacturing. In addition, the Company has extensive capabilities in selective plating of precious and non -precious metals.

The ~~Company~~ Company utilizes Statistical Process Control ("“SPC"”), Design Failure Mode Effects Analysis, Process Failure Mode Effects Analysis and a strict adherence to complete manufacturing documentation in order to manufacture high quality products for internal use as well as external customer sales. The Company believes that its knowledge and use of these procedures give the Company a competitive advantage. Hermetic, Glasseal, Sealtron and HCC Machining are ISO 9001 registered. The ISO 9001 registration, an international standard of quality, should facilitate business expansion in Europe.

Marketing and Sales

The Company'’s products are marketed throughout the Unites States to customers in a wide variety of industries, both by Company-employed salespersons, who work out of the Company'’s plants, and by a number of independent regional manufacturers' ’ sale representatives. The 14 24 Company-employed salespersons receive a base salary plus bonus potential. Sales in Europe are through a two ~~person~~sales offices ~~office~~located in Northampton, England. and Paris, France. As part of the Company'’s growth strategy, the Company believes that it can capture an increasing share of the business outside the United States. International sales (primarily Europe) accounted for approximately 19% (2003), 12% (2002), and 11% (2001), of consolidated sales by HCC. Economic, political, governmental and regulatory conditions in such international markets could adversely affect the Company'’s ability to successfully enter or operate in such markets. Therefore, no assurances can be given that the Company'’s attempts to expand its business into such international markets will be successful. The Company currently has 8 independent regional manufacturers-sales representatives spread geographically across North America and Europe. These representatives, who do not exclusively sell the Company'’s products, are remunerated on a commission basis. The Company believes there is a significant opportunity to increase its sales through expansion of its sales and distribution efforts, both within the markets it currently serves and in new markets.

significant opportunity to increase its sales through expansion of its sales and distribution efforts, both within the markets it currently serves and in new markets. Competition

~~Competition~~ The Company believes based upon internal analysis that most of the Company’s competitors in the GTMS sector of the industry in which it competes are smaller and have less technological and manufacturing expertise than the Company. The Company believes that it occupies a favorable competitive position because of its experience in engineering and production techniques and also its extensive vertical integration. Price has generally been a less significant competitive factor than the quality and design of the GTMS because their cost typically is a small percentage of the total cost of the end products in which they are used and because of the importance of the uses to which many of the Company’s products are put. In addition, products for airbag initiators are qualified for particular new automotive models and new products are subject to design and process verification testing (prior to which there are no sales) which typically takes 8 to 24 months and, therefore, helps to inhibit new entry into the market.

The Company believes based upon internal analysis that most of the Company's competitors in the GTMS sector of the industry in which it competes are smaller and have less technological and manufacturing expertise than the Company. The Company believes that it occupies a favorable competitive position because of its experience in engineering and production techniques and also its extensive vertical integration. Price has generally been a less significant competitive factor than the quality and design of the GTMS because their cost typically is a small percentage of the total cost of the end products in which they are used and because of the importance of the uses to which many of the Company's products are put. In addition, products for airbag initiators are qualified for particular new automotive models and new products are subject to design and process verification testing (prior to which there are no sales) which typically takes 8 to 24 months and, therefore, helps to inhibit new entry into the market. Backlog

~~Backlog~~ As of March 29, 2003, the Company had a backlog of $26.9 million compared to $25.2 million as of March 30, 2002. The Company sells a majority of its products pursuant to contractual agreements, sole source relationships, letters of intent or long-term purchase orders, each of which may permit early termination by the customer. However, due to the specialized, highly engineered nature of the Company’s product, it is not practical in many cases for customers to shift their business to other suppliers without incurring significant switching and opportunity costs.

As of March 31, 2001, the Company had a backlog of $52.4 million compared to $36.2 million as of April 1, 2000. The Company sells a majority of its products pursuant to contractual agreements, sole source relationships, letters of intent or long-term purchase orders, each of which may permit early termination by the customer. However, due to the specialized, highly engineered nature of the Company's product, it is not practical in many cases for customers to shift their business to other suppliers without incurring significant switching and opportunity costs. Employees

~~Employees~~ At March 29, 2003, the Company had approximately 534 employees, substantially all of whom were located in the United States. None of the Company’s employees are subject to a union contract. The Company considers its relations with its employees to be excellent.

~~At March 31, 2001, the Company had approximately 800 employees, substantially all of whom were located in the United States. None of the Company's employees is~~Raw ~~subject to a union contract. The Company considers its relations with its employees to be excellent.~~ Materials

~~Raw~~ The ~~Materials~~ Company obtains raw materials, component parts and supplies from a variety of sources and generally from more than one supplier. The Company’s principal raw materials are steel and glass. The Company’s suppliers and sources of raw materials are based in the United States and the Company believes that its sources are adequate for its needs for the foreseeable future. The loss of any one supplier would not have a material adverse effect on the Company’s financial condition or results of operations.

~~The Company obtains raw materials, component parts and supplies from a variety of sources and generally from more than one supplier. The Company's principal~~Environmental raw materials are steel and glass. The Company's suppliers and sources of raw materials are based in the United States and the Company believes that its sources are adequate for its needs for the foreseeable future. The loss of any one supplier would not have a material adverse effect on the Company's financial condition or results of operations. Matters

~~Environmental~~ The ~~Matters~~ Company’s operations are subject to numerous environmental laws, including those regulating air emissions and discharges to water, and the storage, handling and disposal of solid and hazardous waste. The Company believes that it is in substantial compliance with such laws and regulations. Because environmental laws are becoming increasingly more stringent, the Company’s environmental capital expenditures and costs for environmental compliance may increase in the future.

~~The~~ Under ~~Company's~~certain environmental ~~operations~~laws, ~~are~~in ~~subject~~particular toCERCLA, ~~numerous~~a ~~environmental~~current ~~laws,~~or ~~including~~previous ~~those~~owner ~~regulating~~or operator ~~air~~of ~~emissions~~real ~~and~~property ~~discharges~~may tobe ~~water,~~liable ~~and~~for the ~~storage~~costs of removal or remediation of hazardous or toxic substances on, under or in such property. Generally, liability under CERCLA is joint ~~handling~~and several and remediation can extend to properties owned by third parties. Persons who arrange for the disposal ofor ~~solid~~treatment ~~and~~of hazardous ~~waste.~~or ~~The~~toxic ~~Company~~substances ~~believes~~or ~~that~~otherwise itcause the release of such substances into the environment may also be liable under such laws for the costs of removal or remediation of such substances at a disposal or treatment facility or other location where the substances have migrated or come to be located, whether or not such facility or location is inor ~~substantial~~ever ~~compliance~~was operated ~~with~~by such ~~laws~~person and ~~regulations.~~regardless ~~Because~~of ~~environmental~~whether the method of disposal or treatment was legal at the time. Such laws ~~are~~often ~~becoming~~impose ~~increasingly~~liability ~~more~~whether or not the owner or operator knew of, or ~~stringent~~was responsible for the presence of such hazardous or toxic substances, and the liability ~~Company's~~under ~~environmental~~such ~~capital~~laws ~~expenditures~~has been interpreted to be strict, joint and ~~costs~~several unless the harm is divisible and there is a reasonable basis for ~~environmental~~the ~~compliance~~allocation of responsibility. In addition, the presence of hazardous or toxic substances, or the failure to properly remedy such property may ~~increase~~adversely inaffect the ~~future~~market value of the property, as well as the owner’s ability to sell or lease the property. The Company has potential liability under environmental laws for the remediation of contamination at two of its facilities (see Item 3 for further discussion of environmental matters).

Under certain environmental laws, in particular CERCLA, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in such property. Generally, liability under CERCLA is joint and several and remediation can extend to properties owned by third parties. Persons who arrange for the disposal or treatment of hazardous or toxic substances or otherwise cause the release of such substances into the environment 9

9Item 2 - Properties

may also be liable under such laws for the costs of removal or remediation of such substances at a disposal or treatment facility or other location where the substances have migrated or come to be located, whether or not such facility or location is or ever was operated by such person and regardless of whether the method of disposal or treatment was legal at the time. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for the presence of such hazardous or toxic substances, and the liability under such laws has been interpreted to be strict, joint and several unless the harm is divisible and there is a reasonable basis for the allocation of responsibility. In addition, the presence of hazardous or toxic substances, or the failure to properly remedy such property may adversely affect the market value of the property, as well as the owner's ability to sell or lease the property. The Company has potential liability under environmental laws for the remediation of contamination at two of its facilities (see Item 3 for further discussion of environmental matters). Facilities

The Company’s principal executive offices are owned by the Company and are located in the ~~Item~~Hermetic ~~2—Properties~~ Seal facility located in Rosemead, California. Additionally, the Company has operating facilities in El Monte, California, Lakewood, New Jersey, and Reading, Ohio, as set forth below. The Company also owns approximately 47,400 square feet of plant and office space in Avon, Massachusetts, which is currently vacant.

Facilities

Location	Owned/Leased	Square Feet
Rosemead, CA	Owned	37,000
El Monte, CA	Owned	110,000
Lakewood, NJ	Owned	50,000
Reading, OH	Owned	37,000

~~The~~Item ~~Company's~~3 ~~principal~~- ~~executive~~Legal offices are owned by the Company and are located in the Hermetic Seal facility located in Rosemead, California. Additionally, the Company has operating facilities in El Monte, California; Lakewood, New Jersey, and Reading, Ohio, as set forth below. The Company also owns approximately 47,400 square feet of plant and office space in Avon, Massachusetts, which is currently vacant. Proceedings

Location	Owned/Leased	Square Feet
Rosemead, CA	Owned	37,000
El Monte, CA	Owned	110,000
Lakewood, NJ	Owned	50,000
Reading, OH	Owned	37,000

Environmental Matters

Rosemead, ~~Item 3—Legal Proceedings~~ California

~~Environmental~~ Regional Groundwater ~~Matters~~ Contamination. A portion of the San Gabriel Valley in which the Rosemead facility is located was designated by the EPA as a federal Superfund site in 1984. The Company has been named as a potentially responsible party (“PRP”) under CERCLA for the El Monte Operable Unit. If the Rosemead facility contributed to the regional contamination, such contribution is in connection with alleged spills of the degreasing solvent tetracholoroethylene (PCE).

~~Rosemead~~ Many other companies are believed to be contributors to the groundwater contamination in the El Monte Operable Unit. The Company and 18 other such companies have formed the Northwest El Monte Community Task Force (the “Task Force”) to undertake the investigation of the remediation, to identify other potential contributors and potentially to undertake required remediation. In March 1995, the Task Force entered into a Consent Administrative Order with the EPA to perform a Remedial Investigation and Feasibility Study (RI/FS) of the El Monte Operable Unit. The RI/FS was completed in 1999 and the EPA issued an interim record of decision. The RI/FS costs of approximately $2,400,000 to date have been funded with about one-quarter of the costs coming from governmental entities and the balance paid pursuant to a confidential interim allocation agreement of Task Force members. To date an additional $2,200,000 has been spent or committed to be spent to undertake early remediation efforts on a voluntary basis. In addition, the Task Force, in conjunction with Southern California Water Company, received a $650,000 grant through the San Gabriel Valley Water Quality Authority (“WQA”) to upgrade remediation facilities in connection with the remediation of the deep aquifer on the west side of the El Monte Operable Unit in 2001. Those facilities have been installed. In 2002, an additional $3,250,000 grant was awarded by the WQA to undertake further shallow and deep aquifer remediation as well as pay for ongoing operations and maintenance of the deep aquifer remedy. It is anticipated that an agreement between some members of the Task Force and the EPA to undertake the balance of the remediation required consistent with the record of decision will be executed by September 2003.

~~Regional~~ On-site/Soil and Groundwater ~~Contamination~~Cleanup Costs. In addition Ato ~~portion of~~ the ~~San~~Operable ~~Gabriel~~Unit ~~Valley~~Remediation incosts, ~~which~~ the ~~Rosemead~~Company ~~facility~~has isvoluntarily ~~located~~undertaken ~~was~~both ~~designated~~on-site bysoil ~~the~~and ~~EPA~~groundwater ~~as a federal Superfund site in 1984~~remediation. In ~~The~~1995, the Company ~~has~~installed ~~been named as~~ a ~~potentially~~soil ~~responsible~~vapor extraction ~~party ("PRP") under CERCLA for the El Monte Operable Unit~~system. To Ifdate, the ~~Rosemead~~remediation ~~facility~~system ~~contributed~~has toremoved ~~the~~over ~~regional~~99% ~~contamination,~~of ~~such~~contaminants ~~contribution is~~ in ~~connection with alleged spills of~~ the ~~degreasing solvent tetracholoroethylene (PCE)~~soil.

~~Many other~~ The ~~companies~~Company ~~are~~has installed ~~believed~~a ~~to be contributors to the~~ groundwater ~~contamination~~extraction system in ~~the~~conjunction Elwith ~~Monte~~a ~~Operable Unit~~neighboring facility. This ~~The~~system ~~Company~~extracts contaminated ~~and~~water 18from ~~other such companies have formed~~ the ~~Northwest El~~shallow ~~Monte~~aquifer ~~Community~~and ~~Task~~pumps ~~Force (~~the ~~"Task~~water ~~Force")~~for touse ~~undertake~~in ~~the~~our neighbor’s ~~investigation~~manufacturing ofprocess ~~the~~prior ~~remediation,~~ to ~~identify~~discharge ~~other potential contributors and potentially~~ to ~~undertake~~the ~~required~~municipal ~~remediation~~sanitary sewer. The Insystem ~~March of 1995,~~has ~~the~~been ~~Task~~operational since ~~Force~~August ~~entered~~1996 ~~into~~and ais ~~Consent~~designed ~~Administrative Order with the EPA~~ to ~~perform~~capture acontaminated ~~Remedial~~groundwater ~~Investigation~~from under ~~and Feasibility Study (RI/FS) of~~ the ~~operable~~Company’s ~~unit.~~property ~~The~~before ~~RI/FS~~it ~~was~~impacts ~~completed~~the inregional ~~1999~~groundwater ~~and~~flow. Although the ~~EPA~~system ~~issued~~has anbeen successful, ~~interim~~it ~~record~~is ofpremature ~~decision.~~to ~~The~~determine ~~RI/FS~~how ~~costs~~long ofit ~~approximately~~will ~~$2.4~~be ~~million~~needed to remediate ~~date have been funded with about one-quarter of~~ the ~~costs~~groundwater ~~coming~~to ~~from~~acceptable ~~governmental~~levels, ~~entities~~or ~~and~~if the ~~balance~~ ~~paid~~operation ~~pursuant to a confidential interim allocation agreement~~ of ~~Task Force members. To date an additional $1,100,000 has been spent to undertake early remediation efforts on a voluntary basis~~the ~~and~~system ~~an additional $1,600,000~~ will be ~~spent~~discontinued inand ~~2001.~~replaced ~~This money has been raised pursuant to a matching funds, cost sharing agreement~~ with a ~~public~~regional ~~entity.~~groundwater remediation program.

~~On-site/Soil~~ The ~~and Groundwater Cleanup Costs. In addition to the Operable Unit Remediation costs, the~~ Company ~~has~~ ~~voluntarily~~believes ~~undertaken~~that ~~both~~its ~~on-site~~financial ~~soil~~liability ~~and~~with ~~groundwater~~respect ~~remediation.~~to Inregional ~~1995,~~groundwater contamination ~~the~~may ~~Company~~be ~~installed~~substantially areduced ~~soil~~by ~~vapor~~acting ~~extraction~~on ~~system.~~its Toown ~~date,~~initiative ~~the~~to commence early remediation ~~system~~of ~~has~~groundwater ~~removed~~contamination ~~over~~under ~~97%~~its ~~of contaminants in the soil~~property.

The Company has installed a groundwater extraction system in conjunction with a neighboring facility. This system extracts contaminated water from the shallow aquifer and pumps the water for use in our neighbor's manufacturing process prior to discharge to the municipal sanitary sewer. The system has been operational since August 1996 and is designed to capture contaminated groundwater from under the Company's property before it impacts the regional groundwater flow. Although the system has been successfulAvon, ~~it is premature to determine how long it will be needed to~~ ~~remediate the groundwater to acceptable levels, or if the operation of the system will be discontinued and replaced with a regional groundwater remediation program.~~ Massachusetts

The Company’s facility ~~believes~~in ~~that~~Avon, Massachusetts, currently inactive, was purchased in 1985 and operated as its ~~financial~~Hermetite ~~liability~~facility ~~with~~until ~~respect~~June 1988. The facility became inactive in August of 1989. Subsequent to ~~regional~~its closure, the Company identified significant levels of solvents in the groundwater. Subsurface ~~contamination~~investigations have ~~may~~delineated bea ~~substantially~~plume ~~reduced~~of bycontaminants ~~acting~~extending onfrom ~~its~~the ~~own~~facility, ~~initiative~~beneath toa neighboring ~~commence~~property ~~early~~and into a town public water supply wellfield about 800 ~~remediation~~feet ofto ~~groundwater~~the ~~contamination~~southeast ~~under~~of ~~its~~the property. Despite the risk that the contaminants pose to the wellfield, the levels at the well field remain within acceptable drinking water standards.

The Avon, property is subject to Massachusetts “Chapter 21E,” the state’s hazardous site cleanup program. The property is classified as a “Tier 1B” category based on the level of contaminants. Under Tier 1B procedures, the Company may design its own remediation program subject to state oversight, auditing, and scheduling.

~~The~~ Pursuant ~~Company's~~to ~~facility~~this procedure, inthe ~~Avon~~Company, ~~Massachusetts,~~through ~~currently~~its ~~inactive~~licensed consultants, ~~was~~designed ~~purchased~~a remediation insystem ~~1985~~which ~~and~~is ~~operated~~intended asto ~~its~~capture ~~Hermetite~~the ~~facility~~contaminants ~~until~~before ~~June~~they reach ~~1988~~the town wells. In ~~The~~1996, ~~facility~~the ~~became~~program ~~inactive~~was inapproved, ~~August~~constructed ofand ~~1989~~became operational. In ~~Subsequent~~1999, to ~~its~~accelerate ~~closure~~the cleanup, the Company ~~identified~~installed ~~significant~~additional ~~levels~~extraction ofwells ~~solvents~~closer into the ~~groundwater.~~source ~~Subsurface~~area ~~investigations~~and removed ~~have~~the ~~delineated~~suspected asource ~~plume~~ of contamination. ~~contaminants~~No ~~extending~~additional ~~from~~infrastructure ~~the~~is ~~facility,~~anticipated ~~beneath~~at athis ~~neighboring~~time. To ~~property~~date, ~~and~~the ~~into~~system ahas ~~town~~been ~~public~~very ~~water~~successful in ~~supply~~reducing ~~wellfield~~contaminant ~~about~~levels. Although ~~800 feet to~~ the ~~southeast~~system ofhas ~~the~~been ~~property.~~successful, ~~Despite~~it ~~the~~is ~~fact~~premature ~~that contaminants continue~~ to ~~move~~determine how ~~toward~~long ~~the~~it ~~wellfield,~~will ~~the~~be ~~levels~~needed atto remediate the ~~well~~groundwater ~~field~~to ~~remain within~~ acceptable ~~drinking water standards~~levels.

~~The~~Financial Avon property is subject to Massachusetts "Chapter 21E," the state's hazardous site cleanup program. The property is classified as a "Tier 1B" category based on the level of contaminants. Under Tier 1B procedures, the Company may design its own remediation program subject to state oversight, auditing, and scheduling. Impact

~~Pursuant~~ Uncertainty as to ~~this~~(a) ~~procedure,~~the extent to which the Company caused, ~~through~~if ~~its~~at ~~licensed consultants~~all, ~~designed~~the aconditions ~~remediation~~being ~~system~~investigated, ~~which~~(b) isthe ~~intended~~extent toof environmental ~~capture~~contamination and risks, (c) the ~~contaminants~~applicability ~~before~~of ~~they~~changing ~~reach~~and complex environmental laws (d) the ~~town wells.~~number Inand ~~1996~~financial viability of other PRP’s, (e) the ~~program~~stage ~~was~~of ~~approved~~the investigation and/or remediation, ~~constructed~~(f) the unpredictability of investigation and/or ~~became~~remediation ~~operational.~~costs In(including ~~1999,~~as to when ~~accelerate~~they ~~the~~will ~~cleanup~~be incurred), (g) applicable clean-up standards, (h) the ~~Company~~remediation (if ~~installed~~any) ~~additional~~that ~~extraction~~will ~~wells~~ultimately ~~closer~~be required, and (i) available technology make it difficult to assess the ~~source~~likelihood ~~area~~ and scope of further investigation or ~~removed~~remediation activities or to estimate the ~~suspected~~future ~~source~~costs of ~~contamination~~such activities if undertaken. In Noaddition, ~~additional~~liability under ~~infrastructure~~CERCLA is ~~anticipated~~joint atand ~~this~~several, ~~time.~~and Toany ~~date,~~potential inability of other PRP’s to pay their pro rata share of the ~~system~~environmental ~~has~~remediation ~~been~~costs ~~very~~may ~~successful~~result in the Company being required to bear costs in ~~reducing~~excess ~~contaminant~~of ~~levels.~~its pro rata share.

~~Financial~~ In ~~Impact~~ fiscal 1997, the Company determined a cost estimate and accrued $10,000,000 for existing estimated environmental remediation and other related costs. The time frame over which the Company expects to incur such costs varies with each site, ranging up to 30 years. The most significant judgments and assumptions underlying the measurement of the environmental liability for the Avon site relate to the projected costs of the remediation, the effectiveness of the remediation technology on the site geology and the estimated time required for the remediation. The most significant judgments and assumptions underlying the measurement of the environmental liability for the El Monte Operable Unit are the determination of the extent (vertical and horizontal migration of contaminants) of the contamination within the EMOU, the projected costs to complete the required remediation, the expected timeframe required to complete the remediation, the required standard of clean up to be required by the regulatory agencies and the ultimate number and financial viability of the Potentially Responsible Parties.

~~Uncertainty~~ As ~~as to (a) the extent to which the Company caused, if at all, the conditions being investigated, (b) the extent~~ of ~~environmental~~March ~~contamination and~~29, ~~risks~~2003, ~~(c)~~ the ~~applicability~~accrual offor ~~changing~~estimated ~~and complex~~ environmental ~~laws~~costs ~~(d)~~was ~~the number and financial viability of other PRP's~~$7, ~~(e) the stage of the investigation and/or remediation~~438,000. Actual ~~(f)~~expenditures ~~the unpredictability~~for ~~of investigation and/or~~ environmental remediation ~~costs~~were ~~(including as to when they will be incurred)~~$736,000 (g2003) ~~applicable clean-up standards~~$528,000 (h2002) ~~the~~and ~~remediation~~$476,000 (~~if any~~2001). The ~~that~~Company ~~will~~believes ~~ultimately~~its beaccrual is ~~required~~adequate, ~~and~~but ~~(i)~~as ~~available technology make it difficult to assess~~ the ~~likelihood and~~ scope of ~~further~~its ~~investigation~~obligations orbecomes ~~remediation~~more ~~activities~~clearly ~~or to estimate the future costs of such activities if~~defined, ~~undertaken.~~this Inaccrual ~~addition,~~may ~~liability~~be ~~under~~modified ~~CERCLA is joint~~ and ~~several,~~related ~~and~~charges ~~any~~against ~~potential~~earnings ~~inability of other PRP's to pay their pro rata share of the environmental remediation costs~~ may ~~result~~be ~~in the Company being required to bear costs in excess of its pro rata share~~made.

Claims for Inrecovery ~~fiscal 1997, the Company with the help~~ of ~~independent~~costs ~~consultants,~~already ~~determined~~incurred ~~a cost estimate~~ and ~~accrued~~future ~~$10,000,000~~costs ~~for~~have ~~existing~~been ~~estimated~~asserted ~~environmental remediation and other~~against ~~related~~various ~~costs.~~insurance companies. The ~~time frame over which the~~ Company ~~expects~~has toneither ~~incur~~recorded ~~such~~any ~~costs~~asset ~~varies~~nor ~~with~~reduced ~~each~~any ~~site,~~liability ~~ranging up to 20 years. This estimate is based on progress made~~ in ~~determining the magnitude of~~ ~~such~~anticipation ~~costs, experience gained from sites on which remediation is ongoing or has been completed, and the timing and extent~~ of ~~remedial~~recovery ~~actions~~with ~~required~~respect byto ~~the~~such ~~applicable~~claims ~~governmental authorities~~made.

As of March 31, 2001, the accrual for estimated environmental costs was $8,702,000. The Company believes its accrual is adequate, but as the scope of its obligations becomes more clearly defined, this accrual may be modified and related charges against earnings may be made. Other

~~Claims~~ In August 2002, the Company filed a lawsuit in California Superior Court against Special Devices, Inc. (“SDI”) alleging breach of contract. The allegations primarily related to SDI’s failure to tender payment to the Company for ~~recovery~~shipments of ~~costs~~parts ~~already~~the ~~incurred~~Company manufactured and delivered ~~future~~and ~~costs~~SDI’s ~~have~~breach ~~been~~of ~~asserted~~exclusivity ~~against~~requirements. In ~~various~~June ~~insurance~~2003, ~~companies~~the Company settled this lawsuit with SDI. Under ~~The~~the ~~Company~~terms ~~has~~of the ~~neither~~settlement ~~recorded~~SDI ~~any~~paid ~~asset~~the ~~nor~~Company ~~reduced~~$530,000 ~~any~~and certain mutual releases ~~liability~~related into ~~anticipation~~the underlying claims of ~~recovery~~the litigation were executed. When combined with ~~respect~~earlier payments from SDI related to ~~such~~certain initial claims ~~made.~~in the litigation, the aggregate recovery on the lawsuit was approximately $800,000.

~~Other~~ In addition to the above, the Company is involved in other claims and litigation arising in the normal course of business. Based on the advice of counsel and in the opinion of management, the ultimate resolution of these matters will not have a significant adverse impact on the results of operations, cash flows or financial position of the Company.

OnThe ~~March 3, 1998, Walter Neubauer, a former stockholder of the~~ Company ~~and~~currently amaintains ~~current~~insurance ~~stockholder~~coverage ~~of SDI, filed a lawsuit in California Superior Court (Case~~for ~~BC186937;~~product ~~Walter~~liability ~~Neubauer vs~~claims. There ~~Andrew~~can ~~Goldfarb, et. al.) against the Company and certain other stockholders alleging (i) breach of fiduciary duty, (ii) fraud, (iii) negligent misrepresentation, (iv)~~be ~~negligence,~~no ~~(v)~~assurance ~~violations~~that ofcoverage ~~corporations~~under ~~code~~insurance ~~and~~policies ~~(vi)~~will ~~breach~~be ofadequate ~~contract. The allegations primarily relate~~ to ~~the Company's exercise of an option to acquire Mr. Neubauer's stock in August 1996. In~~cover ~~September~~any ~~1999,~~future ~~five~~product ofliability ~~the six~~ claims ~~were dismissed upon a summary judgment motion made by the Company, including all of the claims~~ against the Company. In ~~The~~addition, ~~remaining~~product ~~claim~~liability insurance coverage is ~~against Andrew Goldfarb~~expensive, ~~the~~difficult ~~former~~to ~~Chief~~maintain ~~Executive~~and ~~Officer,~~may asbe anunobtainable ~~individual,~~in ~~for~~the future ~~alleged~~on ~~violations~~acceptable ~~of oral representations~~terms.

~~On May~~Indemnification/Restricted 7, 1998, the Company filed a lawsuit against Mr. Neubauer in California Superior Court alleging (i) breach of contract, (ii) intentional interference with business relations and (iii) interference with prospective business advantage. All allegations relate to violations of the noncompetition agreement executed by Mr. Neubauer in August 1996. A preliminary injunction was granted in September 1998. The Company is seeking damages of $50.0 million. The case was consolidated with Mr. Neubauer's action, discussed above. Cash

~~There~~ Pursuant to the ~~are~~terms ~~other~~of ~~various~~a ~~claims~~recapitalization ~~and~~in ~~legal~~1997, ~~proceedings~~the ~~against~~selling shareholders agreed to indemnify the Company ~~relating~~for the after-tax costs of contingent liabilities up to ~~its~~a total ~~operations~~of $30 million. As part of the transaction, $6 million was withheld by the Company from the purchase price to the selling shareholders and placed in an interest bearing escrow account (“Restricted Cash”) intended primarily to fund the ~~normal~~after-tax ~~course~~costs of ~~business,~~the environmental ~~none~~liability ofand ~~which~~other contingencies. Upon agreement of the ~~Company~~parties, ~~believes~~but in no event before February 2004, any funds remaining in the account will be ~~material~~ paid to ~~its~~the ~~financial~~selling shareholders. At ~~position~~this date, the only remaining contingencies are environmental contingencies and ~~results~~residual oflitigation costs. ~~its~~The ~~operations~~restricted cash escrow balance was $5,311,000 at March 29, 2003 and $5,901,000 at March 30, 2002. In the event the Restricted Cash is not adequate to cover the liabilities, the Company has been informed by the selling stockholders that they will draw upon personal funds to cover such excess costs.

~~The~~ Included in other ~~Company~~assets ~~currently~~is ~~maintains~~$391,000 ~~insurance~~due ~~coverage~~from ~~for~~a ~~product~~selling ~~liability~~shareholder ~~claims.~~or ~~There~~shareholders ~~can~~related beto legal nocosts ~~assurance~~advanced ~~that~~on ~~coverage~~litigation. The Company ~~under~~has ~~insurance~~been ~~policies~~advised ~~will~~by beone ~~adequate~~of tothe ~~cover~~selling ~~any~~shareholders ~~future product~~that ~~liability~~he ~~claims~~disputes some ~~against~~or ~~the~~all ~~Company.~~of Inthis ~~addition~~receivable. However, ~~product~~if ~~liability~~such ~~insurance~~dispute ~~coverage~~ is ~~expensive~~not otherwise resolved, ~~difficult~~the toCompany ~~maintain~~believes that ~~and~~this ~~may~~advance beis ~~unobtainable~~recoverable infrom the ~~future~~Restricted ~~on acceptable terms~~Cash.

~~Indemnification~~ Item 4 - Submission of Matters to a Vote of Security Holders

Pursuant to the terms of a recapitalization in early 1997, the selling stockholders agreed to indemnify the Company with respect to the after-tax costs of contingent liabilities, subject to a cap for all indemnified liabilities of $30 million. In February 1997, a $6.0 million interest bearing escrow account was established by the selling stockholders (the "Deferred Amount") to secure indemnity claims of the Company. Although there can be no assurances, the Company believes that the Deferred Amount should be adequate to cover these liabilities. In the event the Deferred Amount is inadequate to cover the liabilities, the Company has been informed by the selling stockholders that they will draw upon personal funds to cover such excess costs. None

PART ~~Item 4—Submission of Matters to a Vote of Security Holders~~ II

~~None~~Item 5 — Market for the Registrant’s Common Equity and Related Stockholder Matters

Not ~~PART II~~ Applicable

Item 5 6 —~~Market~~ Selected ~~for~~Financial ~~the Registrant's Common Equity and Related Stockholders Matters~~ Data

~~Not~~ The following selected consolidated financial ~~Applicable~~information for each of the five fiscal years in the period ended March 29, 2003 has been derived from the audited consolidated financial statements of the Company. The information presented below should be read in conjunction with Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements of the Company and related notes thereto appearing elsewhere herein (in thousands).

Item 6—Selected Financial Data

	April 3,			April 1,			March 31,			March 30,			March 29,
	1999			2000			2001			2002			2003
Statement of Operations Data
Net sales	$	67,701		$	54,607		$	80,539		$	64,207		$	41,086
Cost of goods sold	41,361			39,794			53,405			43,278			33,080
Gross profit	26,340			14,813			27,134			20,929			8,006
Selling, general and administrative expenses	7,213			8,073			8,329			6,424			5,851
Impairment of assets	—			—			—			—			500
Earnings from operations	19,127			6,740			18,805			14,505			1,655
Other Income (Expense)
Interest and other income	755			734			649			233			132
Interest expense	(11,190		)	(11,333		)	(10,717		)	(9,847		)	(9,582		)
Total other expense, net	$	(10,435	)	$	(10,599	)	$	(10,068	)	$	(9,614	)	$	(9,450	)
Earnings (loss) before taxes, extraordinary items and cumulative effect of accounting change	8,692			(3,859		)	8,737			4,891			(7,795		)
Taxes (benefit) on earnings (loss)	3,325			(1,525		)	2,975			1,705			(891		)

Earnings (loss) before extraordinary items and cumulative effect of accounting change	5,367			(2,334		)	5,762			3,186			(6,903		)
Extraordinary gain, net of taxes(1)	—			—			3,187			—			—
Cumulative effect of accounting change	—			—			—			—			(3,561		)

Net earnings (loss)	$	5,367		$	(2,334	)	$	8,949		$	3,186		$	(10,465	)

Balance Sheet Data (at period end)
Total assets	$	70,368		$	71,768		$	69,222		$	65,635		$	51,153
Working capital	22,079			13,255			11,019			14,753			11,595
Long-term debt, less current portion	102,043			97,475			87,864			86,627			84,833
Stockholders’ deficit	(51,372		)	(53,706		)	(44,614		)	(41,411		)	(51,859		)
Dividends declared	—			—			—			—			—

~~The~~(1) Represents ~~following~~gain ~~selected~~on ~~consolidated~~early ~~financial~~retirement ~~information for each~~ of ~~the five fiscal years in the period ended March 31~~debt, ~~2001~~net ~~has been derived from the audited consolidated financial statements~~ of ~~the Company. The information presented below should be read in conjunction with Item 7. "Management's Discussion and Analysis of Financial Condition and~~ ~~Results of Operations" and the consolidated financial statements of the Company and related notes thereto appearing elsewhere herein (in thousands)~~taxes.

	March 29, 1997			March 28, 1998			April 3, 1999			April 1, 2000			March 31, 2001
Statement of Operations Data
Net sales	$	56,683		$	64,561		$	67,701		$	54,607		$	80,539
Cost of goods sold		35,729			38,922			41,361			39,794			53,405
Gross profit		20,954			25,639			26,340			14,813			27,134
Selling, general and administrative expenses		9,308			8,552			7,213			8,073			8,329
Non-recurring expense(1)		10,000			1,250			—			—			—
Earnings from operations		1,646			15,837			19,127			6,740			18,805
Interest and other income		479			510			755			734			649
Interest expense		(2,946	)		(10,327	)		(11,190	)		(11,333	)		(10,717	)
Earnings (loss) before taxes, and extraordinary item		(821	)		6,020			8,692			(3,859	)		8,737
Taxes (benefit) on earnings (loss)		(293	)		2,406			3,325			(1,525	)		2,975
Earnings (loss) before extraordinary item		(528	)		3,614			5,367			(2,334	)		5,762
Extraordinary gain/(loss), net of taxes(2)		(1,186	)		(986	)		—			—			3,187
Net earnings (loss)	$	(1,714	)	$	2,628		$	5,367		$	(2,334	)	$	8,949
Balance Sheet Data (at period end)
Total assets	$	116,141		$	62,860		$	70,368		$	71,768		$	69,222
Working capital		7,594			16,883			22,079			13,255			11,019
Long-term debt, less current portion		78,916			98,201			102,043			97,475			87,864
Stockholders' deficit		(53,340	)		(56,940	)		(51,372	)		(53,706	)		(44,614	)
Dividends declared		—			—			—			—			—

13Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following table and discussion should be read in conjunction with the information ~~Item~~contained ~~7—Management's~~in ~~Discussion~~the consolidated financial statements and ~~Analysis~~notes thereto of ~~Financial~~the Company ~~Condition~~appearing elsewhere herein. Unless otherwise stated, all references to years means the Company’s fiscal year ending March 29, 2003 (2003), March 30, 2002 (2002), and ~~Results~~March of31, 2001 ~~Operations~~ (2001), respectively.

~~The following table and discussion should be read in conjunction with the information contained in the consolidated financial statements and notes thereto of~~Results ~~the~~of ~~Company~~Operations ~~appearing elsewhere herein. Unless otherwise stated, all references to years means the Company's fiscal year ending March 31, 2001~~ (~~2001),~~In ~~April 1, 2000 (2000~~millions)~~, and April 3, 1999 (1999), respectively.~~

Results of Operations (In millions)

	2003			Percent		2002			Percent		2001			Percent

Net sales	$	41.1		100.0	%	$	64.2		100.0	%	$	80.5		100.0	%
Gross profit	8.0			19.5	%	20.9			32.6	%	27.1			33.7	%
Selling, general and administrative expenses	5.9			14.4	%	6.4			10.0	%	8.3			10.3	%
Write-down on impairment of assets	.5			1.2	%	—			—		—			—
Earnings from operations	1.7			4.1	%	14.5			22.6	%	18.8			23.4	%
Other expense, net	(9.4		)	(22.9	)%	(9.6		)	(15.0	)%	(10.1		)	(12.5	)%
Cumulative effect of accounting Change	(3.6		)	(8.8	)%	—			—		—			—
Extraordinary gain(1)	—			—		—			—		3.2			4.0	%
Net earnings (loss)	$	(10.5	)	(25.5	)%	$	3.2		5.0	%	$	8.9		11.1	%

	2001			Percent		2000			Percent		1999			Percent
Net sales	$	80.5		100.0	%	$	54.6		100.0	%	$	67.7		100.0	%
Gross profit		27.1		33.7	%		14.8		27.1	%		26.3		38.9	%
Selling, general and administrative expenses		8.3		10.3	%		8.1		14.8	%		7.2		10.7	%
Earnings from operations		18.8		23.4	%		6.7		12.3	%		19.1		28.3	%
Other expense, net		(10.1	)	(12.5	%)		(10.6	)	(19.4	%)		(10.4	)	(15.4	%)
Extraordinary gain(1)		3.2		4.0	%		—		—			—		—
Net earnings (loss)	$	8.9		11.1	%	($	2.3	)	(4.3	%)	$	5.4		7.9	%

⁽¹⁾Represents extraordinary gain on early retirement of debt, net of taxes.

Comparison of the Fiscal Year Ended ~~2001~~2003 with ~~2000~~ 2002

Net Sales

The Company'’s net sales ~~increased~~decreased by approximately 4736.40% or $2523.91 million to $8041.5 1 million for ~~2001~~2003 compared to sales of $5464.62 million for ~~2000~~2002. The ~~significant~~ ~~increase~~decrease was due to ~~increasing~~decreased demand in all markets, ~~other~~but ~~than~~primarily ~~automotive~~due ~~products. Sales~~ to ~~existing aerospace, industrial process control, and petrochemical customers increased by approximately 47% in 2001 compared to 2000. Based on current order volume,~~ the ~~Company~~loss ~~expects~~of ~~the~~an ~~strong~~automotive ~~demand~~contract ~~in the aerospace, industrial process control and petrochemical markets to continue in~~as ~~the~~discussed ~~next several quarters~~below.

~~The~~ Sales ~~Company has continued~~ to ~~develop~~existing aaerospace, ~~significant~~industrial ~~market~~process ~~presence~~control, inand ~~the~~petrochemical ~~telecom markets through component products designed for optical networking infrastructure. Sales of these~~customers ~~products~~decreased ~~increased~~ by $approximately 14.3% ~~million~~ in ~~2001~~2003 compared to ~~2000~~2002. Based on ~~recent~~current ~~industry~~order ~~reports~~volume, the Company expects ~~significant~~modest ~~weakness~~strengthening of demand in ~~these~~the ~~markets~~aerospace, toindustrial ~~prevail~~process control ~~for~~and petrochemical markets over the next few quarters.

On the automotive side, unit shipments of airbag initiator products decreased significantly ~~moderately~~ due to ~~customer~~the ~~demand~~loss onof ~~several~~a ~~existing~~significant ~~programs~~customer. The Company'’s airbag initiator shipments to to its formerly largest customer, Special Devices, Inc. ("“SDI"”) ~~decreased~~ended ~~approximately~~in ~~5% for 2001 compared to the 2000~~March 2002. Overall, revenue from all automotive shipments decreased approximately 574% in ~~2001~~ 2003 compared to ~~2000~~2002. Currently, Onthe ~~January~~Company ~~16,~~is ~~2001,~~in the ~~Company~~process ~~entered~~of transitioning ~~into~~its acapacity ~~new~~to ~~12-month~~other ~~supply~~manufacturers ~~agreement~~of ~~with~~initiators ~~SDI.~~and ~~The~~micro ~~agreement~~gas generators ~~resulted~~for inthe anproduction ~~immediate~~of ~~12%~~airbags ~~price~~and ~~decrease~~seat ~~and~~belt ~~contains~~pretensioners. However, ~~provisions~~these ~~for~~programs ~~future~~and relationships ~~price~~with ~~decreases~~other ~~subject~~customers will take time to ~~implementation~~develop ofand ~~cost~~there ~~reduction~~is ~~initiatives~~no ~~and/or~~assurance ~~increased~~the Company ~~unit~~will ~~volumes.~~be ~~Based~~able onto ~~current~~ultimately ~~order~~regain ~~volume~~its previous market share in these products. On the whole, the Company expects nosignificantly ~~significant~~lower ~~change~~revenues ~~in revenue~~ from automotive products ~~over~~during ~~the near term~~fiscal 2004.

~~Gross~~ The Company ~~Profit~~ had developed a significant market presence in the telecommunications markets through components designed for optical networking infrastructure. However, shipments of these products decreased dramatically as the market for these products collapsed. Sales of these products decreased by approximately 61% in 2003 compared to 2002. Based on recent industry reports, the Company expects significant weakness in these markets during fiscal 2004.

~~Gross profit increased by approximately 83.1% or $12.3 million, to $27.1 million for 2001 compared to $~~14~~.8 million for 2000. Gross margin increased to 33.7% for 2001 from 27.1% for 2000.~~

~~The~~Gross increase in gross profit is attributable to the increased sales volume. The increase in gross margin was primarily attributable to the significant increase in revenue and the corresponding impact of fixed overhead costs leveraged against higher revenue. Profit

14 Gross profit decreased by approximately 61.7% or $12.9 million, to $8.0 million for 2003 compared to $20.9 million for 2002. Gross margin decreased to 19.5% for 2003 from 32.6% for 2002.

~~Selling~~ The decrease in gross profit is primarily attributable to the $23.1 million decrease in sales in 2003. The decrease in gross margin was primarily attributable to the significant decrease in revenue and the corresponding impact of fixed overhead costs leveraged on lower revenue. The most significant fixed overhead costs are depreciation, ~~General~~utilities and ~~Administrative~~property ~~Expenses~~ taxes. These costs are allocated to inventory and ultimately cost of sales, based on the proportion of total fixed costs to total direct labor costs. The ongoing weakness in sales will continue to adversely impact gross profitability and gross margin.

Selling, General ~~general~~ and ~~administrative~~Administrative ("S,G&A") expenses increased by approximately 2.5% or $0.2 million to $8.3 million for 2001 compared to $8.1 million for 2000. S,G&A expenses as a percent to sales decreased to 10.3% in 2001 from 14.8% for 2000. Expenses

~~The~~ Selling, ~~$0.2~~general ~~million~~and ~~increase~~administrative in (“S,G&A”) expenses ~~was~~decreased ~~primarily~~by ~~attributable~~approximately 7.8% toor a $0.35 million ~~increase~~to ~~in selling commissions incurred on the higher sales volume, and a~~ $05.79 million ~~increase~~ infor ~~management~~2003 ~~incentive~~compared ~~plans~~to ~~incurred with the improved operating results of the Company~~$6.4 ~~These~~million ~~increased costs were mostly offset by non-recurring due diligence costs associated with two~~for ~~abandoned acquisitions as well as compensation costs incurred during the management transition in 2000~~2002. ~~The improvement in the percentage of~~ S,G&A expenses as a percent to sales ~~reflects the~~ increased ~~growth~~to 14.4% in ~~net~~ ~~sales~~2003 from 10.0% for 2002.

~~Earnings~~ The $0.5 ~~from~~million ~~Operations~~ decrease in S,G&A expenses was primarily attributable to decreased compensation costs. The increase in the percentage of S,G&A expenses to sales reflects the impact of the modest decrease in S,G&A expenses in relation to the significantly lower revenue.

~~Operating earnings increased $12.1 million to $18.8 million for 2001 compared to $6.7 million for 2000. The significant increase in operating earnings and~~Earnings ~~margin~~from ~~was attributable to the same factors (as discussed above) that contributed to the increase in gross profit, gross margin and S,G&A expenses as a percent to sales.~~ Operations

~~Other~~ Operating earnings ~~Expense~~decreased $12.8 million to $1.7 million for 2003 compared to $14.5 million for 2002. The significant decrease in operating earnings was attributable to the same factors (as discussed above) that contributed to the decrease in gross profit, ~~net~~ gross margin and S,G&A expenses.

Other ~~expense, net (which is predominantly net interest expense) decreased 4.7% or $0.5 million to $10.1 million in 2001 compared to $10.6 million in 2000. The~~ ~~$0.5 million decrease was primarily attributable to lower interest expense realized from the early retirement of debt during 2001. The Company has $91.0 million of indebtedness as of March 31~~Expense, ~~2001 compared to $104.5 million at April 1, 2000.~~ net

~~Extraordinary~~ Other ~~Gain~~expense, net (which is predominantly net interest expense) decreased 2.1% or $0.2 million to $9.4 million in 2003 compared to $9.6 million in 2002. The $0.2 million decrease was primarily attributable to lower interest expense. The Company has $86.6 million indebtedness as of March 29, 2003 compared to $88.7 million at March 30, 2002.

~~During~~Income 2001, the Company purchased for retirement $10.2 million face value of it's 10.75% Senior Subordinated Notes for $4.6 million in cash. The transaction resulted in an extraordinary gain on the early retirement of debt of $3.2 million, net of taxes of $2.1 million. The purchase of this indebtedness will reduce interest costs by $1.1 million annually. Taxes

~~Net~~ The ~~Earnings~~ Company's effective tax rate for fiscal 2003 was a benefit of 11.4% versus a provision of 34.9% during fiscal 2002. The change is attributable to the tax effect of the Company's net loss offset by a full valuation allowance recorded against the Company's deferred tax assets. The valuation allowance was recorded to reduce the deferred tax assets to the amount expected to be realized.

Net ~~earnings increased by approximately $11.2 million to $8.9 million for 2001 from net a net loss of $2.3 million in 2000. The increase in net earnings was~~ ~~primarily attributable to the increase in earnings from operations, the decrease in interest expense and the extraordinary gain, all as discussed above.~~ Earnings

~~Comparison~~ Net earnings decreased by approximately $13.7 million to a $10.5 million loss for 2003 compared to net earnings of $3.2 million in 2002. The decrease in net earnings was primarily attributable to the ~~Fiscal~~decrease ~~Year~~in ~~Ended~~earnings ~~2000~~from ~~with~~operations ~~1999~~ and the $3.6 million charge related to the Cumulative Effect of an Accounting Change.

~~Net~~Comparison of ~~Sales~~ the Fiscal Year Ended 2002 with 2001

The Company's net sales decreased by approximately 19.4% or $13.1 million to $54.6 million for 2000 compared to sales of $67.7 million for 1999. The significant decrease was due to decreasing demand in all product lines. Sales to existing aerospace, industrial process control, and petrochemical customers decreased significantly in 2000. Net ~~non-automotive shipments decreased by approximately 23% in 2000 compared to 1999.~~ Sales

On The ~~the~~Company’s ~~automotive~~net ~~side,~~ sales ofdecreased ~~airbag~~by ~~initiator~~approximately ~~products~~20.2% ~~decreased~~or ~~significantly~~$16.3 ~~due~~million to ~~weak~~$64.2 million ~~customer~~for ~~demand~~2002 oncompared ~~existing~~to ~~programs~~sales of $80.5 million for 2001. The ~~Company's~~decrease ~~airbag~~was ~~initiator~~due ~~shipments~~to (decreasing demand in ~~units)~~all markets. Sales to ~~its~~existing aerospace, ~~largest~~industrial ~~customer~~process control, ~~Special~~and ~~Devices,~~petrochemical ~~Inc.~~customers ~~("SDI")~~decreased ~~was~~by approximately ~~flat~~2% ~~for~~in ~~2000~~2002 compared to ~~1999~~2001. Based ~~The~~on ~~flat~~current ~~units~~order volume, the Company expects continued weakness in the aerospace, industrial process control and petrochemical markets to continue over the next quarter.

On ~~volume~~the ~~was~~automotive ~~compounded~~side, byunit ashipments ~~price~~of ~~reduction~~airbag ~~effected~~initiator ~~under~~products decreased significantly due to a ~~supply~~decline ~~agreement~~in ~~with~~customer ~~SDI~~demand ~~and~~on ~~decreases~~several existing programs. The Company’s airbag initiator shipments to its formerly largest customer, Special Devices, Inc. decreased approximately 20% in 2002 compared to 2001. Overall, revenue from all automotive shipments todecreased ~~other~~approximately 26% ~~customers~~in 2002 compared to 2001. In January ~~The~~2002, the Company’s annual supply agreement with SDI expired and was not ~~effective~~renewed. The Company stopped selling product to SDI in March 182002. Currently, ~~1999~~the Company is in the process of transitioning its capacity to other manufacturers of initiators and micro gas generators for the ~~was~~production ~~due~~of toairbags ~~expire~~and onseat ~~December~~belt 31pretensioners. However, ~~2002~~these (aprograms ~~revised~~and ~~supplier~~relationships ~~agreement~~with ~~was~~other ~~executed~~customers will intake ~~2001).~~time ~~Overall,~~to ~~revenue~~develop ~~from~~and ~~all~~there ~~automotive~~is ~~shipments~~no ~~decreased~~assurance ~~approximately~~the ~~14%~~Company inwill ~~2000~~be ~~compared~~able to ultimately ~~1999~~regain its previous market share in these products. On the whole, the Company expects significantly lower future revenues from automotive products.

~~Gross~~ The Company ~~Profit~~ has continued to develop a significant market presence in the telecommunications markets through component products designed for optical networking infrastructure. Shipments of these products decreased dramatically as the market for these products collapsed. Sales of these products decreased by approximately 59% in 2002 compared to 2001. Based on recent industry reports, the Company expects significant weakness in these markets to prevail for the next few quarters.

Gross ~~profit decreased by approximately 43.7% or $11.5 million, to $14.8 million for 2000 compared to $26.3 million for 1999. Gross margin decreased to 27.1%~~ ~~for 2000 from 38.9% for 1999.~~ Profit

~~The~~ Gross ~~decrease in gross~~ profit isdecreased ~~attributable~~by toapproximately ~~the~~22.9% ~~decreased~~or ~~sales volume~~$6.2 ~~The~~million, ~~decrease in gross margin was primarily attributable~~ to ~~the~~$20.9 ~~significant~~million ~~decrease in revenue and the~~for ~~corresponding~~2002 ~~impact~~compared ofto ~~fixed~~$27.1 ~~overhead~~million ~~costs~~for ~~leveraged against lower revenue~~2001. Gross ~~Additionally, gross~~ margin ~~was~~decreased ~~impacted~~to by32.6% ~~price~~for ~~concessions~~2002 onfrom ~~automotive~~33.7% ~~products~~for ~~that have exceeded the Company's ability to reduce its production costs~~2001.

~~Selling,~~ The decrease ~~General~~in ~~and~~gross ~~Administrative~~profit ~~Expenses~~ is attributable to the $16.3 million decrease in sales in 2002. The decrease in gross margin was primarily attributable to the impact of fixed overhead costs leveraged over lower revenue.

Selling, General ~~general~~ and ~~administrative~~Administrative ("S,G&A") expenses increased by approximately 12.5% or $0.9 million to $8.1 million for 2000 compared to $7.2 million for 1999. S,G&A expenses as a percent to sales increased to 14.8% in 2000 from 10.7% for 1999. Expenses

~~The~~ Selling, ~~$0.9~~general ~~million~~and ~~increase~~administrative in (“S,G&A”) expenses ~~was~~decreased ~~primarily~~by ~~attributable~~approximately 22.9% toor ~~the~~$1.9 ~~write~~million ~~off~~to of$6.4 ~~due~~million ~~diligence~~for ~~costs~~2002 ~~associated~~compared ~~with~~to ~~two~~$8.3 ~~abandoned~~million ~~acquisitions~~for 2001. S,G&A asexpenses ~~well~~ as ~~compensation~~a ~~costs~~percent ~~incurred~~to ~~during~~sales ~~the~~decreased ~~management~~to ~~transition in 2000~~10.0% ~~The increase~~ in ~~the~~2002 ~~percentage~~from of10.3% for 2001. S,G&A expenses toare ~~sales~~expected ~~reflects~~to ~~the~~increase in ~~impact~~2003 ofover ~~the~~2002 ~~increased~~due ~~costs~~to ~~spread~~the ~~over~~impact ~~decreased~~of ~~sales~~the ~~compared~~litigation tosettlement ~~1999.~~received in 2002.

~~Earnings~~ The $1.9 ~~from~~million ~~Operations~~ decrease in S,G&A expenses was primarily attributable to decreased compensation costs and reduced legal expenses due to the settlement of the Neubauer litigation. The improvement in the percentage of S,G&A expenses to sales reflects the impact of the significant decrease in S,G&A expenses over lower revenue.

~~Operating earnings decreased $12.4 million to $6.7 million for 2000 compared to $19.1 million for 1999. The significant decrease in operating earnings and~~Earnings ~~margin~~from ~~was attributable to the same factors (as discussed above) that contributed to the decrease in gross profit, gross margin and S,G&A expenses as a percent to sales.~~ Operations

~~Other~~ Operating earnings ~~Expense~~decreased $4.3 million to $14.5 million for 2002 compared to $18.8 million for 2001. The significant decrease in operating earnings was attributable to the same factors (as discussed above) that contributed to the decrease in gross profit, ~~net~~ gross margin and S,G&A expenses.

Other ~~expense, net (which is predominantly net interest expense) increased 1.9% or $0.2 million to $10.6 million in 2000 compared to $10.4 million in 1999. The~~ ~~$0.2 million increase was attributable to additional interest expense incurred from additional indebtedness~~Expense, net ~~of increased interest income. The Company has $104.5 million of indebtedness as of April 1, 2000 compared to $103.2 million at April 3, 1999.~~

~~Net~~ Other expense, ~~Earnings~~ net (which is predominantly net interest expense) decreased 5.0% or $0.5 million to $9.6 million in 2002 compared to $10.1 million in 2001. The $0.5 million decrease was primarily attributable to lower interest expense realized from the early retirement of debt during 2001. The Company has $88.7 million of indebtedness as of March 30, 2002 compared to $91.0 million at March 31, 2001.

Net ~~earnings decreased by approximately $7.7 million to a net loss of $2.3 million for 2000 from net earnings of $5.4 million in 1999. The decrease in net~~ ~~earnings was primarily attributable to the decrease in earnings from operations.~~ Earnings

~~Liquidity~~ Net earnings decreased by approximately $5.7 million to $3.2 million for 2002 from net earnings of $8.9 million in 2001. The decrease in net earnings was primarily attributable to the decrease in earnings from operations and ~~Capital~~the extraordinary ~~Resources~~ gain recognized in 2001, partially offset by the reduction in interest expense.

~~Net cash provided by operating activities was $8.7 million for 2001 compared to $0.1 million for 2000. The increase of $8.6 million was primarily attributable to increased net earnings.~~ 16

16Liquidity and Capital Resources

Net cash used in ~~investing~~operating activities was $2.62 million for ~~2001~~2003 compared to net cash provided of $1.6.0 million for ~~2000,~~2002. The decrease of $8.2 million was ~~due~~primarily attributable to andecreased ~~increase~~net earnings in(excluding ~~purchases~~the ofcharge ~~property,~~related ~~plant~~to ~~and~~the ~~equipment.~~cumulative effect of accounting change).

Net cash used in ~~financing~~investing activities was $110.84 million for ~~2001~~2003 compared to $10.3 7 million for ~~2000~~2002. The ~~increase~~decrease inwas ~~2001~~due to isa ~~primarily~~reduction ~~attributable~~in topurchases ~~debt~~of ~~maturities~~property, plant and ~~the early retirement of debt~~equipment.

As Net ofcash ~~March~~used ~~31,~~in ~~2001,~~financing ~~the~~activities ~~Company's outstanding indebtedness~~ was $912.01 million, ~~consisting~~for of2003 ~~$79.8~~compared ~~million~~to ~~principal amount of the senior subordinated notes and~~ $103.2 ~~million of~~ ~~other borrowings. The Company also maintains a $20~~ million ~~Revolving Credit Facility ("the Revolver") to augment its liquidity requirements. Borrowings under the Revolver may be used~~ for ~~general and other corporate purposes~~2002. The ~~Revolver~~decrease ~~provides~~in ~~for~~2003 ~~interest on outstanding balances at the bank's prime rate plus 11/4% and~~ is ~~collateralized~~primarily byattributable ~~accounts~~to ~~receivable~~a ~~and inventories of~~decrease the Company. At March 31, 2001 there was $19.1 million available under the Revolver. The Revolver includes covenants requiring maintenance of certain financial ratios. At March 31, 2001 and April 1, 2000 there were no borrowings outstanding under the Revolver and the Company was in ~~compliance~~required ~~with~~principal ~~the~~payments ~~required~~on ~~financial~~long-term ~~ratios~~debt.

~~The~~ As of March 29, 2003, the Company’s ~~believes~~outstanding ~~that~~indebtedness ~~cash~~was ~~flow~~$86.6 ~~from~~million, consisting ~~operations~~of ~~and~~$79.8 million principal amount of the ~~availability~~senior subordinated notes and $6.8 million of ~~borrowings~~capitalized ~~under~~lease obligations and mortgage debt. On June 18, 2003, the Company entered into a $7.5M Revolving Credit ~~Facility~~Agreement ~~will~~(the “Revolver”). ~~provide~~Under ~~adequate~~the ~~funds~~terms ~~for~~of ~~ongoing~~the ~~operations~~Revolver, ~~planned~~the Company may borrow up to 85% ~~capital~~of ~~expenditures~~eligible ~~and~~accounts ~~debt~~receivable. The Revolver ~~service~~provides ~~during~~for interest on outstanding balances at the ~~term~~bank’s prime rate plus 1 ½% (or LIBOR plus 3½%) and is collateralized by accounts receivable, inventories, equipment and intangible assets of the Company. There are no borrowings outstanding under the Revolver and on June 18, 2003, approximately $4,000,000 was available. The Revolver includes covenants requiring maintenance of certain financial ratios.

~~Capital~~ The ~~expenditures~~Company ~~for~~believes ~~fiscal~~that ~~2002~~cash ~~are~~on ~~expected~~hand toof ~~focus~~$6.2 onmillion, ~~vertical~~income ~~integration~~tax ~~with~~refunds ~~investments~~from carryback inof ~~equipment~~tax tolosses ~~expand~~of ~~manufacturing~~$2.6 ~~capacity~~million inand ~~machining,~~cash ~~glass~~generated ~~production~~from operations, ~~sealing~~prior ~~and~~to ~~plating~~interest payments on long-term debt, aswill ~~well~~provide asadequate ~~automation~~funds ~~equipment~~for ongoing tooperations, ~~lower~~planned ~~production~~capital ~~costs~~expenditures onand debt service for the near-term. Over ~~high~~the ~~volume~~next ~~production~~12 ~~lines.~~months, ~~Expected~~the primary ~~capital~~cash ~~expenditures~~obligations ~~for~~of ~~fiscal~~the ~~2002~~Company are ~~approximately~~interest payments ($49.34 million ~~and~~), ~~will~~principal bepayments ~~financed~~on ~~through~~existing ~~working~~debt ($1.8 million), and capital expenditures ($0.6 -$0.8 million).

~~Impact~~ For the Oflonger ~~Recently~~term, ~~Issued~~the ~~Accounting~~operating ~~Standards~~ results of the Company must improve to satisfy its liquidity needs. The annual interest payments and principal payment obligations decrease only modestly over the next several years until the Notes become due in 2007. The Company is making substantial efforts to increase its sales levels and thereby improve the operating results. There is no assurance that these efforts will be successful. In addition, an increase in sales for the Company will require additional investment in working capital to support such increased operations.

In Capital expenditures ~~June~~for ~~1998,~~fiscal ~~the~~2004 ~~FASB~~are ~~issued~~expected ~~SFAS~~to ~~No.~~focus ~~133,~~on ~~"Accounting~~investments ~~for~~in ~~Derivative~~equipment to ~~Instruments~~expand prototyping and ~~Hedging~~qualification ~~Activities". Adoption~~ of ~~SFAS~~new ~~No.~~programs ~~133 is required~~ for ~~the Company's~~new ~~fiscal~~and ~~year beginning April 1, 2001~~existing customers. Expected ~~The~~capital expenditures ~~Company~~for ~~has~~fiscal no2004 ~~Derivative~~are ~~Instruments~~approximately ~~and Hedging Activities as defined in SFAS No~~$0.8 ~~133~~million and; ~~therefore, the adoption~~ will ~~not~~be ~~have any impact on the~~financed ~~Company's~~through ~~financial~~working ~~position, results of operations or cash flows~~capital.

InCritical ~~December 1999, the Securities Exchange Commission issued Staff~~ Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements". The bulletin was effective during the Company's fiscal year 2001. The Company was in compliance with the bulletin; accordingly, the adoption of SAB No. 101 did not have an impact on the Company's consolidated financial position, results of operations or cash flows. Policies

~~Factors~~ In ~~Affecting~~response ~~Future~~to ~~Performance~~ the SEC’s Release No. 33-8040, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies,” we identified the most critical accounting policies upon which our financial status depends. We determined the critical principles by considering accounting policies that involve the most complex or subjective decisions or assessments. We state these accounting policies in the notes to the consolidated financial statements and at relevant sections in the management’s discussion and analysis.

~~Although~~ The ~~increases~~Company indoes ~~operating~~not ~~costs~~believe ~~could~~there ~~adversely~~is ~~affect~~a great likelihood that materially different amounts would be reported under different conditions or using different assumptions related to the ~~Company's~~accounting ~~operations~~policies described below. However, ~~management~~application of ~~does~~these ~~not~~accounting ~~believe~~policies ~~inflation~~involves ~~has~~the ~~had~~exercise aof ~~material~~judgment ~~effect~~and onuse of ~~operating~~assumptions ~~profit~~as ~~during~~to ~~the~~future ~~past~~uncertainties ~~several~~and, ~~years~~as a result, actual results could differ from these estimates. This discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report.

DisclosureRevenue Regarding Forward Looking Statements Recognition

~~This~~ The ~~filing~~Company generally ~~contains~~manufacturers ~~statements~~products ~~that~~under ~~are~~both ~~"forward~~individual ~~looking~~firm ~~statements",~~purchase orders and fixed ~~includes~~price, ~~among~~long-term ~~other~~production ~~things,~~contracts. The ~~discussions~~contracts ofvary ~~the~~in ~~Company's~~length, ~~business~~but ~~strategy~~generally ~~and expectations~~are ~~concerning~~completed ~~market~~within ~~position,~~12 ~~future~~to 24 ~~operations,~~months. Sales ~~margins,~~under ~~profitability,~~individual purchase ~~liquidity~~orders and ~~capital~~long-term ~~resources.~~production ~~Although~~contracts are recognized at the ~~Company~~time units ~~believes~~are ~~that~~shipped ~~the~~and ~~expectations~~title ~~reflected~~and inrisk ~~such~~of ~~forward~~loss transfers (FOB shipping ~~looking~~point). Our ~~statements~~products are ~~reasonable,~~warranted itto meet ~~can~~the ~~give~~specifications noof ~~assurance~~manufacture ~~that~~and ~~such~~customer ~~expectations~~“right ~~will~~of ~~prove~~return” is only for failure to ~~have~~meet ~~been~~the ~~correct~~specifications.

AllAllowance phasesfor ofUncollectible theAccounts operations of the Company are subject to a number of uncertainties, risks and other influences, including general economic conditions, regulatory changes and competition, many of which are outside the control of the Company, any one of which, or a combination of which, could materially affect the results of the Company's operations and whether the forward looking statements made by the Company ultimately prove to be accurate. Receivable

Accounts receivable have been reduced by an allowance for amounts that may become uncollectible in the future. This estimated allowance is based primarily ~~Item~~on ~~7a—Quantitative~~management’s evaluation of the financial condition of the various customers and, ~~Qualitative~~to ~~Disclosures~~date, ~~About~~has ~~Market~~been ~~Risk~~ within management’s expectations. No customer account exceeds 10% of the accounts receivable balance at March 29, 2003.

TheAllowance Companyfor isObsolete exposed to market risk from changes in interest rates on the Company's Revolving Credit Facility. At March 31, 2001, the Company had no outstanding borrowings under the Revolver and, therefore,Excess changes in interest rates would have no impact on the Company's results of operations. Inventory

Inventories are valued at the lower of cost ~~Item~~(first-in, ~~8—Financial~~first-out ~~Statements~~method) or market and ~~Supplemental~~have ~~Data~~ been reduced for any identified excess or obsolete inventories. Management bases it’s analysis of excess or obsolete inventories on actual demand for components or raw material stocks.

INDEX TO FINANCIAL STATEMENTS		Page
Report of Independent Accountants		19
Consolidated Balance Sheets as of March 31, 2001 and April 1, 2000		20
Consolidated Statements of Operations for the years ended March 31, 2001, April 1, 2000 and April 3, 1999		21
Consolidated Statements of Stockholder's Equity (Deficit) for the years ended March 31, 2001, April 1, 2000 and April 3, 1999		22
Consolidated Statements of Cash Flows for the years ended March 31, 2001, April 1, 2000 and April 3, 1999		23
Notes to Consolidated Financial Statements		24
Schedule II—Valuation and Qualifying Accounts		33

Impairment of Long-Lived Assets

~~All~~ Intangible and other ~~financial~~long-lived ~~statement~~assets ~~schedules~~are ~~not~~reviewed ~~listed~~by ~~have~~management ~~been~~for ~~omitted~~impairment ~~since~~whenever ~~the~~events ~~required~~or ~~information~~changes ~~is included~~ in circumstances ~~the~~indicate ~~consolidated financial statements,~~ the ~~notes~~carrying ~~thereto,~~amount ismay not ~~applicable,~~ orbe ~~not required~~recoverable.

18 Intangible assets relate to a customer listing acquired in 1997. Total cost of the customer list was $1,400,000 and it is amortized over 14 years on a straight-line basis. Amortization expense is $100,000 for each fiscal year 2003, 2002 and 2001. Accumulated amortization was $575,000 and $475,000 at March 29, 2003 and March 30, 2002, respectively. Amortization expense will be $100,000 per year through fiscal 2011.

~~REPORT OF INDEPENDENT ACCOUNTANTS~~ Goodwill

~~Board~~ In adopting SFAS No. 142 “Goodwill and Other Intangible Assets”, the Company ceased amortizing goodwill in the first quarter of ~~Directors~~fiscal 2003 and ~~Stockholders~~has assessed initial impairment under transitional rules as ~~HCC~~of ~~Industries~~March ~~Inc~~31, 2002. The goodwill was acquired at a cost of approximately $6,200,000 and ~~Subsidiaries~~had previously been ~~Rosemead~~amortized on a straight-line basis over 40 years. Goodwill amortization for fiscal 2002 and 2001 was $189,000 ~~California~~each year. Accumulated amortization of goodwill was $2,639,000 at March 30, 2002. If no amortization had been recorded in fiscal 2002 and 2001, proforma net income would have been $3,375,000 and $9,138,000, respectively.

~~In our~~ During ~~opinion,~~ the ~~consolidated~~quarter ~~financial~~ended ~~statements~~September ~~listed~~28, in2002, the Company ~~accompanying~~completed ~~index~~its ~~present~~assessment ~~fairly,~~of ~~in all material respects,~~ the ~~financial~~estimated ~~position~~fair value of ~~HCC~~its ~~Industries Inc. and~~two ~~Subsidiaries~~reporting atunits ~~March~~under ~~31,~~the ~~2001~~transitional ~~and~~rules ~~April~~of 1,SFAS ~~2000,~~No. ~~and~~142 ~~the~~using ~~results~~a ofvaluation method ~~their~~based ~~operations~~on ~~and~~a ~~their~~multiple ~~cash flows for each~~ of ~~the~~earnings ~~three~~before ~~years~~interest, ~~in the period ended March 31~~taxes, ~~2001~~depreciation inand amortization. For ~~conformity~~purposes ~~with~~of ~~accounting~~its ~~principles~~assessment ~~generally~~under ~~accepted~~SFAS ~~in the United States of America~~No. ~~In addition~~142, ~~in our opinion,~~ the ~~financial~~Company ~~statement~~concluded ~~schedule~~it ~~listed~~had intwo ~~the~~reporting units, ~~accompanying~~Hermetic ~~index~~(consisting ~~presents~~of ~~fairly,~~Hermetic inSeal ~~all~~Corporation ~~material~~and ~~respects,~~its related ~~the~~entities/operations) ~~information~~and ~~set~~Glasseal ~~forth~~(consisting ~~therein~~of ~~when~~Glasseal ~~read~~Products, inInc. ~~conjunction~~and its ~~with~~subsidiary ~~the~~Sealtron, ~~related~~Inc.). For purposes ~~consolidated~~of ~~financial~~calculating ~~statements.~~earnings ~~These~~before ~~financial~~interest, ~~statements~~taxes, depreciation and amortization ~~financial~~(“EBITDA”) ~~statement~~of ~~schedule~~each ~~are~~of the ~~responsibility~~reporting ofunits, the Company's ~~management;~~used forward ~~our~~12 ~~responsibility~~months isforecasted tooperating ~~express~~results anfor ~~opinion~~fiscal on2003 ~~these~~due ~~financial~~to ~~statements~~1) ~~and~~the loss ~~financial~~in ~~statement~~March ~~schedule~~2002 ~~based~~of onSDI, ~~our~~formerly ~~audits.~~its Welargest ~~conducted~~customer ~~our~~and ~~audits~~2) ofthe ~~these~~significant decrease ~~statements~~ in ~~accordance~~ ~~with~~sales ~~auditing~~to ~~standards~~the ~~generally~~telecommunications ~~accepted~~market. An inallocation of the ~~United~~cost ~~States~~ of ~~America,~~shared ~~which~~resources ~~require that we plan~~ and ~~perform~~corporate expenses ~~the~~directly ~~audit~~related to ~~obtain reasonable assurance about whether~~ the ~~financial statements~~reporting ~~are~~units ~~free~~was ofalso ~~material~~reflected ~~misstatement~~in EBITDA. The Anmultiple ~~audit~~applied ~~includes~~against ~~examining,~~EBITDA onwas 5.7. As a ~~test basis~~result, ~~evidence supporting~~ the ~~amounts~~Company determined ~~and~~that ~~disclosures~~the ingoodwill of the ~~financial~~Company’s ~~statements,~~reporting ~~assessing~~units ~~the~~was ~~accounting~~fully ~~principles~~impaired ~~used~~ and ~~significant~~has ~~estimates~~recorded ~~made~~an byimpairment ~~management,~~charge ~~and~~of ~~evaluating~~$3,561,000. No ~~the~~income ~~overall~~tax ~~financial~~benefit ~~statement~~has ~~presentation.~~been Werecognized for ~~believe~~this ~~that~~charge, ~~our~~as ~~audits~~the ~~provide~~goodwill ais ~~reasonable~~not ~~basis~~deductible for ~~our~~income ~~opinion.~~tax purposes.

/s/ PricewaterhouseCoopersDeferred LLP LosIncome Angeles,Tax California May 11, 2001 Assets

19 Deferred income tax assets and liabilities have been recorded for the differences between the financial accounting and income tax basis of assets and liabilities. Recorded deferred income tax assets and liabilities are described in detail under Note 7 - “Taxes on Earnings” in the related notes to the consolidated financial statements. Significant factors considered by management in the determination of the probability of realization of deferred tax assets include historical operating results and expectations of future earnings and taxable income. During Fiscal 2003, the Company recorded a full valuation allowance against its deferred tax assets, as it was determined that it was more likely than not that they will not be realized.

~~HCC INDUSTRIES INC. AND SUBSIDIARIES Consolidated Balance Sheets (in thousands, except share data)~~ 18

			March 31, 2001			April 1, 2000
ASSETS
Current Assets:
	Cash and cash equivalents		$	8,896		$	14,537
	Trade accounts receivable, less allowance for doubtful accounts of $61 at March 31, 2001 and $51 at April 1, 2000			10,799			10,041
	Inventories			6,468			4,515
	Income taxes receivable			728			2,255
	Prepaid and other current assets			1,398			728
		Total current assets		28,289			32,076
Property, Plant and Equipment, net				25,836			21,605
Other Assets:
	Intangible assets			4,775			5,063
	Deferred financing costs			2,071			2,727
	Deferred income taxes			2,080			4,100
	Restricted cash			6,171			6,197
		Total assets	$	69,222		$	71,768
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
	Current portion of long-term debt		$	3,103		$	6,994
	Accounts payable			3,897			2,950
	Accrued liabilities			10,270			8,877
		Total current liabilities		17,270			18,821
Long Term Liabilities:
	Long-term debt, net of current portion			87,864			97,475
	Other long-term liabilities			8,702			9,178
				113,836			125,474
Commitments and contingencies
Stockholders' Equity (Deficit):
	Common stock; $.10 par value; authorized 550,000 shares, issued and outstanding 137,945 shares at March 31, 2001 and 135,495 shares at April 1, 2000			14			14
	Additional paid-in capital			343			200
	Accumulated deficit			(44,971	)		(53,920	)
Total stockholders' deficit				(44,614	)		(53,706	)
Total liabilities and stockholders' deficit			$	69,222		$	71,768

Protection of the Environment

The Company’s operations involve the use and disposal ~~accompanying~~of ~~notes~~certain ~~are~~substances regulated under environmental protection laws. On an ~~integral~~ongoing, ~~part~~regular basis, certain processes continue to be modified in order to reduce the impact on the environment, including the reduction or elimination of ~~these~~certain chemicals used in and wastes generated from operations. Liabilities related to environmental matters are further discussed under Item 3 — “Legal Proceedings” and under Note 10 - “Environmental and Other Liabilities” in the related notes to the consolidated financial statements.

20Contingencies

The Company is subject to various investigations, ~~HCC~~claims, ~~INDUSTRIES~~legal ~~INC~~and administrative proceedings, covering a wide range of matters that arise in the ordinary course of business activities. Any ~~AND~~liability ~~SUBSIDIARIES CONSOLIDATED~~that ~~STATEMENTS~~may OFresult ~~OPERATIONS (~~from these proceedings in ~~thousands)~~ not expected to have a material adverse effect on the Company’s results of operations, cash flows or financial position.

			For The Year Ended
			March 31, 2001			April 1, 2000			April 3, 1999
Net sales			$	80,539		$	54,607		$	67,701
Cost of goods sold				53,405			39,794			41,361
Gross profit				27,134			14,813			26,340
Selling, general and administrative expenses				8,329			8,073			7,213
Earnings from operations				18,805			6,740			19,127
Other income (expense):
	Interest and other income			649			734			755
	Interest expense			(10,717	)		(11,333	)		(11,190	)
		Total other expenses, net		(10,068	)		(10,599	)		(10,435	)
Earnings (loss) before taxes and extraordinary item				8,737			(3,859	)		8,692
Taxes (benefit) on earnings (loss)				2,975			(1,525	)		3,325
Earnings (loss) before extraordinary item				5,762			(2,334	)		5,367
Extraordinary gain on retirement of debt, net of taxes of $2,125				3,187			—			—
Net earnings (loss)			$	8,949		$	(2,334	)	$	5,367

A number of claims / disputes have arisen with SDI in conjunction with the wind down of the sales to SDI. The Company is pursuing its claims and will use all remedies available to resolve the issues. The ultimate resolution of these claims is not expected to have a material adverse impact on the results of operations, cash flows or financial position of the Company.

The accompanyingOther notes are an integral part of these consolidated financial statements. Matters

21 The Company does not have off-balance sheet arrangements, financings or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs). In the ordinary course of business, the Company leases certain real properties, primarily sales and office facilities, and equipment. Transactions with related parties are in the ordinary course of business, are conducted on an arm’s-length basis, and are not material to the Company’s financial position, results of operations or cash flow.

		Common Stock
					Additional Paid-In Capital		Retained Earnings (Deficit)			Total Stockholders' Equity(Deficit)
		Shares	Amount
Balance, March 28, 1998		135	$	13	$	—	$	(56,953	)	$	(56,940	)
	Sale of stock	—		1		200		—			201
	Net earnings	—		—		—		5,367			5,367
Balance, April 3, 1999		135		14		200		(51,586	)		(51,372	)
	Net loss	—		—		—		(2,334	)		(2,334	)
Balance, April 1, 2000		135		14		200		(53,920	)		(53,706	)
	Sale of stock	3		—		50		—			50
	Non-cash stock compensation	—		—		93		—			93
	Net earnings	—		—		—		8,949			8,949
Balance, March 31, 2001		138	$	14	$	343	$	(44,971	)	$	(44,614	)

The Company is exposed to market risk from changes in interest rates on the Company’s Revolving Credit Facility. At June 18, 2003 (the effective date of the Facility), the Company had no outstanding borrowings under the Revolver. See Note 5 - “Long-term Debt” and Note 6 - “Revolving Credit Facility” in the related notes to the consolidated financial statements.

~~The accompanying notes are an integral part of these consolidated financial statements.~~ 19

22Impact Of Recently Issued Accounting Standards

Statement ~~HCC~~of ~~INDUSTRIES~~Financial ~~INC~~Accounting Standard No. ~~AND~~145: In ~~SUBSIDIARIES CONSOLIDATED~~May ~~STATEMENTS~~2002, OFthe ~~CASH~~Financial ~~FLOWS~~ Accounting Standards Board (in“FASB”) ~~thousands~~issued Statement of Financial Accounting Standard (“SFAS”) No. 145, “Rescission of FAS Nos. 4, 44, and 64, Amendment of FAS No. 13, and Technical Corrections.” Among other things, SFAS No. 145 rescinds various pronouncements regarding early extinguishments of debt and allows extraordinary accounting treatment for early extinguishment only when the provisions of Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations / Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” are met. SFAS No. 145 provisions regarding early extinguishment of debt are generally effective for fiscal years beginning after May 15, 2002. Management does not believe that the adoption of this statement will have a material impact on our consolidated financial statements.

					For The Year Ended
					March 31, 2001			April 1, 2000			April 3, 1999
Cash flows from operating activities:
Net earnings (loss)					$	8,949		$	(2,334	)	$	5,367
Reconciliation of net earnings (loss) to net cash provided by operating activities:
		Depreciation				2,251			1,773			1,684
		Amortization				639			670			715
		Deferred income taxes				1,332			108			(333	)
		Extraordinary gain				(3,187	)		—			—
		Non-cash stock compensation				93			—			—
		Non-cash expense				—			—			1,085
		Changes in operating assets and liabilities:
			(Increase) decrease in trade accounts receivable, net			(758	)		(207	)		302
			(Increase) decrease in inventories			(1,953	)		(145	)		240
			Decrease (increase) in other assets			44			(43	)		(159	)
			Increase in other liabilities			917			1,595			120
			Increase (decrease) in accounts payable and income taxes receivable/payable			349			(1,351	)		(2,033	)
				Net cash provided by operating activities		8,676			66			6,988
Cash flows from investing activities:
	Purchases of property, plant and equipment					(2,565	)		(1,644	)		(2,242	)
		Net cash used in investing activities				(2,565	)		(1,644	)		(2,242	)
Cash flows from financing activities:
	Principal payments on long-term debt					(7,204	)		(1,280	)		(993	)
	Early retirement of debt					(4,598	)		—			—
	Proceeds from sale of stock					50			—			201
			Net cash used in financing activities			(11,752	)		(1,280	)		(792	)
Net (decrease) increase in cash and cash equivalents						(5,641	)		(2,858	)		3,954
Cash and cash equivalents at beginning of period						14,537			17,395			13,441
Cash and cash equivalents at end of period					$	8,896		$	14,537		$	17,395
Supplemental noncash financing activities:
	Capital lease obligations and mortgages				$	3,917		$	2,581		$	3,978
	Bonus notes payable to employees					—			—			1,085

Statement of Financial Accounting Standard No. 146: In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” Under EITF Issue No. 94-3, a liability for an exit cost is recognized at the date an entity commits to an exit plan. SFAS No. 146 eliminates the definition and requirements for recognition of exit costs in EITF Issue No. 94-3 and requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. This Statement also establishes that fair value is the objective for initial measurement of the liability. The provisions of this Statement will be effective after December 31, 2002. The adoption of SFAS No. 146 will affect the timing of the recognition of future costs associated with exit or disposal activities and will not affect previous charges related to such activities.

~~The~~ Statement of ~~accompanying~~Financial ~~notes~~Accounting ~~are~~Standard No.148: In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure — an ~~integral~~amendment ~~part~~of SFAS No. 123.” This Statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition ~~these~~for ~~consolidated~~a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The amendments to Statement 123 in paragraphs 2(a)-2(e) of this Statement shall be effective for financial statements for fiscal years ending after December 15, 2002. Earlier application of the transition provisions in paragraphs 2(a)-2(d) is permitted for entities with a fiscal year ending prior to December 15, 2002, provided that financial statements for the 2002 fiscal year have not been issued as of the date this Statement is issued. Early application of the disclosure provisions in paragraph 2(e) is encouraged. The amendment to Statement 123 in paragraph 2(f) of this Statement and the amendment to Opinion 28 in paragraph 3 shall be effective for financial reports containing condensed financial statements for interim periods beginning after December 15, 2002. The Company does not believe this standard will have a material impact on its financial position or results of its operations.

23 Financial Accounting Standards Board Interpretation No. 45: In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This Interpretation clarifies the requirements for a guarantor’s accounting for and disclosures of certain guarantees issued and outstanding. This Interpretation also clarifies the requirements related to the recognition of a liability by a guarantor at the inception of a guarantee for the obligations the guarantor has undertaken in issuing that guarantee. The disclosure provisions of the Interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of this Interpretation did not have a material impact on the Company’s financial position, results of operations or cash flows.

Financial Accounting Standards Board Interpretation No. 46: In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities — an Interpretation of ARB No. ~~HCC~~51.” The ~~INDUSTRIES~~Interpretation ~~INC~~clarifies the application of Accounting Research Bulletin No. ~~AND~~51, ~~SUBSIDIARIES NOTES~~“Consolidated TOFinancial Statements,” ~~CONSOLIDATED~~to ~~FINANCIAL~~certain ~~STATEMENTS~~ entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The provisions of this Interpretation are effective for all enterprises with variable interests in variable interest entities created after January 31, 2003. The adoption of this Interpretation is not expected to have a significant impact on the Company’s financial results.

~~1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:~~ 20

~~General~~ Inflation

~~HCC~~ Although ~~Industries~~increases in ~~Inc.~~operating ~~and~~costs ~~Subsidiaries~~could ~~("HCC"~~adversely oraffect "the Company")’s ~~was incorporated in Delaware in 1985. HCC designs~~operations, ~~manufactures and markets broad lines of~~management ~~state-of-the-art,~~does ~~high~~not ~~precision~~believe ~~electronic~~inflation ~~connection~~has ~~devices~~had ~~known~~a asmaterial ~~hermetic~~effect ~~seals~~on ~~and~~operating ~~operates~~profit ~~in one reportable industry segment. The Company's products are sold primarily in North America and~~during ~~Europe to~~ the ~~aerospace,~~past ~~energy,~~several ~~telecommunications, test and measurement and automotive industries~~years.

OnDisclosure ~~February~~Regarding ~~14,~~Forward ~~1997,~~Looking pursuant to a Stock Purchase and Sale Agreement dated as of December 23, 1996, the Company, certain members of management and an investor group completed a recapitalization of the Company (the "Recapitalization"). In connection with the Recapitalization, the Company issued an aggregate of 87,721 shares of common stock to the investor group and repurchased an aggregate of 245,972 shares of common stock from the former principal stockholders. As a result, the investor group acquired a 65% ownership interest in the Company. In accounting for the Recapitalization, no fair value adjustments were made to the book value of the Company's assets and no goodwill was recognized. The amounts paid to the selling stockholders to purchase and retire the shares of common stock was charged to stockholders' equity as a treasury stock transaction. Statements

~~Indemnification~~ This filing contains statements that are “forward looking statements”, and includes, among other things, discussions of the Company’s business strategy and expectations concerning market position, future operations, margins, profitability, liquidity and capital resources. Although the Company believes that the expectations reflected in such forward looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct.

In All phases ~~addition,~~of ~~in connection with~~ the ~~Recapitalization,~~operations aof ~~$6,000,000 interest bearing escrow account was established by~~ the ~~selling stockholders to indemnify the~~ Company ~~with~~are ~~respect~~subject to ~~after-tax~~a ~~costs~~number of ~~contingent liabilities~~uncertainties, ~~subject~~risks toand aother ~~cap~~influences, ~~for~~including ~~all~~general ~~indemnified~~economic conditions, ~~liabilities~~regulatory ofchanges ~~$30~~and ~~million.~~competition, ~~The~~many ~~escrow~~of ~~account~~which ~~has~~are ~~been~~outside ~~classified~~the control asof ~~restricted cash on~~ the ~~consolidated~~Company, ~~balance~~any ~~sheet.~~one ~~The~~of ~~restricted cash~~which, ~~escrow~~or ~~balance~~a ~~was~~combination ~~$6,171,000~~of ~~at March 31~~which, ~~2001~~could materially ~~and~~affect ~~$6,197,000~~the atresults ~~April~~of 1,the ~~2000.~~Company’s ~~Any~~operations ~~funds~~and ~~remaining~~whether inthe forward ~~this~~looking ~~account~~statements ~~upon~~made ~~satisfaction~~by ofthe ~~conditions~~Company ~~specified~~ultimately inprove ~~the~~to ~~escrow~~be accurate. The ~~agreement,~~Company ~~will~~does benot assume ~~paid~~any obligation to ~~the~~update ~~selling~~these ~~stockholders.~~forward looking statements.

~~Principles~~Item 7a — Quantitative Ofand ~~Consolidation~~ Qualitative Disclosures About Market Rate Risk

The ~~consolidated~~Company ~~financial~~is ~~statements~~exposed ~~include~~to ~~the~~market ~~accounts~~risk offrom ~~the~~changes ~~Company~~in interest ~~and~~rates ~~all~~on ~~wholly~~the ~~owned~~Company’s ~~subsidiaries~~Revolving Credit Facility. At ~~All~~June ~~intercompany~~18, ~~transactions~~2003 (~~which~~effective ~~are~~date ~~primarily~~of the ~~sales/purchases~~Revolving ~~and~~Credit ~~receivables/payables~~Facility), ~~have~~the ~~been~~Company ~~eliminated~~had no outstanding borrowings under the Revolver and, therefore, changes in ~~consolidation.~~interest rates would have no impact on the Company’s results of operations.

The Company's 103/4% Senior Subordinated Notes are guaranteed by all operating subsidiaries of the Company (the "Subsidiary Guarantors"). The guarantee obligations of the Subsidiary Guarantors (which are all direct or indirect wholly owned subsidiaries of the Company) are full, unconditional and joint and several. The aggregate assets, liabilities, earnings, and equity of the Subsidiary Guarantors are substantially equivalent to the total assets, liabilities, earnings and equity of HCC Industries Inc. and its subsidiaries on a consolidated basis. Separate financial statements of the Subsidiary Guarantors are not included in the accompanying financial statements because management of the Company has determined that separate financial statements of the Subsidiary Guarantors would not be material to investors. 21

~~Use~~Item 8 — Financial ofStatements ~~Estimates~~ and Supplemental Data

~~The~~INDEX ~~preparation~~TO ofFINANCIAL ~~financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets~~ STATEMENTS

24Report of Independent Auditors Consolidated Balance Sheets as of March 29, 2003 and March 30, 2002 Consolidated Statements of Operations for the years ended March 29, 2003, March 30, 2002, and March 31, 2001 Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended March 29, 2003, March 30, 2002, and March 31, 2001 Consolidated Statements of Cash Flows for the years ended March 29, 2003, March 30, 2002, and March 31, 2001 Notes to Consolidated Financial Statements Schedule II - Valuation and Qualifying Accounts

~~and~~All ~~liabilities,~~other ~~reported~~financial ~~results~~statement ofschedules ~~operations~~not ~~and~~listed ~~disclosure~~have ofbeen ~~contingencies~~omitted since at the ~~dates~~required ofinformation ~~the consolidated financial statements. Actual results could differ from those estimates.~~ is

~~Accounting~~included ~~Period~~ in the consolidated financial statements, the notes thereto, is not applicable, or not required.

~~The consolidated financial statements are based on the fiscal year ending on the Saturday nearest to March 31.~~ 22

~~Revenue~~REPORT ~~Recognition~~ OF INDEPENDENT AUDITORS

~~The~~Board ~~Company~~of ~~generally~~Directors ~~manufactures products under both individual firm purchase orders~~ and ~~fixed price, long-term production contracts. The contracts vary in~~ ~~length, but generally are completed within 12 to 24 months. Sales under individual purchase orders and long-term production contracts are recognized at the time units are shipped and title transfers.~~ Stockholders

~~Cash~~HCC ~~Equivalents~~ Industries Inc. and Subsidiaries

~~The Company considers all highly liquid investments purchased with an initial maturity of three months or less to be cash equivalents. The Company has bank balances~~Rosemead, ~~including cash and cash equivalents, which at times may exceed federally insured limits.~~ California

~~Accounts~~In ~~Receivable~~our opinion, ~~Concentration~~the Ofconsolidated ~~Credit~~financial ~~Risk~~statements listed in the accompanying index present fairly, in all material respects, the financial position of HCC Industries Inc. and ~~Geographic~~Subsidiaries ~~Information~~ at March 29, 2003 and March 30, 2002, and the results of their operations and their cash flows for each of the three years in the period ended March 29, 2003 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

~~The~~As ~~Company~~discussed ~~grants uncollateralized credit to its customers who are located~~ in ~~various~~Note ~~geographical~~1, ~~areas.~~effective ~~Estimated~~March ~~credit~~31, ~~losses~~2002, ~~and~~the ~~returns~~Company ~~have been~~adopted ~~provided~~Statement ~~for~~of inFinancial ~~the~~Accounting ~~financial~~Standards ~~statements~~No. ~~and~~142, to“Goodwill ~~date,~~and ~~have~~Other Intangible ~~been within management's expectations~~Assets. ”

~~Two customers each accounted for more than 10% of the Company'~~/s/ ~~consolidated~~PricewaterhouseCoopers ~~revenues~~LLP inLos ~~fiscal year 2001 and one customer in fiscal years 2000 and 1999. Sales to Special Devices~~Angeles, ~~Incorporated~~ ~~("SDI")~~California ~~were~~May ~~$20~~15,~~736,000~~ ~~(26%)~~2003, ~~$21,193,000~~except ~~(39%) and $24,642,000 (36%)~~ for ~~the~~Note ~~fiscal years 2001~~6, ~~2000~~ and ~~1999,~~the ~~respectively.~~fifth ~~The~~paragraph ~~related accounts receivable from SDI as~~ of ~~March~~Note ~~31, 2001 and April~~ 1, ~~2000~~as ~~was $3,042,000 and $4,713,000, respectively. Sales~~ to ~~another~~which ~~customer amounted to $8,920,000 (11%) for~~ the ~~fiscal~~date ~~year~~is ~~2001~~June ~~and the related receivable as of March 31~~18, ~~2001 was $375,000~~2003.

Sales to European customers were approximately $9,250,000 (11.5%), $5,663,000 (10.4%), and $5,000,000 (7.4%) of the Company's consolidated sales for fiscal years 2001, 2000 and 1999, respectively. Sales are attributed to countries based on the location of customers. 23

~~Inventories~~ HCC INDUSTRIES INC. AND SUBSIDIARIES

~~Inventories~~Consolidated Balance ~~are stated at the lower of cost (first-in, first-out method) or market.~~ Sheets

~~Property~~(in thousands, ~~Plant~~except ~~and~~share ~~Equipment~~ data)

Property, plant and equipment is recorded at cost. Depreciation is computed generally by the straight-line method over the estimated useful lives of the respective assets of 3 years to 40 years. ASSETS

Repairs and maintenance are charged directly to expense as incurred. Additions and betterments to property, plant and equipment are capitalized. When assets are disposed of, the related cost and accumulated depreciation thereon are removed from the accounts and any resulting gain or loss is included in operations.

	March 29,			March 30,
	2003			2002

Current Assets:
Cash and cash equivalents	$	6,215		$	10,990
Trade accounts receivable, less allowance for doubtful accounts of $70 (2003) and $70 (2002)	6,626			8,356
Inventories	5,174			6,016
Income taxes receivable	2,473			506
Prepaid and other current assets	857			1,130

Total current assets	21,345			26,998

Property, Plant and Equipment, net	22,278			24,895

Other Assets:
Goodwill	—			3,561
Intangible assets	825			925
Deferred financing costs	1,394			1,732
Deferred income taxes, net	—			1,623
Restricted cash	5,311			5,901

Total assets	$	51,153		$	65,635

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current Liabilities:
Current portion of long-term debt	$	1,779		$	2,109
Accounts payable	1,504			1,475
Accrued liabilities	6,467			7,721

Total current liabilities	9,750			11,305

Long Term Liabilities:
Long-term debt, net of current portion	84,833			86,627
Environmental and other liabilities	8,429			9,114
	103,012			107,046

Commitments and contingencies

Stockholders’ Equity (Deficit):
Common stock; $.10 par value; authorized 550,000 shares, issued and outstanding 137,945 shares	14			14
Additional paid-in capital	377			360
Accumulated deficit	(52,250		)	(41,785		)

Total stockholders’ deficit	(51,859		)	(41,411		)

Total liabilities and stockholders’ deficit	$	51,153		$	65,635

~~Intangible~~The ~~Assets~~ accompanying notes are an integral part of these consolidated financial statements.

The excess of purchase price over net assets acquired is amortized on a straight-line basis over the estimated useful lives of the respective assets of 14 to 40 years. Amortization expense was $288,000 24

25HCC INDUSTRIES INC. AND SUBSIDIARIES

(2001),CONSOLIDATED $289,000STATEMENTS (2000),OF and $291,000 (1999). Accumulated amortization on the excess purchase price over net assets acquired was $2,826,000 and $2,538,000 as of March 31, 2001 and April 1, 2000, respectively. OPERATIONS

~~Long-Lived~~ (in ~~Assets~~ thousands)

In accordance with SFAS No. 121, long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the Company evaluates the carrying value of its goodwill and property, plant and equipment on an ongoing basis and recognizes an impairment when the estimated future undiscounted cash flows from operations are less than the carrying value of the related long-lived assets.

	For The Year Ended
	March 29,			March 30,			March 31,
	2003			2002			2001

Net sales	$	41,086		$	64,207		$	80,539
Cost of goods sold	33,080			43,278			53,405

Gross profit	8,006			20,929			27,134

Selling, general and administrative expenses	5,851			6,424			8,329
Impairment of assets	500			—			—

Earnings from operations	1,655			14,505			18,805

Other income (expense):
Interest and other income	132			233			649
Interest expense	(9,582		)	(9,847		)	(10,717		)

Total other expenses, net	(9,450		)	(9,614		)	(10,068		)

Earnings (loss) before taxes and cumulative effect of accounting change and extraordinary item	(7,795		)	4,891			8,737

Taxes (benefit) on earnings (loss)	(891		)	1,705			2,975

Earnings (loss) before cumulative effect of accounting change and extraordinary item	(6,904		)	3,186			5,762

Cumulative effect of accounting change	(3,561		)	—			—

Extraordinary gain on retirement of debt, net of taxes of $2,125	—			—			3,187

Net earnings (loss)	$	(10,465	)	$	3,186		$	8,949

~~Fair~~The ~~Value~~accompanying notes are an integral part of ~~Financial~~these ~~Instruments~~ consolidated financial statements.

All financial instruments are held for purposes other than trading. The estimated fair value of the Company's long-term debt is based on either quoted market prices or current rates for similar issues for debt of the same remaining maturities. All other non-derivative financial instruments as of March 31, 2001 and April 1, 2000 approximate their carrying amounts either because of the short maturity of the instrument, or based on their effective interest rates compared to current market rates for similar long-term debt or obligations. 25

~~Income~~HCC ~~Taxes~~ INDUSTRIES INC. AND SUBSIDIARIES

~~The~~CONSOLIDATED ~~Company~~STATEMENTS ~~accounts~~OF ~~for~~STOCKHOLDERS’ ~~income~~EQUITY taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities. (DEFICIT)

~~Stock~~(in ~~Based Employee Compensation Awards~~ thousands)

Statement of Financial Accounting Standards No. 123, "Accounting for the Awards of Stock-Based Compensation to Employees" ("SFAS No. 123") encourages, but does not require companies to record compensation cost for stock-based compensation plans at fair value. The Company has adopted the disclosure requirements of SFAS No. 123, which involves pro forma disclosure of net income under SFAS No. 123, detailed descriptions of plan terms and assumptions used in valuing stock option grants. The Company has chosen to continue to account for stock-based employee compensation awards in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees".

				Additional		Retained			Total
	Common Stock			Paid-In		Earnings			Stockholders’
	Shares	Amount		Capital		(Deficit)			Equity(Deficit)

Balance, April 1, 2000	135	$	14	$	200	$	(53,920	)	$	(53,706	)

Sale of stock	3	—		50		—			50

Non-cash stock compensation	—	—		93		—			93

Net earnings	—	—		—		8,949			8,949

Balance, March 31, 2001	138	14		343		(44,971		)	(44,614		)

Non-cash stock compensation	—	—		17		—			17

Net earnings	—	—		—		3,186			3,186

Balance, March 30, 2002	138	14		360		(41,785		)	(41,411		)

Non-cash stock compensation	—	—		17		—			17

Net loss	—	—		—		(10,465		)	(10,465		)

Balance, March 29, 2003	138	$	14	$	377	$	(52,250	)	$	51,859

~~Recently~~The ~~Issued~~accompanying notes ~~Accounting~~are ~~Standards~~ an integral part of these consolidated financial statements.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". Adoption of SFAS No. 133 is required for the Company's fiscal year beginning April 1, 2001. The Company has no Derivative Instruments and Hedging Activities as defined in SFAS No. 133 and; therefore, the adoption will not have any impact on the Company's financial position, results of operations or cash flows. 26

~~In December~~HCC ~~1999,~~INDUSTRIES ~~the Securities Exchange Commission issued Staff Accounting Bulletin ("SAB") No~~INC. ~~101,~~AND ~~"Revenue Recognition in Financial Statements". The bulletin was effective during the Company's fiscal year 2001. The Company was in compliance with the bulletin; accordingly, the~~ SUBSIDIARIES

26CONSOLIDATED STATEMENTS OF CASH FLOWS

~~adoption~~(in ~~of SAB No. 101 did not have an impact on the Company's consolidated financial position, results of operations or cash flows.~~ thousands)

2. INVENTORIES:

	For The Year Ended
	March 29,			March 30,			March 31,
	2003			2002			2001
Cash flows from operating activities:
Net earnings (loss)	$	(10,465	)	$	3,186		$	8,949
Reconciliation of net earnings (loss) to net cash provided by (used in) operating activities:
Depreciation	2,544			2,599			2,251
Amortization	438			628			639
Impairment of assets	500			—			—
Cumulative effect of accounting change	3,561			—			—
Deferred income taxes	2,059			903			1,622
Extraordinary gain	—			—			(3,187			)
Non-cash stock compensation	17			17			93
Changes in operating assets and liabilities:
Decrease (increase) in trade accounts receivable, net	1,730			2,443			(758			)
Decrease (increase) in inventories	842			452			(1,953			)
Decrease (increase) in other assets	(1,540		)	17			44
(Decrease) increase in accounts payable	29			(2,125		)	59
(Decrease) increase in accrued and other liabilities	(1,939		)	(2,137		)	917

Net cash provided by (used in) operating activities	(2,224		)	5,983			8,676

Cash flows from investing activities:
Purchases of property, plant and equipment	(427		)	(736		)	(2,565			)

Net cash used in investing activities	(427		)	(736		)	(2,565			)

Cash flows from financing activities:
Principal payments on long-term debt	(3,215		)	(3,153		)	(7,204			)
Proceeds from issuance of long-term debt	1,091			—			—
Early retirement of debt	—			—			(4,598			)
Proceeds from sale of stock	—			—			50

Net cash used in financing activities	(2,124		)	(3,153		)	(11,752			)

Net increase (decrease) in cash and cash equivalents	(4,775		)	2,094			(5,641			)

Cash and cash equivalents at beginning of period	10,990			8,896			14,537
Cash and cash equivalents at end of period	$	6,215		$	10,990		$	8,896

Supplemental noncash financing activities:
Capital lease obligations	$	1,091		$	922		$		3,917
Cash taxes paid	$	(983	)	$	950		$		3,250
Cash interest paid	$	9,234		$	9,462		$		10,325

~~Inventories~~The ~~consist~~accompanying notes ofare ~~the~~an ~~following~~integral ~~(in~~part ~~thousands):~~of these consolidated financial statements.

	March 31, 2001		April 1, 2000
Raw materials and component parts	$	4,861	$	3,036
Work in process		1,607		1,479
	$	6,468	$	4,515

~~3. PROPERTY,~~HCC ~~PLANT~~INDUSTRIES INC. AND ~~EQUIPMENT:~~ SUBSIDIARIES

~~Property,~~NOTES ~~plant~~TO ~~and~~CONSOLIDATED ~~equipment~~FINANCIAL ~~consist of the following (in thousands):~~ STATEMENTS

	March 31, 2001			April 1, 2000
Land	$	4,017		$	4,017
Buildings and improvements		9,671			9,160
Furniture, fixtures and equipment		24,917			19,043
		38,605			32,220
Less accumulated depreciation		(12,769	)		(10,615	)
	$	25,836		$	21,605

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

~~4. LONG-TERM DEBT:~~ General

~~Long-term~~ HCC Industries ~~debt~~Inc. ~~consists~~and Subsidiaries (“HCC” or “Company”) was incorporated in Delaware in 1985. HCC designs, manufactures and markets broad lines of state-of-the-art, ~~following~~high (precision electronic connection devices known as hermetic seals and operates in ~~thousands):~~one reportable industry segment. The Company’s products are sold primarily in North America and Europe to the aerospace, energy, telecommunications, test and measurement and automotive industries.

	March 31, 2001		April 1, 2000
103/4% Senior Subordinated Notes—interest payable semi-annually; due May 15, 2007	$	79,785	$	90,000
Subordinated Bonus Notes—10% interest payable semi-annually; $3,000,000 due March 28, 2001 and $1,083,000 due April 3, 2002		1,083		4,085
Term loans on land, building and improvements—8% interest payable monthly; due May 2008		2,762		2,762
Subordinated Notes due Selling Shareholders—12% interest payable semi-annually; due March 28, 2001		—		2,500
Capital lease obligations (interest rates ranging between 6.36% and 9.63%)		7,337		5,122
		90,967		104,469
Less current portion		3,103		6,994
	$	87,864	$	97,475

On February 14, 1997, pursuant to a Stock Purchase and Sale Agreement dated as of December 23, 1996, the Company, certain members of management and an investor group completed a recapitalization of the Company (the “Recapitalization”). In connection with the Recapitalization, the Company issued an aggregate of 87,721 shares of common stock to the investor group and repurchased an aggregate of 245,972 shares of common stock from the former principal stockholders. As a result, the investor group acquired a 65% ownership interest in the Company. In accounting for the Recapitalization, no fair value adjustments were made to the book value of the Company’s assets and no goodwill was recognized. The amounts paid to the selling stockholders to purchase and retire the shares of common stock was charged to stockholders’ equity as a treasury stock transaction.

~~On May~~Liquidity ~~6, 1997, the Company issued $90,000,000 in principal amount of 103/4% Senior Subordinated Notes ("Notes") due in May 2007~~ and ~~used~~Capital the proceeds of such issuance to refinance existing debt. In issuing the Notes, the Company incurred $3,870,000 in deferred financing costs. These costs are being amortized using the straight-line method (which approximates the effective interest Resources

27 The Company believes that cash on hand of $6.2 million, income tax refunds from carryback of tax losses of $2.6 million and cash generated from operations, prior to interest payments on long-term debt, will provide adequate funds for ongoing operations, planned capital expenditures and debt service for the near-term. Over the next 12 months, the primary cash obligations of the Company are interest payments ($9.4 million), principal payments on existing debt ($1.8 million), and capital expenditures ($0.6 -$0.8 million).

For ~~method)~~the ~~over~~longer term, the ~~term~~operating results of the ~~respective~~Company ~~Notes.~~must improve to satisfy its liquidity needs. The ~~fair~~annual interest ~~value~~payments ofand ~~the~~principal ~~Notes~~payment ~~may~~obligations ~~vary~~decrease ~~from~~only ~~time~~modestly toover the ~~time~~next ~~based~~several onyears until the ~~Company's~~Notes ~~operating~~become ~~performance~~due ~~and~~in ~~other~~2007. The ~~market~~Company ~~related~~is ~~factors~~making ~~external~~substantial efforts to increase its sales levels and thereby improve the operating results. There is no assurance that these efforts ~~Company~~will be successful. In ~~Presently~~addition, ~~the~~an increase ~~Company~~in ~~believes~~sales for the ~~fair~~Company ~~value~~will ofrequire ~~the~~additional ~~Notes~~investment toin beworking capital ~~significantly~~to ~~less~~support ~~than~~such ~~the~~increased ~~carrying value~~operations.

~~During~~ On ~~fiscal~~June ~~year~~18, ~~2001~~2003, the Company ~~purchased~~entered ~~for~~into ~~retirement~~a $107.25M ~~million~~Revolving ~~face~~Credit ~~value~~Agreement (the “Revolver”). Under the terms of the ~~Notes~~Revolver, ~~for~~the ~~$4.6~~Company ~~million~~may inborrow ~~cash.~~up ~~The~~to ~~transaction~~85% of ~~resulted~~eligible inaccounts anreceivable. The Revolver ~~extraordinary~~provides ~~gain~~for interest on outstanding balances at the bank’s prime rate ~~early~~plus ~~retirement~~1 of½% ~~debt~~(or ofLIBOR $plus 3.2½%) ~~million~~and is collateralized by accounts receivable, inventories, ~~net~~equipment ofand ~~taxes~~intangible assets of $2the Company.1 There ~~million~~are no borrowings outstanding under the Revolver and on June 18, 2003, approximately $4,000,000 was available. The Revolver includes covenants requiring maintenance of certain financial ratios.

~~The Notes~~Indemnification/Restricted ~~are redeemable at the option of the Company commencing on May 15 of the year set forth below at the redemption prices also set forth below:~~ Cash

Period	Redemption Price
2002	105.375	%
2003	103.583	%
2004	101.792	%
2005 and thereafter	100.000	%

In conjunction with the Recapitalization, the selling shareholders agreed to indemnify the Company for the after-tax costs of contingent liabilities up to a total of $30 million. As part of the transaction, $6 million was withheld by the Company from the purchase price to the selling shareholders and placed in an interest bearing escrow account (“Restricted Cash”) intended primarily to fund the after-tax costs of the environmental liability and other contingencies. Upon agreement of the parties, but in no event before February 2004, any funds remaining in the account will be paid to the selling shareholders. At this date, the only remaining contingencies are environmental contingencies and residual litigation costs. The restricted cash escrow balance was $5,311,000 at March 29, 2003 and $5,901,000 at March 30, 2002. In the event the Restricted Cash is not adequate to cover the liabilities, the Company has been informed by the selling stockholders that they will draw upon personal funds to cover such excess costs.

~~Minimum payments due under long-term debt as of March 31, 2001 are as follows (in thousands):~~ 28

Fiscal Year	Amount
2002	$	3,103
2003		1,891
2004		1,532
2005		1,272
2006		620
2007 and thereafter		82,549
	$	90,967

Included in other assets is $391,000 due from a selling shareholder or shareholders related to legal costs advanced on litigation. The Company has been advised by one of the selling shareholders that he disputes some or all of this receivable. However, if such dispute is not otherwise resolved, the Company believes that this advance is recoverable from the Restricted Cash.

~~Cash payments~~Principles ~~for~~Of ~~interest were $10,325,000 (2001), $10,906,000 (2000) and $10,752,000 (1999). Included in accrued liabilities is interest payable of $3,274,000 at March 31, 2001 and $3,697,000 at April 1, 2000.~~ Consolidation

5 The consolidated financial statements include the accounts of the Company and all wholly owned subsidiaries. ~~LINE~~ All OFintercompany transactions ~~CREDIT:~~ (which are primarily sales/purchases and receivables/payables) have been eliminated in consolidation.

The Company’s ~~has~~10 ¾% aSenior ~~revolving~~Subordinated ~~credit~~Notes ~~facility~~and ~~agreement,~~the asRevolving ~~amended~~Credit onFacility ~~November 3,~~are ~~1999,~~guaranteed by all operating subsidiaries of the Company (the ~~"Revolver"~~“Subsidiary Guarantors”). The ofguarantee upobligations toof ~~$20,000,000~~the ~~expiring on~~Subsidiary ~~February 14,~~Guarantors ~~2002.~~(which ~~The~~are ~~Revolver~~all ~~provides~~direct ~~for~~or ~~interest~~indirect onwholly ~~outstanding~~owned ~~balances~~subsidiaries atof the Company) ~~bank's~~are ~~prime~~full, ~~rate~~unconditional ~~plus~~and ~~1-1/4%~~joint and isseveral. The ~~collateralized~~aggregate byassets, ~~accounts~~liabilities, ~~receivable~~ earnings, and ~~inventories~~equity of the ~~Company.~~Subsidiary AtGuarantors ~~March 31,~~are ~~2001~~substantially ~~and~~equivalent ~~April 1~~to the total assets, ~~2000~~liabilities, ~~the~~earnings ~~prime~~and ~~rate~~equity ~~was~~of 8HCC Industries Inc.~~00%~~ and ~~9.00%,~~its subsidiaries ~~respectively~~on a consolidated basis. Separate Atfinancial ~~March~~statements ~~31,~~of ~~2001,~~the ~~there~~Subsidiary ~~was~~Guarantors ~~$19,055,000~~are ~~available~~not included ~~under~~in the ~~Revolver.~~accompanying ~~The~~financial ~~Revolver includes~~statements ~~covenants~~because ~~requiring~~management ~~maintenance~~ of ~~certain~~the Company ~~financial~~has ~~ratios.~~determined Atthat ~~March 31,~~separate ~~2001~~financial ~~and~~statements ~~April 1,~~of ~~2000~~the ~~there~~Subsidiary Guarantors ~~were~~would nonot ~~borrowings~~be ~~outstanding~~material ~~under~~to ~~the Revolver~~investors.

28 The Company has no direct or indirect guarantees of the indebtedness of others.

~~6. TAXES~~Use ONof ~~EARNINGS:~~ Estimates

The ~~components~~preparation of financial ~~income~~statements ~~tax~~in ~~expense~~conformity ~~(benefit)~~with ~~before~~accounting ~~extraordinary~~principles ~~item~~generally accepted ~~consist~~in the United States of America requires management to make estimates and assumptions that affect the ~~following~~reported ~~(in~~amounts ~~thousands):~~of assets and liabilities, reported results of operations and disclosure of contingencies at the dates of the consolidated financial statements. Actual results could differ from those estimates.

		2001		2000			1999
Current:
	Federal	$	1,437	$	(1,341	)	$	3,090
	State		206		(292	)		568
			1,643		(1,633	)		3,658
Deferred:
	Federal		1,131		91			(290	)
	State		201		17			(43	)
			1,332		108			(333	)
		$	2,975	$	(1,525	)	$	3,325

Accounting Period

The consolidated ~~Company's~~financial ~~effective~~statements ~~tax~~are ~~rate~~based ~~differs~~on ~~from~~ the ~~statutory~~fiscal ~~federal~~year ~~income~~ending ~~tax~~on ~~rate~~the asSaturday nearest ~~follows:~~to March 31.

	2001		2000		1999
Tax provision (benefit) at the statutory rate	34.0	%	(34.0	)%	34.0	%
Nondeductible expenses	1.2	%	2.1	%	1.0	%
State taxes, net of federal benefit	3.0	%	(4.7	)%	4.0	%
Other	(4.1	)%	(2.9	)%	(0.7	)%
	34.1	%	(39.5	)%	38.3	%

Reclassifications

~~The~~ Certain ~~components~~reclassifications ofhave been made to the ~~net~~2002 ~~deferred~~and ~~taxes~~2001 ~~are~~financial asstatements ~~follows~~to conform ~~(in~~to ~~thousands):~~the 2003 presentation.

		March 31, 2001			April 1, 2000
Deferred Tax Assets:
	Environmental liabilities	$	3,481		$	3,671
	Accrued bonus and other		983			1,928
			4,464			5,599
Deferred Tax Liabilities:
	Depreciation and other		(1,402	)		(1,205	)
Deferred Tax Asset, net		$	3,062		$	4,394

Revenue Recognition

~~Cash~~ The Company ~~tax~~generally ~~payments~~manufacturers ~~were~~products ~~$3,250,000~~under ~~(2001),~~both ~~$239,000~~individual ~~(2000),~~firm purchase orders and fixed $5price,~~302~~ long-term production contracts. The contracts vary in length,~~000~~ but generally are completed within 12 to 24 months. Sales under individual purchase orders and long-term production contracts are recognized at the time units are shipped and title and risk of loss transfers (~~1999~~FOB shipping point). Our products are warranted to meet the specifications of manufacture and customer “right of return” is only for failure to meet the specifications.

~~7. CAPITAL~~Cash ~~STOCK:~~ Equivalents

The Company considers isall ~~authorized~~highly toliquid ~~issue~~investments anpurchased ~~aggregate~~with ofan ~~550,000~~initial ~~shares~~maturity of three ~~common~~months ~~stock.~~or ~~These~~less ~~shares~~to ~~may~~ be ~~issued~~cash inequivalents. The ~~four~~Company ~~different~~has ~~classes~~bank (Abalances, Bincluding cash, Ccash orequivalents, ~~D shares)~~and ~~which~~restricted ~~differ~~cash, ~~only~~which inexceed ~~voting~~federally ~~rights~~insured ~~per share as follows:~~ limits.

Class		Voting Rights Per Share
A		1
B		1
C		None
D		10

Accounts Receivable, Concentration Of Credit Risk and Geographic Information

~~During~~ The ~~fiscal year 2001, the~~ Company ~~sold~~grants ~~2,450~~uncollateralized ~~shares~~credit ofto ~~Class~~its Acustomers ~~common~~who ~~stock~~are tolocated ~~the~~in various ~~Company's~~geographical ~~Chairman~~areas. Estimated credit ~~for~~losses ~~$50,000.~~and Inreturns ~~conjunction~~have ~~with~~been ~~this~~provided ~~transaction,~~for in the ~~Company~~financial ~~recorded~~statements ~~non-cash~~and, ~~compensation~~to ~~of $76~~date,~~000~~ ~~during~~have ~~fiscal~~been ~~year~~within ~~2001~~management’s expectations. No ~~The~~customer ~~changes~~account inexceeds ~~each~~10% ~~class~~ of ~~common shares for each of~~ the accounts ~~three~~receivable ~~years~~balance inat ~~the period ended~~ March 3129, ~~2001 are as follows (in thousands):~~ 2003.

		Class of Common Stock
		A			B			C			D			Total
		Shares	Par Value		Shares	Par Value		Shares	Par Value		Shares	Par Value		Shares	Par Value
Balance—March 28, 1998		103	$	9	27	$	3	4	$	1	1	$	—	135	$	13
	Sale of Stock	—		1	—		—	—		—	—		—	—		1
Balance—April 3, 1999		103		10	27		3	4		1	1		—	135		14
Balance—April 1, 2000		103		10	27		3	4		1	1		—	135		14
	Sale of Stock	3		—	—		—	—		—	—		—	3		—
Balance—March 31, 2001		106	$	10	27	$	3	4	$	1	1	$	—	138	$	14

The Company stopped selling products to Special Devices, Inc. (“SDI”) in March 2002. Sales to SDI were $14,596,000 (23%) and $20,736,000 (26%) for the fiscal years 2002 and 2001, respectively. The related accounts receivable from SDI as of March 30, 2002 was $2,401,000. Sales to another customer amounted to $8,920,000 (11%) for the fiscal year 2001 and the related receivable as of March 31, 2001 was $375,000.

~~The~~ Sales to ~~remaining~~International ~~412~~customers (primarily Europe) were approximately $7,~~055~~619,000 ~~shares~~(19%), $7,738,000 ~~are~~(12%) ~~undesignated~~and $9,250,000 as(12%) of tothe ~~class~~Company’s consolidated sales for fiscal years 2003, 2002 and 2001, respectively. Sales are attributed to countries based on the shipping location of customers.

In February 1997, the Company adopted a stock option plan (the "Option Plan") which provides for the grant to employees and directors, from time to time, of non-qualified stock options to purchase up to an aggregate of 17,990 shares of common stock at exercise prices to be determined by the Board of Directors. The Option Plan provides for the grant of management options to purchase 5,485 shares of common stock (the "Management Options"), management performance options to purchase 10,870 shares of common stock (the "Management Performance Options"), director options to purchase 515 shares of common stock (the "Director Options") and director performance options to purchase 1,120 shares of common stock (the "Director Performance Options"). The Management Options and Director Options are subject to a vesting schedule that generally provides for each series of options to vest 20% per year over five years if the Company attains specified annual or cumulative earnings targets as defined in the Option Plan. The Management Performance Options and Director Performance Options are subject to a vesting schedule based on a change in control in which the investor group realizes specified annual rates of return on its equity investment in the Company as defined in the Option Plan. All options are exercisable over a period of 10 years and will automatically vest on the seventh anniversary of the date on which the Option Plan was adopted, regardless of whether the performance criteria are achieved. Inventories

~~The Company~~ Inventories ~~granted options to purchase 5,000, 2,500 and 470 shares of common stock for the fiscal years 2001, 2000, and 1999, respectively, with an exercise price of $370 per share~~are ~~(or~~stated ~~higher), which is equal to (or above) the fair value of common stock~~ at the ~~date~~lower of ~~grant,~~cost ~~except for 1,000 shares~~ (first-in fiscal year 2000 with an exercise price below estimated fair market value. Such difference will be recognized as additional compensation expense on a straight line basis over the vesting period of the underlying options. During fiscal year 2001, ~~the Company recorded non~~first-~~cash compensation~~out ofmethod) ~~$17,000~~or market.

30Property, Plant and Equipment

Property, plant ~~related~~and toequipment ~~these~~is ~~shares.~~recorded Asat ofcost. Depreciation ~~March~~is ~~31,~~computed ~~2001,~~generally ~~17,390~~by ~~options~~the ~~have~~straight-line ~~been~~method ~~granted~~over ~~under~~ the estimated ~~Option~~useful ~~Plan~~lives ~~which~~of ~~entitles~~ the ~~holders~~respective toassets ~~purchase~~as ~~upon vesting 17~~follows: furniture,~~390~~ ~~shares~~fixtures ofand ~~common~~equipment ~~stock~~— at3 anto ~~exercise~~10 ~~price of~~years; ~~$370.49~~buildings ~~per~~and ~~share.~~improvements At— ~~March~~10 ~~31, 2001, options on 1,533 shares were exercisable and options~~ to ~~purchase~~40 ~~600 shares of common stock remained available for grant~~years.

~~The~~ Repairs ~~weighted~~and ~~average~~maintenance ~~fair~~are ~~value~~charged ofdirectly ~~each~~to ~~option~~expense ~~granted~~as ~~was~~incurred. Additions ~~estimated~~and onbetterments ~~the~~to ~~date~~property, ofplant and ~~grant~~equipment toare becapitalized. When assets ~~approximately~~are ~~$85~~disposed toof, ~~$100 using~~ the ~~minimum~~related ~~value~~cost ~~method~~and ~~with~~accumulated ~~the~~depreciation ~~following assumptions~~thereon ~~(i) risk-free~~are ~~interest~~removed ~~rate~~from ofthe ~~5.32%,~~accounts ~~6.38%~~ and ~~5.48%~~any ~~for~~resulting ~~fiscal~~gain ~~2001,~~or ~~2000~~loss ~~and~~is ~~1999,~~included ~~respectively,~~in operations ~~(ii) expected~~in ~~option~~the ~~life~~period of ~~5 years, (iii) forfeiture rate of 0 and (iv) no expected dividends~~disposition.

~~The Company~~Intangible has adopted the disclosure only provisions of SFAS No. 123. For the years ended March 31, 2001, April 1, 2000 and April 3, 1999, had the Company recognized compensation expense in accordance with Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", net earnings (loss) would have been $8,715,000, ($2,566,000) and $5,135,000, respectively. Assets

~~8. EMPLOYEE~~ Intangible and ~~BENEFIT~~other ~~PLANS:~~ long-lived assets are reviewed by management for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

In Intangible ~~1993,~~assets relate ~~the~~to ~~Company~~a ~~adopted~~customer ~~the~~listing ~~HCC~~acquired ~~Savings~~in ~~and Investment Plan (the "Plan") which covers all eligible full-time employees~~1997. ~~The Company established the Plan~~ toTotal ~~meet~~cost ~~the requirements~~ of ~~a qualified retirement plan pursuant to~~ the ~~provisions~~customer oflist ~~Section~~was ~~401(k)~~$1,400,000 ofand ~~the~~it ~~Internal~~is ~~Revenue~~amortized ~~Code.~~over 14 ~~The~~years ~~Plan~~on ~~provides~~a ~~participants~~straight-line ~~the opportunity to make tax deferred~~basis. ~~contributions~~Amortization toexpense ais ~~retirement~~$100,000 ~~trust~~for ~~account~~each infiscal ~~amounts~~year up2003, to2002 ~~15% of their gross wages~~and 2001. Accumulated ~~The~~amortization ~~Company~~was $575,000 ~~has~~and ~~elected~~$475,000 toat ~~make~~March ~~matching~~29, ~~contributions~~2003 inand ~~amounts~~March ~~that~~30, ~~may~~2002, ~~change from year to year~~respectively. Amortization ~~The~~expense ~~Company contributed~~will ~~$667,000~~be ~~(2001),~~ $~~572~~100,000 ~~(2000)~~per year ~~and~~through ~~$536,000~~fiscal ~~(1999) in matching contributions to the Plan~~2011.

In connection with the Recapitalization, the Company adopted a bonus plan (the "Bonus Plan"), pursuant to which the Company will grant Bonus Units (each representing an interest in the bonus pool of $6.0 million) to certain key employees. The Bonus Units are awarded by a committee of the Board of Directors of the Company. On April 3, 1999 and March 28, 1998, $1.1 million and $3.0 million of Bonus Units became vested, respectively. Vested contingent bonuses become due and payable on the third anniversary of the applicable vesting date and will bear interest at 10% per annum (payable semi-annually in arrears) from each applicable vesting date until paid in full. 30

~~9. COMMITMENTS AND CONTINGENCIES:~~ Goodwill

~~Environmental~~ In adopting SFAS No. 142 “Goodwill and Other Intangible Assets”, the Company ceased amortizing goodwill in the first quarter of fiscal 2003 and has assessed initial impairment under transitional rules as of March 31, 2002. The goodwill was acquired at a cost of approximately $6,200,000 and had previously been amortized on a straight-line basis over 40 years. Goodwill amortization for fiscal 2002 and 2001 was $189,000 each year. Accumulated amortization of goodwill was $2,639,000 at March 30, 2002. If no amortization had been recorded in fiscal 2002 and 2001, proforma net income would have been $3,375,000 and $9,138,000, respectively.

As During anthe ~~ongoing~~quarter ~~facet~~ended September 28, 2002, the Company completed its assessment of the ~~Company's~~estimated ~~business,~~fair itvalue isof ~~required~~its totwo reporting ~~maintain~~units ~~compliance~~under ~~with~~the ~~various~~transitional ~~environmental~~rules ~~regulations~~of SFAS No. ~~The~~142 ~~cost~~using a valuation method based on a multiple of ~~this~~earnings ~~compliance~~before isinterest, taxes, depreciation and ~~included~~amortization. For inpurposes of its assessment under SFAS No. 142, the Company's ~~operating~~concluded ~~results~~it ashad ~~incurred.~~two ~~These~~reporting units, ~~ongoing~~Hermetic ~~costs~~(consisting ~~include~~of ~~permitting~~Hermetic ~~fees~~Seal Corporation and ~~expenses~~its related entities/operations) and ~~specialized~~Glasseal ~~effluent~~(consisting ~~control~~of ~~systems~~Glasseal asProducts, ~~well~~Inc. asand its ~~monitoring~~subsidiary Sealtron, Inc.). For purposes of calculating earnings before interest, taxes, depreciation and amortization ~~site~~(“EBITDA”) ~~assessment~~of each of the reporting units, the Company used ~~costs~~forward ~~required~~12 bymonths ~~various~~forecasted ~~governmental~~operating ~~agencies.~~results Infor fiscal 2003 due to 1) the loss ~~opinion~~in March 2002 of ~~management~~SDI, formerly its largest customer and 2) the ~~maintenance~~significant decrease in sales to the telecommunications market. An allocation of ~~this~~the ~~compliance~~cost ~~will~~of ~~not~~shared ~~have~~resources aand ~~significant~~corporate expenses ~~effect~~directly onrelated to the ~~financial~~reporting ~~position~~units orwas ~~results~~also ofreflected ~~operations~~in EBITDA. The multiple applied against EBITDA was 5.7. As a result, the Company determined that the goodwill of the Company’s reporting units was fully impaired and has recorded an impairment charge of $3,561,000. No income tax benefit has been recognized for this charge, as the goodwill is not deductible for income tax purposes.

~~In August~~Impairment ~~1994, the U.S. Environmental Protection Agency ("EPA") identified the Company as a potentially responsible party ("PRP") in the El Monte Operable Unit ("EMOU")~~ of the San Gabriel Valley Superfund Sites. In early 1995, the Company and the EPA executed an Administrative Consent Order which requires the Company and other PRP's to perform a Remedial Investigation and Feasibility Study ("RI/FS") for the EMOU. The RI/FS was completed in 1999 and the EPA issued an interim record of decision. In addition, the Company's facility in Avon, Massachusetts is subject to Massachusetts "Chapter 21E", the State's hazardous site cleanLong-upLived program. Uncertainty as to (a) the extent to which the Company caused, if at all, the conditions being investigated, (b) the extent of environmental contamination and risks, (c) the applicability of changing and complex environmental laws (d) the number and financial viability of other PRP's, (e) the stage of the investigation and/or Assets

31 Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the Company evaluates the carrying value of its intangible assets and property, plant and equipment on an ongoing basis and recognizes an impairment when the estimated future undiscounted cash flows from operations are less than the carrying value of the related long-lived assets.

~~remediation,~~Fair ~~(f)~~Value ~~the unpredictability~~ of ~~investigation~~Financial and/or remediation costs (including as to when they will be incurred), (g) applicable clean-up standards, (h) the remediation (if any) that will ultimately be required, and (i) available technology make it difficult to assess the likelihood and scope of further investigation or remediation activities or to estimate the future costs of such activities if undertaken. In addition, liability under CERCLA is joint and several, and any potential inability of other PRP's to pay their pro rata share of the environmental remediation costs may result in the Company being required to bear costs in excess of its pro rata share. Instruments

In All financial ~~fiscal~~instruments ~~1997,~~are ~~the~~held ~~Company~~for ~~with~~purposes ~~the~~other ~~help~~than oftrading. The ~~independent~~estimated ~~consultants,~~fair ~~determined~~value aof ~~cost~~the ~~estimate~~Company’s ~~and~~long-term ~~accrued~~debt ~~$10,000,000~~is ~~for~~based on ~~existing~~either ~~estimated~~quoted ~~environmental~~market ~~remediation~~prices ~~and~~or ~~other related~~current ~~costs.~~rates ~~The~~for ~~time~~similar ~~frame~~issues ~~over~~for ~~which~~debt of the ~~Company~~same ~~expects~~remaining tomaturities. All other ~~incur~~non-derivative ~~such~~financial ~~costs~~instruments ~~varies~~as ~~with~~of ~~each~~March ~~site~~29, ~~ranging~~2003 upand toMarch 2030, 2002 ~~years.~~approximate ~~This~~their ~~estimate~~carrying isamounts ~~based~~either onbecause ~~progress~~of ~~made in determining~~ the ~~magnitude~~short maturity of ~~such~~the ~~costs~~instrument, ~~experience~~or ~~gained~~based ~~from sites~~ on ~~which~~their ~~remediation~~effective isinterest ~~ongoing~~rates orcompared ~~has~~to ~~been~~current market ~~completed,~~rates ~~and~~for ~~the~~similar ~~timing~~long-term ~~and~~debt ~~extent~~or ~~of remedial actions required by the applicable governmental authorities~~obligations.

~~As of~~Income March 31, 2001, the accrual for estimated environmental costs was $8,702,000. Actual expenditures for environmental remediation for each of the three years in the period ended March 31, 2001 were $476,000 (2001), $238,000 (2000) and $203,000 (1999). The Company believes its accrual is adequate, but as the scope of its obligations becomes more clearly defined, this accrual may be modified and related charges against earnings may be made. Taxes

~~Claims~~ The Company accounts for ~~recovery~~income oftaxes ~~costs~~under ~~already~~the ~~incurred~~liability method. Under this method, deferred tax assets and ~~future~~liabilities ~~costs~~are determined ~~have~~based ~~been~~on ~~asserted~~the ~~against~~differences ~~various~~between ~~insurance~~the ~~companies~~financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation ~~The~~allowances ~~Company~~are ~~has~~established ~~neither~~when ~~recorded~~necessary ~~any~~to ~~asset~~reduce deferred ~~nor~~tax ~~reduced~~assets ~~any~~to the amount expected to be realized. Significant ~~liability~~factors considered by management in ~~anticipation~~the determination of ~~recovery~~the ~~with~~probability ~~respect~~of realization toof ~~such~~deferred ~~claims~~tax ~~made~~assets include historical operating results and expectations of future earnings and taxable income. Income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities.

~~Other~~ 31

OnStock ~~March~~Based 3,Employee ~~1998,~~Compensation Walter Neubauer, a former stockholder of the Company and a current stockholder of SDI, filed a lawsuit in California Superior Court (Case BC186937; Walter Neubauer vs. Andrew Goldfarb, et. al.) against the Company and certain other stockholders alleging (i) breach of fiduciary duty, (ii) fraud, (iii) negligent misrepresentation, (iv) negligence, (v) violations of corporations code and (vi) breach of contract. The allegations primarily relate to the Company's exercise of an option to acquire Mr. Neubauer's stock in August 1996. In September 1999, five of the six claims were dismissed upon a summary judgement motion made by the Company, including all of the claims against the Company. The remaining claim is against Andrew Goldfarb, the former Chief Executive Officer, as an individual, for alleged violations of oral representations. Awards

On SFAS ~~May~~No. 7123, ~~1998,~~“Accounting for the ~~Company~~Awards ~~filed~~of aStock-Based ~~lawsuit~~Compensation ~~against~~to ~~Mr.~~Employees” encourages, ~~Neubauer~~but indoes ~~California~~not ~~Superior~~require ~~Court~~companies ~~alleging~~to ~~(i)~~record ~~breach~~compensation ofcost ~~contract,~~for stock-based ~~(ii)~~compensation ~~intentional~~plans ~~interference~~at ~~with~~fair ~~business relations~~value. ~~and~~The ~~(iii)~~Company ~~interference~~has ~~with~~adopted ~~prospective~~the ~~business~~disclosure ~~advantage~~requirements of SFAS No. ~~All~~123, ~~allegations~~which involves ~~relate~~pro toforma ~~violations~~disclosure of ~~the~~net ~~noncompetition~~income ~~agreement~~under ~~executed~~SFAS ~~by Mr~~No. ~~Neubauer~~123, indetailed descriptions ~~August~~of ~~1996.~~plan Aterms ~~preliminary~~and ~~injunction~~assumptions ~~was granted~~used in ~~September~~valuing ~~1998.~~stock option grants. The Company ishas ~~seeking~~chosen ~~damages~~to continue ofto ~~$50.0~~account ~~million.~~for ~~The~~stock-based ~~case~~employee ~~was~~compensation ~~consolidated~~awards in accordance with ~~Mr.~~Accounting ~~Neubauer's~~Principles ~~action,~~Board ~~discussed~~Opinion ~~above~~No. 25, “Accounting for Stock Issued to Employees”.

InImpact ~~addition~~Of toRecently ~~the~~Issued ~~above,~~Accounting the Company is involved in other claims and litigation arising in the normal course of business. Based on the advice of counsel and in the opinion of management, the ultimate resolution of these matters will not have a significant effect on the financial position or the results of operations of the Company. Standards

10 Statement of Financial Accounting Standard No. 145: ~~RELATED~~ In ~~PARTY~~May ~~TRANSACTIONS:~~ 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 145, “Rescission of FAS Nos. 4, 44, and 64, Amendment of FAS No. 13, and Technical Corrections.” Among other things, SFAS No. 145 rescinds various pronouncements regarding early extinguishments of debt and allows extraordinary accounting treatment for early extinguishment only when the provisions of Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations / Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” are met. SFAS No. 145 provisions regarding early extinguishment of debt are generally effective for fiscal years beginning after May 15, 2002. Management does not believe that the adoption of this statement will have a material impact on our consolidated financial statements.

~~The~~ Statement ~~Company~~of Financial ~~pays~~Accounting anStandard ~~annual~~No. ~~management~~146: In ~~fee~~July of2002, ~~$125~~the FASB issued SFAS No. 146,~~000~~ ~~plus~~“Accounting ~~expenses~~for Costs Associated with Exit or Disposal Activities.” This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to ~~Windward~~Exit ~~Capital~~an ~~Partners~~Activity (aincluding ~~member~~Certain ofCosts ~~the~~Incurred ~~investor~~in ~~group~~a Restructuring).” Under ~~The~~EITF ~~total~~Issue ~~annual~~No. 94-3, ~~management~~a liability for an exit cost is recognized at the date an entity commits ~~fee~~to an exit plan. SFAS No. 146 eliminates the definition and ~~expenses~~requirements ~~paid~~for torecognition ~~Windward~~of ~~Capital~~exit ~~Partners~~costs ~~was~~in EITF ~~$143,000,~~Issue ~~$218,000~~No. 94-3 and ~~$152,000~~requires that a liability for a cost associated with an exit or disposal activity be recognized when the ~~fiscal~~liability ~~years~~is ~~ended~~incurred. This ~~March~~Statement also establishes that fair value is the objective for initial measurement of the liability. The provisions of this Statement will be effective after December 31, ~~2001,~~2002. The adoption ~~April~~of 1,SFAS ~~2000~~No. 146 will affect the timing of the recognition of future costs associated with exit or disposal activities and ~~April~~will 3,not ~~1999,~~affect ~~respectively.~~previous charges related to such activities.

32 Statement of Financial Accounting Standard No.148: In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure — an amendment of SFAS No. 123.” This Statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The amendments to Statement 123 in paragraphs 2(a)-2(e) of this Statement shall be effective for financial statements for fiscal years ending after December 15, 2002. Earlier application of the transition provisions in paragraphs 2(a)-2(d) is permitted for entities with a fiscal year ending prior to December 15, 2002, provided that financial statements for the 2002 fiscal year have not been issued as of the date this Statement is issued. Early application of the disclosure provisions in paragraph 2(e) is encouraged. The amendment to Statement 123 in paragraph 2(f) of this Statement and the amendment to Opinion 28 in paragraph 3 shall be effective for financial reports containing condensed financial statements for interim periods beginning after December 15, 2002. The Company does not believe this standard will have a material impact on its financial position or results of its operations.

~~HCC INDUSTRIES INC. AND SUBSIDIARIES~~ 32

Financial Accounting ~~SCHEDULE~~Standards ~~II—VALUATION~~Board ~~AND~~Interpretation ~~QUALIFYING~~No. ~~ACCOUNTS~~ 45: In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This Interpretation clarifies the requirements for a guarantor’s accounting for and disclosures of certain guarantees issued and outstanding. This Interpretation also clarifies the requirements related to the recognition of a liability by a guarantor at the inception of a guarantee for the obligations the guarantor has undertaken in issuing that guarantee. The disclosure provisions of the Interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of this Interpretation did not have a material impact on the Company’s financial position, results of operations or cash flows.

Financial Accounting (Standards Board Interpretation No. 46: In ~~thousands)~~ January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities — an Interpretation of ARB No. 51.” The Interpretation clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The provisions of this Interpretation are effective for all enterprises with variable interests in variable interest entities created after January 31, 2003. The adoption of this Interpretation is not expected to have a significant impact on the Company’s financial results.

		Balance at Beginning of Year		Additions— Charged to Costs and Expenses		Deductions— Uncollectible Accounts Write Offs		Balance at End of Year
2001
	Allowance for doubtful accounts	$	51	$	81	$	71	$	61
2000
	Allowance for doubtful accounts	$	46	$	11	$	6	$	51
1999
	Allowance for doubtful accounts	$	40	$	6	$	—	$	46

2. INVENTORIES:

Inventories consist ~~Item~~of ~~9—Changes~~the following (in ~~and Disagreements with Accountants on Accounting and Financial Disclosure~~ thousands):

None

	March 29,		March 30,
	2003		2002

Raw materials and component parts	$	4,094	$	4,503
Work in process	1,080		1,513

	$	5,174	$	6,016

3. PROPERTY, PLANT ~~PART~~AND ~~III~~ EQUIPMENT:

Property, ~~Item~~plant ~~10—Directors~~ and ~~Executive~~equipment consist ~~Officers~~of ~~for~~ the ~~Registrant~~ following (in thousands):

Management

	March 29,			March 30,
	2003			2002

Land	$	4,017		$	4,017
Buildings and improvements	9,458			9,938
Furniture, fixtures and equipment	26,661			26,254

	40,136			40,209
Less accumulated depreciation	(17,858		)	(15,314		)
	$	22,278		$	24,895

~~The~~ Equipment ~~following~~acquired under ~~table~~capitalized ~~sets~~leases ~~forth~~is ~~certain~~included ~~information~~in ~~concerning~~ the ~~directors~~table ~~and~~above. The ~~executive~~cost ~~officers~~ of ~~the~~leased ~~Company.~~equipment ~~Each~~was ~~director~~$8,836,000 (2003) isand ~~elected~~$10,431,000 ~~for a one~~ (12002) ~~year~~. The ~~term~~accumulated oramortization ~~until~~was ~~such~~$2,651,000 ~~person's~~(2003) ~~successor is duly elected~~ and ~~qualified.~~$2,237,000 (2002).

Name	Age	Position
Richard Ferraid	45	Director, Chairman, President and CEO of HCC
Christopher H. Bateman	49	Director, Vice President and Chief Financial Officer of HCC
Robert H. Barton III	67	Director of HCC
Andy Goldfarb	53	Director of HCC
Fred Hauser	64	Director of HCC
John M. Leonis	67	Director of HCC
Robert H. Rau	64	Director of HCC
Thomas J. Sikorski	40	Director of HCC
Gary L. Swenson	63	Director of HCC

~~Mr.~~ The Company ~~Ferraid~~recognized ~~joined~~a ~~the~~$0.5 ~~Company~~million write-down in ~~1992~~the ~~and~~fair ~~currently~~value ~~serves~~of asone ~~the~~of ~~Chairman,~~its ~~President~~properties in ~~and~~the ~~Chief~~second ~~Executive~~quarter ~~Officer~~ of ~~HCC~~Fiscal 2003. The ~~Prior~~vacant toproperty ~~becoming~~located ~~the~~in ~~President~~Avon, ~~and~~Massachusetts ~~CEO~~had ofbeen ~~HCC~~held in ~~March~~ ~~2000,~~anticipation ~~he served~~of inpotential ~~various~~future ~~capacities~~use ~~including~~as ~~President~~a ofmanufacturing ~~Glasseal~~facility. In ~~from~~September ~~1994-2000.~~2002, ~~Mr.~~the ~~Ferraid~~Board ~~became~~authorized management ato ~~director~~pursue ofselling the ~~Company~~property. Based inon ~~February~~recent ~~1997~~market ~~following~~activity ~~the~~and ~~consummation~~management’s ofbest estimate, the ~~Recapitalization. Mr.~~fair ~~Ferraid~~value ~~previously~~of ~~worked~~the atproperty ~~Electrical~~was ~~Industries,~~less athan ~~competitor~~the ofcurrent ~~the~~book ~~Company.~~value ~~Mr.~~and ~~Ferraid~~required ~~has~~a corresponding ~~over~~write-down 20to ~~years~~properly ofreflect ~~experience~~its inestimated ~~the~~fair ~~GTMS~~market ~~industry~~value.

Mr4. ~~Bateman~~ ACCRUED joined the Company in 1986 and has served in various capacities. He currently serves as Vice President, Secretary and Chief Financial Officer of HCC. Mr. Bateman has been a director of the Company since 1989. Prior to joining HCC, Mr. Bateman worked for Touche Ross & Co. from LIABILITIES

33Accured liabilities consist of the following (in thousands):

1978 through 1986. He currently serves on the Board of Directors of Methodist Hospital Foundation, a non-profit foundation.

	March 29,		March 30,
	2003		2002

Accrued compensation	$	1,747	$	2,689
Accrued interest	3,251		3,251
Accrued other	1,469		1,781

	$	6,467	$	7,721

Mr5. LONG-TERM Barton was elected a director of HCC in February 1997 following the consummation of the Recapitalization. Mr. Barton was elected Chairman of French Holdings, Inc. in October 1996 and Chairman and CEO of Meridian Automotive Systems, Inc. in April 1997. Mr. Barton was Chairman, President and Chief Executive Officer of Alcoa Fujikura Ltd. from May 1984 to December 1996. He currently serves on the Board of Directors of and as senior advisor to Alcoa Fujikura Ltd., and is Chairman, President and Chief Executive Officer of Meridian Automotive Systems, Inc. DEBT:

~~Mr. Goldfarb~~ Long-term ~~retired~~debt asconsists ~~Chairman, Chief Executive Officer and President~~ of ~~HCC in January 2000 after having served in various capacities since 1976. Mr. Goldfarb has been a director~~the offollowing ~~the Company since 1979 and continues to serve the Company~~ (in ~~that role. He currently serves on the Board of Directors of Safety Components International.~~ thousands):

Mr. Hauser was elected a director of HCC in April 1999. Mr. Hauser retired from Metropolitan Life Insurance Company in 1997 as Senior Vice President and Corporate Controller after 39 years with the company. Mr. Hauser has served as a director of METMOR, MetLife's mortgage banking operations, and MetLife Securities, a broker dealer. Mr. Hauser has also served on the board of the New York chapter of the Financial Executives Institute, an organization of Chief Financial Officers, Treasurers and Controllers of major corporations, and was its President in 1993-1994.

	March 29,		March 30,
	2003		2002
10 ¾% Senior Subordinated Notes - interest payable semi-annually; due May 15, 2007	$	79,785	$	79,785

Term loans on land, building and improvements - 8% interest payable monthly; due May 2008	2,763		2,762

Capital lease obligations (interest rates ranging between 6.36% and 9.63%)	4,064		6,189

	86,612		88,736
Less current portion	1,779		2,109

	$	84,833	$	86,627

~~Mr.~~ On ~~Leonis~~May ~~was~~6, ~~elected~~1997, athe ~~director~~Company ofissued ~~HCC~~$90,000,000 in ~~July~~principal ~~1997.~~amount ~~Mr.~~of ~~Leonis~~10 ~~retired~~¾% asSenior Subordinated ~~Chairman~~Notes of(“Notes”) due in May 2007 and used the ~~Board~~proceeds of ~~Directors~~such issuance ofto ~~Litton~~refinance ~~Industries,~~existing ~~Inc~~debt. In issuing the Notes, the Company incurred $3,870,000 in ~~April~~deferred ~~1999~~financing costs. These ~~Mr.~~costs ~~Leonis~~are ~~worked~~being ~~at Litton~~amortized ~~Industries~~using inthe ~~various~~straight-line ~~capacities~~method ~~for~~(which approximates the effective interest method) over 36the ~~years.~~term Mrof the respective Notes. At ~~Leonis~~March ~~currently~~29, ~~serves~~2003, asthe aunamortized ~~member~~deferred offinancing cost was $1,394,000. The Notes are redeemable at the ~~Board~~option of ~~Directors~~the Company commencing on May 15 of ~~Litton~~the ~~Industries~~year set forth at the following redemption prices: 105.375% (2002), 103.583% (2003), 101.792% (2004) and 100% (2005 and thereafter).

Mr. Rau was elected a director of HCC in July 1998. Mr. Rau retired December 31, 1998 as President of the Aerostructures Group of The BFGoodrich Company. Prior to its merger with BFGoodrich, Mr. Rau was President and Chief Executive Officer of Rohr, Inc. from 1993 to 1997. Before joining Rohr, he was an Executive Vice President of Parker Hannifin Corporation and President of its Aerospace Sector. In addition, Mr. Rau is a past member of the Board of Governors of the Aerospace Industries Association, a past Chairman of the General Aviation Manufacturers Association, a member of the Board of Trustees of Whittier College and a member of the Board of Directors of B. F. Goodrich Aerospace Europe and Chairman of the International Advisory Panel of Singapore Aerospace. 34

~~Mr. Sikorski~~ During ~~was~~fiscal ~~elected~~year a2001, ~~director of HCC in February 1997 following~~ the ~~consummation~~Company purchased offor ~~the~~retirement ~~Recapitalization~~$10.2 ~~Mr.~~million ~~Sikorski~~face ~~has~~value ~~been a Managing Director~~ of ~~Windward~~the ~~Capital~~Notes ~~Partners, L.P.~~for ~~since its founding in 1994~~$4.6 ~~Prior to joining Windward Capital Partners, L.P., Mr. Sikorski was Director of Private Equity Investments at MetLife from 1992 to 1994 and prior to that was a Vice~~million ~~President~~ in ~~the leveraged Buyout Group at the First Boston Corporation from 1986 to 1992~~cash. The ~~Mr.~~transaction ~~Sikorski~~resulted ~~currently~~in ~~serves~~an extraordinary gain on the ~~Board~~early retirement of ~~Directors~~debt of ~~Furr's Supermarkets, Inc~~$3.,2 ~~DCV Holdings~~million, ~~Inc.~~net ~~and~~of ~~Palace~~taxes ~~Entertainment,~~of ~~Inc~~$2.1 Mrmillion. ~~Sikorski is Mr. Swenson's son-in-law.~~

~~Mr.~~ Minimum ~~Swenson~~payments ~~was~~due ~~elected~~under along-term ~~director~~debt ofas ~~HCC in February 1997 following the consummation~~ of ~~the~~March ~~Recapitalization. Mr. Swenson has been President and Senior Managing Director of Windward Capital Partners~~29, ~~L.P.~~2003 ~~since~~are ~~it's~~as ~~founding~~follows (in ~~1994, and was a Managing Director of CS First Boston Corporation from 1974 to 1994. Mr. Swenson currently serves on the Board of Directors of Furr's~~ ~~Supermarkets, Inc. and Meridian Automotive Systems, Inc. Mr. Swenson is Mr. Sikorski's father-in-law.~~ thousands):

	Capitalized Leases
			Less
Fiscal	Total		Interest		Net		Other
Year	Obligation		Portion		Amount		Debt		Total
2004	$	2,039	$	260	$	1,779	$	—	$	1,779
2005	1,657		125		1,532		—		1,532
2006	732		29		703		—		703
2007	51		1		50		—		50
2008							79,785		79,785
2009 and thereafter							2,763		2,763
	$	4,479	$	415	$	4,064	$	82,548	$	86,612

The fair value of the 10 ¾% Senior Subordinated Notes (“Notes”) may vary from time to time based on Company specific factors and ~~Item~~other ~~11—Executive~~market ~~Compensation~~ related factors external to the Company. Presently, the Company is unaware of any recent trading activity or trade prices, however, the Company believes the fair value of the Notes may be significantly less than the carrying value. This belief is based upon the current market conditions in the high-yield bond market, the recent losses incurred by the Company and the Company’s knowledge of the past limited trading activity in the Notes including the Company’s repurchase of Notes in fiscal 2001. Further, continued poor operating performance by the Company may negatively impact the credit quality of the Notes, which may have a negative impact on the fair value of the Notes. Although the Company believes that the fair value of the Notes may be significantly less than the carrying value, settlement of the Notes at less than the carrying amount may not be possible or may not be a prudent management decision.

The following table sets forth the total value of compensation received by the Chief Executive Officer and the two most highly compensated executive officers, other than the Chief Executive Officer, who served as executive officers of the Company as of March 31, 2001, (collectively with the Chief Executive Officer, the "Named Executive Officers") for services rendered in all capacities to the Company for the year ended March 31, 20016. REVOLVING CREDIT FACILITY:

~~Summary~~ On June ~~Compensation~~18, ~~Table~~2003, the Company entered into a $7.5M Revolving Credit Agreement (the “Revolver”). Under the terms of the Revolver, the Company may borrow up to 85% of eligible accounts receivable. The Revolver provides for interest on outstanding balances at the bank’s prime rate plus 1 ½% (or LIBOR plus 3½%) and is collateralized by accounts receivable, inventories, equipment and intangible assets of the Company. There are no borrowings outstanding under the Revolver and on June 18, 2003, approximately $4,000,000 was available. The Revolver includes covenants requiring maintenance of certain financial ratios.

							Long-Term Compensation— Number of Securities Underlying Options
		Annual Compensation
Name and Principal Position	Fiscal Year								All Other Compensation(2)
		Salary		Bonus
Richard Ferraid Chairman, Chief Executive Officer and President	2001 2000 1999	$$$	350,000 218,806 205,418	$$$	526,968 51,150 40,000	(3)	$	17,000 — —	$$$	14,790 13,590 13,608
Christopher Bateman Chief Financial Officer and Vice President	2001 2000 1999	$$$	212,496 207,874 205,418	$$$	476,968 51,150 20,000	(3)		— — —	$$$	15,360 20,058 24,033
Dennis Moore Vice President	2001 2000 1999	$$$	119,910 117,359 116,522	$$$	257,858 28,859 29,494	(3)		— — —	$$$	15,922 9,955 10,043

~~Grants~~7. TAXES ofON ~~Stock Options~~ EARNINGS:

~~Options on 3,000 shares were granted to Mr. Ferraid during the fiscal year ended March 31, 2001. These options vest at 1/3 per year for calendar years 2001,~~ ~~2002 and 2003. Options on 2,500 shares were granted to Mr. Ferraid during the fiscal year ended April 1, 2000.~~ The ~~options~~components ~~vest~~of atincome ~~1/3~~tax ~~per~~expense ~~year~~(benefit) ~~for~~before ~~fiscal~~extraordinary ~~years 2001, 2002 and 2003. These options are~~item ~~not~~consist ~~part~~ of the ~~Option Plan as discussed below.~~ following

35(in thousands):

The following table sets forth information concerning the value of unexercised options held by the Named Executive Officers. The Named Executive Officers did not exercise any options during the fiscal year ended March 31, 2001.

	2003			2002		2001
Current:
Federal	$	(2,915	)	$	749	$	1,190
State	(35		)	53		163
	(2,950)			802		1,353

Deferred:
Federal	1,711			751		1,378
State	348			152		244
	2,059			903		1,622

	$	(891)		$	1,705	$	2,975

	Options Outstanding at March 31, 2001
Name	Number of Shares Under Option— Exercisable/ Unexercisable	Value of Unexercised Options— Exercisable/ Unexercisable(1)
Richard Ferraid	577/8,513	$123,373/$370,000
Christopher Bateman	244/2,951	$—/$—
Dennis Moore	71/1,074	$—/$—

The Company’s effective tax rate differs from the statutory federal income tax rate as follows:

Employment Agreements

	2003		2002		2001

Tax provision (benefit) at the statutory rate	(34.0	)%	34.0	%	34.0	%
Valuation allowance	22.6	%	—		—
Nondeductible expenses	0.1	%	1.5	%	0.7	%
State taxes, net of federal benefit	0.1	%	2.8	%	1.6	%
Other	(0.2	)%	(3.4	)%	(2.2	)%

	(11.4	)%	34.9	%	34.1	%

In The ~~March~~components ~~2000,~~of ~~Richard Ferraid entered into an employment agreement with HCC (~~the ~~"Employment~~net ~~Agreement").~~deferred ~~Pursuant to the Employment Agreement,~~taxes ~~Mr. Ferraid~~are ~~will be employed by HCC until March 31, 2003 provided that HCC may terminate Mr. Ferraid by reason of disability, death or for good cause (~~as ~~defined~~follows (in ~~the Employment Agreement~~thousands). Upon termination by the Company for reasons other than death, disability or good cause, Mr. Ferraid will be entitled to receive salary and benefits for a period of 24 months. The agreement provides for a base salary to be determined in accordance with HCC's policies and an annual bonus contingent on certain performance-based criteria. Pursuant to the terms of the agreement, Mr. Ferraid, during the term of the Employment Agreement and a one year period thereafter, may not solicit customers of the Company, engage in business with any competing entity or induce any other employee of the Company to leave his or her employment with the Company. On December 31, 2000, Mr. Ferraid's employment agreement was amended to reflect the additional stock options granted to him. :

Mr. Goldfarb's employment with the Company expired on April 1, 2000. In fiscal 2001, the Company executed an agreement that compensates Mr. Goldfarb at $156,000 per year for consulting services and certain non-compete provisions. The agreement has a two-year term and expires on March 31, 2002.

	March 29,			March 30,
	2003			2002
Deferred Tax Assets:
Environmental liabilities	$	2,980		$	3,270
Accrued vacation and other	566			461
	3,546			3,731
Deferred Tax Liabilities:
Depreciation and other	(1,787		)	(1,647		)

Deferred Tax Asset, net	1,759			2,084

Valuation allowance	(1,759		)	—

Deferred Tax Asset, net	$	—		$	2,084

~~Mr. Rau~~ During ~~served~~Fiscal ~~as the Chief Executive Officer (CEO) of the Company from January 3~~2003, ~~2000 through March 8, 2000 (when Mr. Ferraid was named CEO) and agreed to serve as~~ the ~~Non-Executive Chairman of the~~ Company ~~for~~recorded a ~~one~~full valuation ~~year~~allowance ~~period~~against ~~ending~~its ~~December 31,~~deferred ~~2000.~~tax ~~Mr. Rau's compensation for the period was $450~~assets,~~000~~ ofas ~~which~~it ~~$200,000~~ was ~~paid~~determined ~~in the fiscal year~~that ~~ended~~it ~~April 1, 2000. Mr. Rau~~ was ~~also~~more ~~given~~likely anthan ~~option~~not tothat ~~purchase~~they ~~2,450~~will ~~shares~~not ofbe ~~HCC stock at a price of $50,000, which purchase was made in June 2000~~realized.

~~Option Plan~~ 36

In8. CAPITAL connection with the Recapitalization, HCC adopted the Option Plan which provides for the grant to employees from time to time of non-qualified stock options to purchase up to an aggregate of 22,887 shares (reduced to 17,990 shares in December 2000) of Common Stock at exercise prices to be STOCK:

36 The Company is authorized to issue an aggregate of 550,000 shares of common stock. These shares may be issued in four different classes (A, B, C or D shares) which differ only in voting rights per share as follows:

determined by the Board of Directors. The Option Plan provides for the grant of management options to purchase 5,485 shares of Common Stock (the "Management Options"), management performance options to purchase 10,870 shares of Common Stock (the "Management Performance Options"), director options to non-affiliates of Windward to purchase 585 shares of Common Stock (the "Director Options"), and director performance options to non-affiliates of Windward to purchase 1,120 shares of Common Stock (the "Director Performance Options"). The Management Options and Director Options were granted subject to an EBITDA (as defined in the Option Plan) vesting schedule that provides for 20% of each series of options to vest in each of fiscal year 1998 through fiscal year 2002 if the Company attains a specified target for each such year. The Options will also vest if certain cumulative EBITDA targets are achieved after certain multiple year periods or, so long as the Windward Group realizes specified rates of return on its aggregate equity investment, upon a Change of Control (as defined in the Option Plan). In addition, regardless of whether the performance criteria are achieved, all Options including, the performance-based Options, will vest automatically on the seventh anniversary of the date of grant. To date, only 20% of stock options related to the Management Options and Director Options have vested.

		Voting Rights
Class		Per Share
A		1
B		1
C		None
D		10

~~The Management~~ During ~~Performance~~fiscal ~~Options~~year ~~and~~2001, ~~Director~~the Company ~~Performance~~sold ~~Options~~2,450 ~~were~~shares ~~granted~~of ~~subject~~Class toA acommon ~~vesting~~stock ~~schedule~~to ~~providing~~the ~~for~~Company’s ~~approximately~~Chairman for $50%,000. In ofconjunction ~~each~~with ~~series~~this transaction, ofthe ~~options~~Company torecorded ~~vest~~non-cash ~~upon~~compensation ~~a Change~~ of ~~Control~~$76,000 induring fiscal ~~which~~year ~~the~~2001. The ~~Windward~~changes ~~Group~~in ~~realizes~~each class aof ~~30%~~common ~~compounded~~shares ~~annual~~for ~~rate~~each of ~~return~~the onthree ~~its~~years ~~aggregate equity investment~~ in the ~~Company~~period ~~and~~ended ~~the remaining options vesting upon a Change of~~March ~~Control~~29, in2003 ~~which~~are ~~Windward~~as ~~Group~~follows ~~realizes a 40% compounded annual rate of return on its aggregate equity investment~~ (in ~~the Company.~~ thousands):

As of March 31, 2001, 17,390 options have been granted under the Option Plan which entitle the holders to purchase upon vesting 17,390 shares of Common Stock at an exercise price of $370.49 per share. An additional 600 Management Options and Management Performance Options may be granted under the Option Plan.

	Class of Common Stock
	A			B			C			D			Total
		Par			Par			Par			Par			Par
	Shares	Value		Shares	Value		Shares	Value		Shares	Value		Shares	Value

Balance - April 1, 2000	103	$	10	27	$	3	4	$	1	1	$	—	135	$	14
Sale of Stock (2001)	3	—		—	—		—	—		—	—		3	—

Balance - March 29, 2003	106	$	10	27	$	3	4	$	1	1	$	—	138	$	14

~~Contingent~~ ~~Bonus~~The ~~Plan~~ remaining 412,055 shares are undesignated as to class.

In February ~~connection~~1997, ~~with~~ the ~~Recapitalization,~~Company ~~HCC~~ adopted a stock option plan (the ~~Bonus~~“Option Plan”) which provides for the grant to employees and directors, ~~pursuant~~from time to ~~which~~time, of non-qualified stock options to purchase up to an aggregate of 17,990 shares of common stock at exercise prices to be determined by the ~~Company~~Board ~~will~~of Directors. The Option Plan provides for the grant ~~Bonus~~of ~~Units~~management ~~(each~~options ~~representing~~to anpurchase ~~interest~~5,485 inshares of common stock (the ~~bonus~~“Management ~~pool~~Options”), management performance options to purchase 10,870 shares of ~~$6.0~~common ~~million~~stock (the “Management Performance Options”), director options to purchase ~~certain~~515 ~~key~~shares of common stock (the “Director Options”) and director ~~employees~~performance options to purchase 1,120 shares of common stock (the ~~"Participants"~~“Director Performance Options”). The ~~Bonus~~Management Options ~~Units~~and ~~will~~Director beOptions ~~awarded~~are bysubject to a ~~committee~~vesting schedule that generally provides for each series of options to vest 20% per year over five years if the Company ~~Board~~attains ofspecified ~~Directors~~annual ofor ~~HCC~~cumulative ~~formed~~earnings totargets ~~administer~~as defined in the ~~Bonus~~Option Plan. The OnManagement Performance ~~April 3,~~Options ~~1999~~ and ~~March 28,~~Director ~~1998,~~Performance Options are subject to a vesting ~~$1.1~~schedule ~~million~~based ~~and~~on ~~$3.0~~a ~~million~~change in control in which the investor group realizes specified annual rates of ~~Bonus~~return ~~Units~~on ~~became~~its ~~vested,~~equity ~~respectively~~investment in the Company as defined in the Option Plan. All ~~Vested~~options are ~~contingent~~exercisable ~~bonuses~~over ~~become~~a ~~due~~period of 10 years and ~~payable~~will automatically vest on the seventh ~~third~~ anniversary of the ~~applicable~~date ~~vesting~~on ~~date~~which ~~and~~the ~~will~~Option ~~bear interest~~Plan atwas ~~10%~~adopted, regardless ~~per~~of ~~annum~~whether ~~(payable~~the ~~semi-annually~~performance incriteria ~~arrears)~~are ~~from~~achieved. As ~~each~~of ~~applicable~~March ~~vesting~~29, ~~date~~2003, ~~until~~15,815 ~~paid~~options inhave been ~~full.~~granted ~~Pursuant~~under tothe ~~this~~Option Plan, which entitles the ~~$3.0~~holders ~~million~~to ofpurchase ~~Bonus~~upon vesting ~~Units~~15,815 ~~vested~~shares inof ~~1998~~common ~~were~~stock ~~paid during~~at ~~fiscal~~an ~~2001~~exercise price of $370.49 per share.

Under the terms of the Bonus Plan, all of an employee's Bonus Units terminate immediately when such employee ceases to be employed by the Company, unless such employment ceases due to such employees' death or disability, in which case such employee will be vested in a portion of such employee's Bonus Units. 37

37 The Company granted options to purchase 3,000 and 2,500 shares of common stock during fiscal years 2001 and 2000, respectively, with an exercise price of $370 per share (or higher), which is equal to (or above) the fair value of common stock at the date of grant, except for 1,000 options in fiscal year 2000 with an exercise price below estimated fair market value. Such difference will be recognized as additional compensation expense on a straight line basis over the vesting period of the underlying options. During fiscal year 2002 and 2001, the Company recorded non-cash compensation of $17,000 related to these options.

~~Director~~ The weighted ~~Compensation~~ average fair value of each option granted was estimated on the date of grant to be approximately $85 to $100 using the minimum value method with the following assumptions (i) risk-free interest rate of 5.32% and 6.38% for fiscal 2001 and 2000, respectively, (ii) expected option life of 5 years, (iii) forfeiture rate of 0 and (iv) no expected dividends.

~~Each of Messrs. Barton, Leonis, Rau and Hauser receive an annual fee of $20,000. In addition, Mr. Rau received a fee of $250,000 and $200,000 in fiscal 2001~~ The ~~and~~following ~~2000,~~table ~~respectively,~~summarizes ~~for~~outstanding ~~serving as Chairman of the Board. Messrs. Barton, Leonis and Rau were granted 695, 470 and 470~~ stock options, respectively, of which 215, 150 and 150, respectively, are subject to a vesting schedule that generally provides for each option to vest 20% per year over five years (25% over four years for Mr. Rau) commencing on the first anniversary of the date of grant if the Company attains specified annual or cumulative earnings targets set forth in the Option Plan and the remaining options vest upon a change in control in which the Windward Group realized specified annual rates of return on its equity investment in the Company as defined in the Option Plan. All options automatically vest on the seventh anniversary of the date of grant regardless of whether the performance criteria are achieved. All options have an exercise price equal to the fair value of the common stock at the date of grant ($370.49 per share). :

Compensation Committee Interlocks and Insider Participation

		Weighted
	Number	Average
	of Shares	Exercise Price

Outstanding at April 1, 2000	21,325	$	379.18
Granted	5,000	740.98
Canceled	3,435	370.49
Outstanding at March 31, 2001	22,890	459.51
Canceled	160	370.49
Outstanding at March 30, 2002	22,730	460.14
Canceled	1,415	370.49
Outstanding at March 29, 2003	21,315	$	466.09

In The ~~fiscal~~following ~~2001,~~table ~~the~~summarizes information ~~Company~~concerning ~~had~~currently nooutstanding ~~compensation committee~~ and ~~compensation~~exercisable ~~matters~~stock ~~were~~options ~~handled~~at March ~~either~~29, ~~by Mr. Ferraid or by the Board of Directors.~~ 2003:

Item 12—Security Ownership of Certain Beneficial Owners and Management

		Weighted
		Average
Exercise	Number	Remaining	Number
Price	Outstanding	Life	Exercisable

0.00	1,000	7.0	1,000
370.49	15,815	4.3	1,200
740.98	2,500	7.3	1,667
1,111.47	2,000	7.8	1,333
	21,315		5,200

The Company ~~following~~has ~~table~~adopted ~~lists~~the ~~all~~disclosure ~~shares~~only provisions of ~~HCC's~~SFAS ~~Common~~No. ~~Stock~~123. For asthe ofyears ended March 3129, ~~2001~~2003, ~~beneficially owned by each director of HCC~~March 30, ~~each~~2002 ~~executive officer of HCC~~ and ~~each~~ ~~person~~March ~~known~~31, by2001, had the Company torecognized ~~beneficially~~compensation ~~own~~expense ~~more~~in accordance ~~than~~with 5%Statement of ~~such~~Financial ~~outstanding~~Accounting ~~shares~~Standards ~~of Common Stock at such date~~No. ~~The~~123, ~~table~~“Accounting for ~~also~~Stock-Based ~~reflects~~Compensation”, ~~the~~net ~~percentage~~earnings of(loss) ~~the~~would ~~shares~~have ~~owned beneficially by~~been ~~all~~($10,487,000), ~~executive~~$2,938,000 ~~officers~~ and ~~directors of HCC as a group. Share numbers and percentages in the table are rounded to the nearest whole share. As of March 31~~$8, ~~2001 there were 137~~715,~~945~~000, ~~shares of HCC Common Stock outstanding~~respectively.

Name and Address of Beneficial Owners	Number of Shares of Common Stock*	Percent
Windward/Park HCC, L.L.C.(a)(b)	53,836	39.0	%
Windward/Merban, L.P.(a)(b)	10,767	7.8	%
Windward/Merchant, L.P.(a)(b)	21,535	15.6	%
Windward Capital Associates, L.P.(a)(b)(c)	87,721	63.6	%
Windward Capital Associates, Inc.(b)(c)	87,721	63.6	%
Gary Swenson(b)(d)(e)	87,721	63.6	%
Thomas J. Sikorski(b)(e)	—	**
Robert Barton(h)	—	**
John M. Leonis(h)	270	0.2	%
Robert Rau(g)(h)	2,720	2.0	%
Fred Hauser(h)	—	**
Andrew Goldarb(h)(k)	30,453	22.1	%
Christopher Bateman(h)(i)(j)	9,173	6.6	%
Richard Ferraid(h)(j)	3,558	2.6	%
All directors and executive officers of the Company as a group (7 persons)(j)(l)	46,174	33.5	%

389. EMPLOYEE BENEFITS:

~~L.P.~~ In 1993, the Company adopted the HCC Savings and ~~Windward/Merchant,~~Investment LPlan (the “Plan”) which covers all eligible full-time employees.P The Company established the Plan to meet the requirements of a qualified retirement plan pursuant to the provisions of Section 401(k) of the Internal Revenue Code., The ~~all~~Plan ~~other~~provides ~~stockholders~~participants the opportunity to make tax deferred contributions to a retirement trust account in amounts up to 15% of ~~HCC~~their ~~own~~gross ~~Class~~wages. The ACompany ~~Common~~has ~~Stock~~elected to make matching contributions in amounts that may change from year to year. The Company ~~See~~contributed ~~note~~$543,000 (a2003), ~~below.~~$668,000 (2002), and $667,000 (2001) in matching contributions to the Plan.

3910. ENVIRONMENTAL AND OTHER LIABILITIES:

Environmental and ~~Item~~other ~~13—Certain~~liabilities ~~Relationships~~consist ~~and~~of ~~Related~~the following ~~Transactions~~ (in thousands):

The Company pays an annual management fee of $125,000 plus expenses to Windward Capital Partners (a member of the investor group). The total annual management fee and expenses paid to Windward Capital Partners was $143,000, $218,000 and $152,000 for the fiscal years ended March 31, 2001, April 1, 2000 and April 3, 1999, respectively.

	March 29,		March 30,
	2003		2002

Due to Selling Shareholders	$	991	$	940
Environmental Liability	7,438		8,174

	$	8,429	$	9,114

40The due to Selling Shareholders represents interest earned to the benefit of the Selling Shareholders on the restricted cash account in accordance with the terms of the Recapitalization transaction in February 1997. Payment of this liability is subject to the same limitations as the Restricted Cash. (See Note 1).

In August 1994, the U.S. Environmental Protection Agency (“EPA”) identified the Company as a ~~PART~~potentially IV responsible party (“PRP”) in the El Monte Operable Unit (“EMOU”) of the San Gabriel Valley Superfund Sites. In early 1995, the Company and the EPA executed an Administrative Consent Order which requires the Company and other PRP’s to perform a Remedial Investigation and Feasibility Study (“RI/FS”) for the EMOU. The RI/FS was completed in 1999 and the EPA issued an interim record of decision. In addition, the Company’s facility in Avon, Massachusetts is subject to Massachusetts “Chapter 21E”, the State’s hazardous site clean-up program. Uncertainty as to (a) the extent to which the Company caused, if at all, the conditions being investigated, (b) the extent of environmental contamination and risks, (c) the applicability of changing and complex environmental laws (d) the number and financial viability of other PRP’s, (e) the stage of the investigation and/or remediation, (f) the unpredictability of investigation and/or remediation costs (including as to when they will be incurred), (g) applicable clean-up standards, (h) the remediation (if any) that will ultimately be required, and (i) available technology make it difficult to assess the likelihood and scope of further investigation or remediation activities or to estimate the future costs of such activities if undertaken. In addition, liability under CERCLA is joint and several, and any potential inability of other PRP’s to pay their pro rata share of the environmental remediation costs may result in the Company being required to bear costs in excess of its pro rata share.

In fiscal 1997, ~~Item~~the ~~14—Exhibits~~Company determined a cost estimate and accrued $10,000,000 ~~Financial~~for ~~Statement~~existing estimated ~~Schedules~~environmental remediation and other related costs. The time frame over which the Company expects to incur such costs varies with each site, ranging up to 30 years. The most significant judgments and ~~Reports~~assumptions underlying the measurement of the environme

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