In April, 1999, The Fairchild Corporation acquired Kaynar Technologies, and in a single stroke became the dominant player in the aerospace fastener industry. With what we internally estimate to be in excess of 40% world market share.

The Kaynar Technologies acquisition required us to stretch financially. We spent the last quarter of fiscal 1999, and all of fiscal 2000, digesting, rationalizing and integrating the businesses of Kaynar. We have melded into one the best of both businesses.

We have done this amidst a market where worldwide sales have declined and when all of our competition was striving to gain or at least not lose market share.

Our synergistic cost savings in this fiscal year alone were in excess of $20 million. Many more opportunities for cost savings exist and we will certainly avail ourselves of these opportunities.

We had been preparing ourselves for some time, by divesting non-core assets and increasingly narrowing the focus of our business. Dispositions such as that of Nacanco for over $48.2 million could not happen overnight. We recognized a $25.7 million pre-tax gain from the disposition of Nacanco. Our disposition of the Dallas Aerospace engine business for $57 million too had long been planned, but could not have been better timed. With these transactions, we were able to reduce and provide the financial flexibility to concentrate on our Fairchild Fasteners business.

We also disposed of FA Technologies Division. One of these dispositions provided a special dividend. The spin-off and sale of Fairchild Technologies' optical disc equipment business provided our shareholders an opportunity to participate in the growth of Global Sources, a dynamic and profitable business-to-business, on-line marketplace services provider. Analyst reports by Bear Stearns and Merrill Lynch, and an industry report by the Aberdeen Group, may provide you with interesting information on Global Sources and its business.

As the aerospace markets begin their upturn, we can see the tangible results of our efforts. In fiscal 2000, revenues in our aerospace fasteners segment totaled $534 million, an increase of 21% over last year, while our consolidated operating profit improved by $69.2 million. Our net earnings improved 42 cents per share. After adjusting for one-time events, EBITDA from Fairchild Fasteners would have been approximately $87 million. We believe that the bulk of one-time charges are behind us, and that we can look forward to solid performance from our core business.

Our consolidated sales for the year improved by 2.9% to $635.4 million, primarily from the 21% increase in fastener sales, offset by the partial year impact of the disposition of Dallas Aerospace and the impact on revenues of foreign currency fluctuations of approximately $7 million. Our operating income improved by $69 million, to $23 million, in part because the prior year included one-time charges from the dispositions of Solair, Inc. and Dallas Aerospace, and costs related to the acquisition of Kaynar Technologies. Our net earnings improved to $0.39 per share from a loss of $2.59 per share a year ago.

I believe that the global economic environment is substantially better than it was when I reported to you twelve months ago, and I am certain that we are in a considerably stronger position to take advantage of it.

I am confident that the determination of our work force, the skills of our experienced management, our strategic market position, and our financial vision will provide us with performance in the years to come on which we will be able to look back with pride and satisfaction.

Sincerely,
Jeffrey J. Steiner
Chairman & Chief Executive Officer