ADVANCED TECHNICAL PRODUCTS INC, 10-K405, 1999-03-31

ADVANCED TECHNICAL PRODUCTS INC
10-K405, 1999-03-31
METAL FORGINGS & STAMPINGS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1998

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 0-1298

ADVANCED TECHNICAL PRODUCTS, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 11-1581582
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

200 MANSELL CT. EAST, SUITE 505
ROSWELL, GEORGIA 30076
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (770) 993-0291

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Common Stock, $0.01 par value Nasdaq / National Market System

Indicate by 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 months (or for such 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 [ ]

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant on March 23, 1999 was $36,414,354 (3,711,017 shares at $9.8125 per
share, the closing price of the registrant's common stock on the Nasdaq National
Market on March 23, 1999). As of that date, 5,252,235 shares of the Company's
Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

THE INFORMATION REQUIRED BY PART III IS INCORPORATED BY REFERENCE FROM THE
REGISTRANT'S DEFINITIVE PROXY STATEMENT TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO REGULATION 14A NOT LATER THAN 120 DAYS AFTER THE
END OF THE FISCAL YEAR COVERED BY THIS REPORT.
<PAGE>
PART I

ITEM 1. BUSINESS

GENERAL

Advanced Technical Products, Inc. ("ATP" or "Company") is a Delaware
corporation that manufactures a variety of products in two principal business
segments, an aerospace and defense segment and a commercial segment. Such
products are manufactured through five business units, Marion Composites,
Intellitec, Lincoln Composites, Alcore and Lunn Industries. The aerospace and
defense segment designs, develops and manufactures advanced composite material
products used in the aerospace and defense industries, including radomes,
aircraft components, missile and satellite composite structures, engine
components, rocket motor cases, pressure vessels, relocatable shelters, missile
launch tubes, torque shafts and fuel tanks, as well as a wide range of
integrated defense systems including electro-optical systems, chemical detection
systems, ordnance delivery systems and light-weight camouflage systems. The
commercial segment produces natural gas vehicle ("NGV") fuel tanks, specialty
vehicle electronic products, products used in the exploration and production of
oil and gas and aluminum honeycomb products used by industrial, transportation
and construction customers. See Note 4 to the consolidated financial statements
of the Company for a summary of selected financial data of each reportable
business segment.

On October 31, 1997, TPG Holdings, Inc., a Delaware corporation ("TPG"),
merged (the "Merger") with Lunn Industries, Inc., a Delaware corporation
("Lunn"), under the name "Advanced Technical Products, Inc." Lunn was originally
incorporated in New York in 1948 and was reincorporated in Delaware in 1987. TPG
was formed in 1995 to acquire the business and assets of three operating units
of the Brunswick Technical Group (the "Brunswick Business"), which was completed
on April 28, 1995.

ACQUISITIONS

On May 29, 1998, ATP acquired all of the capital stock of Brigantine SA, a
manufacturer of honeycomb products and engineered panels located in France. The
acquired company, renamed Alcore Brigantine, operates as a subsidiary of Alcore,
Inc. The acquisition is expected to expand the Company's access to the European
aerospace and commercial markets.

AEROSPACE AND DEFENSE SEGMENT

COMPOSITE BASED PRODUCTS

RADOMES. ATP develops and manufactures high-temperature composite materials
and products for aerospace and defense applications and is a leading
manufacturer of composite aircraft structures and composite missile structures.
One of ATP's principal products is high-performance radomes. A radome is the
housing, usually made of composite materials, that shelters the antenna assembly
of a radar set on an airplane, rocket or missile. Management believes that ATP
has approximately a 75% share of the domestic high-performance radome market and
is the sole supplier of radomes for aircraft such as the A-6, AV-8B, B-1, B-1B,
C-5B, C-17, E-2C, F-4, F-5, F-14, F-15, F-16 and the F/A-18. Additionally, ATP
owns ceramic radome manufacturing technology which enables it to manufacture
high temperature, high performance radomes for interceptor missile applications.
Management believes that ATP has been the sole supplier of Patriot Missile
radomes for the past 12 years. Sales of radomes for each of 1998, 1997 and 1996
constituted 7.8%, 16.8% and 14.3%, respectively, of the total consolidated
revenues of ATP.

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AIRCRAFT COMPONENTS. ATP manufactures a variety of other components used in
the aerospace and defense industry. ATP currently fabricates flap assemblies for
the C-17 aircraft and began delivery of winglets and landing gear doors for the
C-17 during 1998. Management believes the C-17 is a high-priority program for
the United States Air Force, and that the production of these C-17 components
will provide a stable stream of revenue for the foreseeable future. ATP also
manufactures composite-based canopies, fuel tanks, wing and floor panels,
fairings and other aircraft components. ATP has also participated in
developmental projects that include the successful application of radar
absorbing materials and structures, frequency selective surfaces and low
observable applications. ATP's program to supply flap track fairings to The
Aerostructures Corporation, which parts are installed on the Airbus A330 and
A340 aircraft, is currently in the start-up phase and deliveries are expected to
begin in the second quarter of 1999. This "life of the program" contract is
anticipated to cover approximately 500 aircraft. In February 1998, ATP also
announced that it had entered into a long-term production alliance with GE
Aircraft Engines pursuant to which ATP will manufacture two composite inlet
devices for the GE F414-400 turbofan engine to be used in the United States
Navy's newest fighter, the F/A-18E/F "Super Hornet." In June 1998, GE placed an
order with an estimated value of $65 million over five years as the initial step
in the GE-ATP alliance. Sales of aircraft components for each of 1998, 1997 and
1996 constituted 16.1%, 8.8% and 12.1%, respectively, of the total consolidated
revenues of ATP.

ROCKET MOTOR CASES. ATP manufactures a variety of rocket motor cases used in
solid propellant propulsion systems that are incorporated into strategic
(long-range) and tactical missile systems as well as orbiting commercial
satellites and deep-space penetration spacecraft. ATP manufactures rocket motor
cases for use in strategic missiles such as the D-5 Trident II, as well as for
tactical missile systems such as the VT-1 and the PAC-3 Anti-Missile missile.
ATP also manufactures the ORBUS-21D rocket motor case, which is used in
conjunction with the space shuttle and other unmanned launch vehicles to place
satellites into earth's orbit, and is used on deep space missions.

PRESSURE VESSELS. ATP produces various high-performance pressure vessels that
are used predominantly in aircraft, launch vehicles and space applications where
weight minimization is critical. These high-performance pressure vessels are
used in critical system applications, including emergency power, crew capsule
impact and flotation, maneuvering, environmental, fuel feed and purge systems.
ATP has been a leader in the integration of filament winding technology in
combination with metal liners that results in vessels that meet or exceed
structural requirements. A number of existing pressure vessel configurations are
currently qualified by prime contractors and the military. This qualification
minimizes competition for follow-on orders and provides a variety of products
that can be offered for new applications with minimal capital investment and
production lead time.

FUEL TANKS. External fuel tanks are used by the military to provide an
aircraft with additional operating range. The military requires all-composite
external fuel tanks because they offer a significant weight advantage and
improved crash survivability, greater safety in a fire, and improved gun fire
protection. Management believes that ATP is currently the only qualified
producer of the tank liner for the 230-Gallon AH-64/UH-60 Fuel Tank, which is
used by the United States Army. In October 1998, ATP received a contract for the
production of the 480 gallon external fuel tanks for the F-18 E/F. The contract
covers requirements for three years, along with an option to purchase additional
tanks. Initial deliveries are expected in the last half of 1999.

VEHICLE/MISSILE STRUCTURES. ATP's vehicle/missile structure product line
historically has included composite products used for various structured
applications in the aerospace and defense area, including marine, launch
vehicles, space and aircraft applications. Products more recently included in
this product line are missile warheads, radar housings, missile structures,
aircraft and missile control surfaces and aircraft engine ducts. These
structures must be light-weight and have excellent structural properties in
order to replace conventional metal products. These projects are usually
obtained from various aerospace and defense companies and government
laboratories which need to develop prototype hardware to demonstrate
capabilities of advanced composites.

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TUBULAR PRODUCTS. ATP's tubular product line includes missile launch tubes
and torque shafts. The primary products in the launch tube line include the
Multiple Launch Rocket System ("MLRS") and the launch canister for the submarine
launched Tomahawk Missile. While the MLRS program is extremely important to the
United States Army as an effective, low-cost weapon system, the Army has a
combined inventory of over 500,000 of these missiles and the funding level for
this program has been, and likely will remain, low. Composites offer desirable
properties for torque shafts for various aerospace and defense applications and
are presently being used in the V-22 Osprey and Boeing Vertol's 234 helicopter.
ATP has also manufactured two prototype drive shafts for the GD-Electric Boat
for evaluation for submarines.

RESIN TRANSFER MOLDING. Resin transfer molding ("RTM") is the fabrication of
a composite component by pumping resin into a mold containing reinforcement
material. The rough product is then removed from the mold and finished. While
use of this manufacturing process is primarily driven by its lower cost, recent
advances in materials and equipment have helped to make the process a viable
choice for fabricating composite aircraft and military structures. Currently,
ATP supplies over 90 parts on the Air Force Air Superiority Fighter, the F-22,
and is the only qualified supplier of RTM components for the Navy's F-18 E/F. In
addition to serving as a supplier to the manufacturers of military aircraft, ATP
is also providing components for commercial aircraft, engine components and
containers for military hardware. ATP is continuing to look for ways to expand
the use of this manufacturing process to a wide variety of applications in
support of the aerospace and defense customer base.

METAL BONDING. ATP supplies metal bonded products through its Lunn Industries
division. ATP possesses the technology and qualifications required by The Boeing
Company for Phosphoric Acid Anodizing ("PAA") and structural bonding to BAC
5555. This PAA capability allows ATP to service the commercial aircraft market.
Numerous other qualifications allow ATP to provide products and services to the
spaceflight, defense and industrial markets. ATP-metal bonded products can be
found in the Boeing 777, 747, 757, 767 and 727 commercial aircraft as well as
numerous defense and satellite applications.

HONEYCOMB. ATP manufactures aluminum and non-metallic honeycomb products
through its Alcore division for use in the aerospace and aircraft industries.
Aluminum honeycomb is a lightweight cellular material composed of hexagonal
cells. The most prominent characteristics of aluminum honeycomb products are
high strength-to-weight ratios, fatigue resistance, energy absorption, sound
dampening, heat exchange, radio frequency shielding, machinability, airflow
directionalization and corrosion resistance. Management believes that one of
Alcore's most promising products is PAA-CORE(R), a phosphoric acid anodized
honeycomb product. PAA-CORE(R), qualified to Boeing specifications as BMS 4-4
and 4-6, has recently been designated as the material of choice for all new
metal bonded structures at Boeing and management believes it is now becoming the
material of choice of other commercial and military aircraft industries. During
1998, the Alcore division acquired capital equipment which enables it to produce
non-metallic core material. This capability is expected to complement the
division's existing metallic core product lines and helps solidify Alcore's
position as a leading global supplier of structural core materials. In addition,
the Company's acquisition of Alcore Brigantine is expected to expand the
Company's access to the European aerospace and commercial markets. Sales of
honeycomb products for each of 1998, 1997 and 1996 constituted 14.1%, 2.2% and
0%, respectively, of the total consolidated revenues reported by ATP. These
include revenues reported subsequent to the date of the acquisition of Alcore
(October 31, 1997) and Alcore Brigantine (May 29, 1998).

OTHER DEFENSE SYSTEMS

SHELTERS/SHELTER INTEGRATION. ATP designs, develops and produces mobile
military shelters and has developed leading design and automated production
capabilities for honeycomb, and foam and beam sandwich panel construction,
relocatable shelters. Management believes that most of the shelters in the
inventory of the Department of Defense (the "DOD") were designed and produced by
ATP or its predecessors. Sales of shelters and shelter integration products for
each of 1998, 1997 and 1996 constituted 16.1%, 12.1%, and 16.2% , respectively,
of the total consolidated revenues of ATP.

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CHEMICAL DEFENSE. ATP is an industry leader in remote chemical detection,
which is expected to be a growth market for the next several years, based on the
latest U. S. defense budgets. ATP's M21 Remote Chemical Sensing Device was
successfully deployed during the Gulf War and has led to the Company's receipt
of a contract to develop the next generation remote sensor, the Joint Services
Lightweight Standoff Chemical Agent Detector ("JSLSCAD"). The JSLSCAD contract,
awarded in 1997, consists of a cost-plus development phase worth slightly over
$30 million over four years, plus options for production units potentially worth
over $200 million. During 1998, the Company passed first article testing and
began production on the Improved Chemical Agent Monitor ("ICAM"), a monitoring
system designed to detect surface contamination on a wide variety of objects.
Full-scale production of the ICAM is expected to continue through 2002. ATP is
also actively involved in the development and production of collective
protection systems. Collective protection systems provide a clean and
over-pressured environment for soldiers to conduct their mission. Management
believes that ATP's collective protection systems, such as the internally
developed Bio-Chem Filter Blower Unit, are the collective protection system of
choice for several of the next generation vehicle systems. Also, ATP is
producing the M28 Deployable Medical Collective Protection Equipment ("CPE").
This product assures a clean environment for field hospital units for both the
United States Army and Air Force. Production of the M28 CPE is expected to
continue through the first half of 2000. Sales of chemical defense systems and
related products for each of 1998, 1997 and 1996 constituted 10.1%, 4.4% and
17.8%, respectively, of the total consolidated revenues of ATP.

ORDNANCE. ATP has been the sole manufacturer of the Volcano launcher system.
This system, which is mounted on wheeled and tracked vehicles as well as UH60A
helicopters, provides for rapid deployment of mine fields. Customers include the
United States Army and other defense prime contractors. A large Volcano contract
was completed in early 1998 fulfilling the government's current inventory
requirements. Follow-on production on this program is expected to be
insignificant for the next few years. Sales of ordnance delivery system
components for each of 1998, 1997 and 1996 constituted 2.1%, 18.8%, and 5.1%,
respectively, of the total consolidated revenues of ATP.

TACTICAL DECEPTION. ATP is a leading producer of tactical deception products
for the U. S. Armed Forces and other military customers and has delivered
approximately a million modules of U. S. military Lightweight Camouflage Screen
Systems ("LCSS"). The Company announced in April 1998 that it was awarded a $3.6
million contract by the U.S. Army Communications-Electronics Command to produce
various configurations of radar scattering camouflage systems and components.

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COMMERCIAL SEGMENTS

The commercial segment is comprised of four operating segments which provide
the following products.

NATURAL GAS VEHICLE FUEL TANKS

Legislation mandating stricter air pollution regulations combined with the
abundance of natural gas has created a demand for clean running NGVs. The demand
for NGVs is expected to grow dramatically over the next several years as
installation and refueling infrastructure is added. The most rapidly growing
segment of this market is for transit buses and other types of fleet vehicles
which return to a central depot at the end of each shift. There is also a great
deal of interest in many economically developed countries for NGVs. ATP is
actively working with regulatory agencies in other countries to develop
standards to allow use of all composite NGV cylinders.

ATP has spent over six years and $10 million to design, develop and market an
extremely durable, all-composite, plastic-lined Type IV Tank for the NGV market.
The ATP trademarked "Tuffshell T" tank competes with steel tanks (Type I),
metal-lined tanks with a hoop over-wrap (Type II) and metal-lined tanks with a
full over-wrap (Type III). Weight reduction and resistance to external damage
are the primary technical criteria during fuel tank selection. The Type IV tank
offers substantial weight reductions (a minimum of 30% versus glass wrapped
aluminum lined Type III tanks) and the flexibility to reduce the impact of the
weight increase. Type IV tanks may be placed on the roof or underbody of transit
buses without violating Federal restrictions on curb weight. Metal lined tanks
that offer reliable impact resistance are generally too heavy to place on the
roof of buses. Light duty sedan/truck designers must also keep their gross
vehicle weights below defined Federal levels to meet Environmental Protection
Agency classifications and to meet customer preferences concerning vehicle
handling and low repair costs for suspension and brake components. This is
especially important for the highly successful import vehicle sedan segment
where engine displacement is below the North American average. ATP makes 60% of
all NGV tanks manufactured in the U.S., where its Type IV tank is preferred by
major builders of transit compressed natural gas powered coaches. The Company
sells NGV tanks to operators of fleet vehicles and bus and auto manufacturers,
including Honda. During 1998, ATP was awarded a contract by Matra Auto of France
to supply 3,000 NGV tanks for the Enviro 2000, Malaysia's NGV taxi. ATP has also
signed a distribution agreement with Mitsui Plastics, Inc. for certain Asian
countries. In April 1998, ATP began delivery of NGV fuel tanks for Honda of
America's 1998 Model Civic GX. ATP believes its Type IV tank has captured market
share of about 90% of the OEM transit bus production over the last year. In
addition, the Company's market share for the OEM sedan production and the
truck/auto conversion business is estimated at 30% and 35%, respectively. To
accommodate the expected increase in future NGV product demand, the Company's
tank manufacturing operation was recently moved to a facility which doubles
production capacity and enhances productivity through improved product flow and
material handling.

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SPECIALTY VEHICLE ELECTRONIC PRODUCTS

The specialty vehicle electronics group is engaged in the design and
manufacture of electronic products for the specialty vehicle market that are
primarily used to distribute and control electrical power throughout the
vehicle. This market includes recreational vehicles ("RVs"), conversion vans,
trucks, buses, boats and other vehicles. Currently, ATP sells approximately 250
different products, most of which have been introduced to meet a customer's
request to solve a particular problem. ATP's products fall into three main
categories: battery run-down protection and charging, power switching and
control, and 120 volt AC power management. Many of the battery run-down
protection and charging products are centered around ATP's patented disconnect
relay. The power switching and distribution products center on ATP's unique
patented multiplex system. ATP's patented 120 volt AC power management products
are used in RVs to minimize the overloading of circuit breakers. ATP's
electrical products are currently utilized by all major motor home original
equipment manufacturers and all but one of the major van converters. ATP is
currently directing efforts at increasing its market penetration into the truck,
bus and marine industries and increasing sales to major vehicle fleet operators.
During 1998, ATP signed an agreement with Waltco Truck Equipment Co., one of the
world's largest manufacturers of lift gates, to be their exclusive source of
electronic and electrical components. The initial products include a unique
weatherproof "Super Switch", and a controller to prevent damage to the
electro-hydraulic pump motor caused by overuse of the lift gate. ATP has also
begun supplying a unique energy management system to Winnebago Industries, the
second largest manufacturer of motor homes. Approximately half of all motor
homes built are now installed with ATP's energy management systems. During 1998,
the Company also received the first production order for the new Programmable
Multiplex Control ("PMC") from Marshall Bus in the United Kingdom. The PMC, a
new system that simplifies wiring in transportation and commuter buses
worldwide, is the world's first user programmable multiplex system intended for
use in vehicles. The system is also suitable for other specialty vehicles, such
as emergency and maintenance equipment.

OIL AND GAS EXPLORATION PRODUCTS

Current deepwater oil completion and production technology utilizes heavy
steel riser systems that require expensive tensioning and buoyancy systems, and
whose designs are often governed by fatigue considerations. Composite marine
risers provide advantages over conventional steel risers because composite
materials are lighter weight, more fatigue and corrosion resistant, better
thermal insulators and can be designed for improved structural and mechanical
performance. Overall, production platform cost reductions are possible as a
result of the lower weight and greater compliance of composite risers, along
with improvements in system reliability. ATP is currently completing the
development of a composite rigid riser for use in deepwater oil production in
partnership with Shell, Conoco and Amoco.

ATP applied the NGV all-composite tank technology to develop an accumulator
tank for the Production Riser Tensioning system on off-shore platforms. There
are as many as four accumulators per well and the new platforms have in excess
of 25 wells per platform. The all-composite accumulator is lighter weight,
non-corrosive and competitively priced with all-steel accumulators. The ATP
accumulator meets ASME Code X and currently there is not a qualified competitor
for this product. These accumulators offer some significant advantages for the
platform and as a result the revenue is expected to increase significantly over
the next several years.

SHAFTS AND ROLLERS

In the industrial machine industry, there is a growing recognition and
acceptance of the advantages of composite shafts and rollers over heavier steel
units. Composite shafts are much lighter and, with the use of carbon fiber, the
stiffness is maintained and the fatigue life is increased. ATP manufactures
several sizes and configurations of shafts.

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HONEYCOMB

Beginning in 1994, Alcore expanded beyond the aerospace market into a number
of non-aerospace markets. Applications for high performance, low cost commercial
products were developed for manufacturers of "clean rooms" for computer chip
manufacturing and bio-medical research centers, laminated panels for luxury
cruise ship cabins and numerous architectural uses. Alcore's honeycomb products
are utilized by manufacturers of rail car doors for municipal transit systems,
and, due to unique crush characteristics and energy absorbing qualities, by the
nuclear and energy absorption industries. The acquisition of Alcore Brigantine,
the Company's French subsidiary, is expected to enhance Alcore's emergence into
non-aerospace markets on a global basis.

COMPETITION AND MARKETS

ATP competes with many manufacturers which, depending on the product
involved, range from large diversified enterprises to smaller companies
specializing in particular products. Factors that affect ATP's competitive
posture are the quality of products and services, the ability to employ certain
technologies and pricing strategies. ATP competes by defining and understanding
customer and market needs, using its technology base to develop new product
applications that meet those needs, communicating and demonstrating the
technical advantage of its products and building long-term relationships with
its customers.

There are many companies that compete with ATP in the aerospace and defense
industry. While ATP's management believes that it has an approximate 75% share
of the domestic high-performance radome market and is a leading supplier of
radomes in the domestic and international markets, ATP competes with a number of
other companies in the production of composite based products used in the
aerospace and defense industries. ATP is a leader in the design and production
of chemical detection equipment. Similarly, while ATP's market share varies with
respect to its other aerospace and defense products such as rocket motor cases,
fuel tanks and pressure vessels, ATP overall has only a minor share of the total
aerospace and defense markets.

Certain of ATP's other commercial products are highly specialized and face
less competition in their respective markets. ATP's management believes that ATP
has approximately 50% of the NGV fuel tank market and is a leading supplier of
battery run-down protection and the power switching and control devices for the
motor home and van conversion original equipment manufacturer markets.
Additionally, while there are numerous producers of standard drill pipe and
casing and fiberglass tubulars, ATP has a leading position in the application of
advanced composites in the oil and gas industry.

MARKETING AND CUSTOMERS

ATP markets its aerospace and defense products through direct personal
contacts with its customers, active membership in various industry groups, and
by participation in industry trade shows. ATP's aerospace and defense products
are sold primarily to agencies of the United States government and to commercial
customers in the aerospace industry. In 1998, sales to the United States
government either directly or by subcontract constituted 61% of ATP's total
consolidated revenue. Other major customers include The Boeing Company and
Lockheed Martin Corporation. Combined aerospace component sales to these
customers, most of which are included above as United States government sales by
subcontract, represented 19.9% of ATP's total consolidated revenues during 1998.
ATP's aerospace and defense products are generally designed and developed to
customer specifications.

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ATP markets and sells NGV fuel tanks and specialty vehicle electronics
primarily to vehicle manufacturers. ATP sells a predominant number of its
specialty vehicle products to only a few major customers, the loss of any of
which would have an adverse impact on its specialty vehicle products group.

In the commercial composites business, it is necessary to carry a reasonable
raw material and finished goods inventory to allow for a rapid customer
response. The average days sales outstanding of accounts receivable for the
commercial products run somewhat longer than for comparable aerospace and
defense products. Also, there is a greater risk of bad debt associated with
commercial products.

The Company provides warranties on product for material and workmanship based
on standard industry practice. Though ATP has endeavored to design an extremely
safe and durable product, the NGV tank and production riser have a potential for
greater product liability than standard aerospace and defense products. ATP
believes it has adequate product liability insurance to offset these risks.

PATENTS

ATP owns numerous patents and patent applications, some of which, together
with licenses under patents owned by others, are utilized in its operations.
While such patents and licenses are, in the aggregate, important to the
operation of ATP's business, no existing patent, license or other similar
intellectual property right is of such importance that its loss or termination
would, in the opinion of management, materially affect ATP's business.

BACKLOG

ATP's total backlog of contracts as of December 31, 1998 was approximately
$585 million as compared to approximately $552 million as of December 31, 1997.
These backlogs include options or unreleased orders of approximately $394
million in 1998 and $360 million in 1997. The increase in the backlog reflects
(i) a change in management's strategy, since acquiring the Brunswick Business in
1995, to obtain longer-term contracts than its predecessor; (ii) improved
economic conditions in the aerospace industry; and (iii) the military's
commitment to develop systems to combat chemical warfare. Predominantly all of
the backlog relates to the aerospace and defense segment.

GOVERNMENT CONTRACTS

Because the United States government is a primary customer, ATP's revenues
are directly affected by the government's budget process and inadequate funding
of the operation and maintenance portion of the DOD budget or a reduction in the
budgeted amount for certain programs could have an adverse impact on the revenue
of ATP. All government contracts, and, in general, subcontracts thereunder are
subject to termination in whole or in part at the convenience of the United
States government as well as for default. Long-term government contracts and
related orders are subject to cancellation if appropriations for subsequent
performance periods become unavailable. However, with respect to most contracts
involving the military, ATP would be entitled to receive cancellation payments
upon cancellation of such contracts.

RAW MATERIALS AND SUPPLIES

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Raw materials essential to the conduct of all of ATP's business segments
generally are available at competitive prices. ATP has not experienced
significant difficulties in its ability to obtain raw materials and other
supplies needed in its manufacturing processes, nor does ATP expect such
difficulties to arise in the future. ATP ordinarily acquires components and
materials through purchase orders typically covering ATP's requirements for
periods averaging 90 to 120 days.

RESEARCH AND DEVELOPMENT

ATP has spent $864,000, $1,063,000 and $1,213,000 for each of 1998, 1997 and
1996, respectively, on research and development. Predominantly all of the
research and development expenses relate to the aerospace and defense segment.

SEASONALITY

The United States government's fiscal year begins on October 1 and contracts
and options on contracts are generally awarded just prior to its year end. The
lead time to perform the necessary design work, procure materials and begin
production is generally several months, which can create a period of low
production, revenue and profits in the first half of each fiscal year of ATP.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations."

FOREIGN OPERATIONS

Foreign sales to manufacturers worldwide totaled approximately 16.0%, 7.1%
and 5.8% of ATP's total revenues for each of 1998, 1997 and 1996, respectively.
See Note 4 to the consolidated Financial Statements for additional disclosure of
geographical financial data.

ENVIRONMENTAL REGULATION

ATP's operations are subject to numerous local, state and federal laws and
regulations concerning the containment and disposal of hazardous materials,
pursuant to which ATP has incurred compliance costs. Such costs to date have not
been material. ATP does not presently anticipate the need for significant
expenditures to ensure continued compliance with current environmental
protection laws. Regulations in this area are subject to change and there can be
no assurance that future laws or regulations will not have a material adverse
effect on ATP.

EMPLOYEES

At December 31, 1998, ATP had 1,568 employees. Approximately 37% of ATP's
employees are covered by three separate collective bargaining agreements with
various international and local unions. ATP's management considers employee
relations generally to be good and believes that the probability is remote that
renegotiating these contracts will have a material adverse effect on its
business.

9
<PAGE>
ITEM 2. PROPERTIES

ATP's principal executive offices are located in Roswell, Georgia. ATP
maintains various facilities nationwide and considers all of its facilities to
be in relatively good operating condition and adequate for their present uses.
ATP believes that it has sufficient capacity to meet its current and anticipated
manufacturing requirements. The following table sets forth ATP's principal
manufacturing plants:

APPROXIMATE LEASED
SQUARE OR
FOOTAGE OWNED
----------- ------
Marion Composites Division:
Marion, Virginia .............................. 1,019,000 Owned

Intellitec Division:
Deland, Florida ............................... 353,000 Owned

Lincoln Composites Division:
Lincoln, Nebraska ............................. 226,000 Owned
Lincoln, Nebraska ............................. 126,000 Leased

Lunn Industries Division:
Glen Cove, New York ........................... 93,000 Leased

Alcore Division:
Belcamp, Maryland ............................. 90,000 Owned
Edgewood, Maryland ............................ 110,000 Leased
Anglet, France ................................ 70,000 Leased

The manufacturing facilities of the Marion Composites Division and the Lunn
Industries Division are used exclusively in connection with ATP's aerospace
and defense segment. While predominantly used in connection with ATP's aerospace
and defense segment, the facilities of the Intellitec Division, the Lincoln
Division and the Alcore Division are used to some extent in connection with
ATP's commercial segment.

ATP pays approximately $1,159,000 in annual rental expense with respect to
its leased facilities, of which approximately $291,000 relates to facilities in
Lincoln, Nebraska, $275,000 relates to facilities in Glen Cove, New York,
$478,000 relates to facilities in Edgewood, Maryland and $115,000 relates to
facilities in Anglet, France. ATP earns approximately $250,000 in rental income
on certain of its Deland, Florida facilities.

Leases covering ATP's leased facilities expire at varying dates generally
within the next 15 years. ATP anticipates no difficulty in either retaining
occupancy through lease renewals, month-to-month occupancy or purchases of
leased facilities, or replacing the leased facilities with equivalent
facilities.

During 1998, ATP's Alcore Division entered into a ten year lease agreement
for the facility located in Edgewood, Maryland. Alcore is currently nearing
completion of its move of operations from a leased facility located in Jessup,
Maryland to the Edgewood facility. ATP anticipates that the Edgewood facility
will provide increased production capability to facilitate future business
expansion. ATP plans to sublease the Jessup facility and anticipates that
sublease rental income will substantially offset the lease cost.

10
<PAGE>
ITEM 3. LEGAL PROCEEDINGS

ATP is not a party to any legal proceedings, other than routine claims and
lawsuits arising in the ordinary course of its business. ATP does not believe
that such claims and lawsuits, individually or in the aggregate, will have a
material adverse effect on ATP's business. Compliance with federal, state, local
and foreign laws and regulations pertaining to the discharge of materials into
the environment, or otherwise relating to the protection of the environment, has
not had, and is not anticipated to have, a material effect upon the capital
expenditures, earnings or competitive position of ATP.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

11
<PAGE>
PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

ATP's common stock is traded on the National Market System of the Nasdaq
Stock Market, Inc. under the symbol "ATPX." The following table sets forth the
high and low sales prices of ATP common stock for the calendar quarters
indicated, as reported by the Nasdaq Stock Market, Inc.:

ATP COMMON STOCK

MARKET PRICE
-------------------
FISCAL YEAR ENDED DECEMBER 31, HIGH LOW
- - ------------------------------ ------- -------
1998
First Quarter .......................................... $14.875 $11.000
Second Quarter ......................................... $15.313 $11.000
Third Quarter .......................................... $13.250 $ 5.500
Fourth Quarter ......................................... $10.000 $ 5.500

1997
First Quarter .......................................... $ 9.375 $ 6.563
Second Quarter ......................................... $12.500 $ 7.500
Third Quarter .......................................... $17.813 $10.938
Fourth Quarter (1)
October 1 - October 31 ............................. $16.250 $11.875
November 4 - December 31 ........................... $18.000 $11.500

(1)On October 31, 1997, the Company effected a ten-to-one reverse stock split
and issued an additional 3,943,830 shares in connection with the Merger. The
common stock of the Company began trading on November 4, 1997 on this basis.
Market prices reported for periods prior to November 4, 1997 have been
adjusted to reflect the reverse stock split.

On March 23, 1999, ATP had approximately 1,203 stockholders of record. The
last reported sales price of ATP's common stock on such date was $9.8125.

ATP has not paid dividends on its common stock and does not currently intend
to pay any cash dividends in the foreseeable future. The determination of the
amount of future cash dividends to be declared and paid on the common stock of
ATP, if any, will depend upon ATP's financial condition, earnings and cash flow
from operations, the level of its capital expenditures, its future business
prospects and other factors that the Board of Directors of ATP deems relevant.
In addition, ATP's debt agreements contain covenants restricting the payment of
cash dividends to ATP's common stockholders.

12
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

SELECTED CONSOLIDATED FINANCIAL DATA

The selected financial data presented below as of and for the periods ending
December 31, 1994 through December 31, 1998, have been derived from the audited
financial statements of ATP, TPG and Brunswick Technical Group, the assets of
which were acquired by TPG on April 28, 1995 pursuant to the acquisition of the
Brunswick Business.

The information presented below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the consolidated financial statements of ATP and related notes and
other financial information included elsewhere in this Annual Report on Form
10-K.

Amounts are in thousands, except EPS data.
<TABLE>
<CAPTION>
ATP TPG BRUNSWICK TECHNICAL GROUP
------------------- ----------------------------- ------------------------------
AS OF AND AS OF AND
AS OF AND AS OF AND FOR THE EIGHT FOR THE FOUR AS OF AND
FOR THE YEAR ENDED FOR THE YEAR MONTHS MONTHS FOR THE YEAR
------------------- ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, APRIL 28, DEC. 31,
1998 1997 1996 1995 1995 1994
-------- -------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues ................................... $165,074 $119,433 $ 126,534 $ 79,172 $ 28,416 $ 118,660
Cost of revenues ........................... 126,678 91,312 94,365 61,738 27,354 112,950
-------- -------- ------------- ------------- ------------- -------------
Gross profit ............................... 38,396 28,121 32,169 17,434 1,062 5,710
General and administrative
expenses ............................... 25,570 19,006 21,758 12,123 1,350 3,923
-------- -------- ------------- ------------- ------------- -------------
Operating income (loss) .................... 12,826 9,115 10,411 5,311 (288) 1,787
Interest expense (1) ....................... 3,579 2,273 2,377 1,892 -- --
-------- -------- ------------- ------------- ------------- -------------
Income (loss) before income
taxes and extraordinary item ............ 9,247 6,842 8,034 3,419 (288) 1,787
Income tax provision (benefit) ............. 3,560 2,634 3,093 1,312 (112) 683
-------- -------- ------------- ------------- ------------- -------------
Income (loss) before extra-
ordinary item ......................... 5,687 4,208 4,941 2,107 (176) 1,104
Extraordinary item (2) ..................... -- -- 667 -- -- --
-------- -------- ------------- ------------- ------------- -------------
Net income (loss) .......................... $ 5,687 $ 4,208 $ 4,274 $ 2,107 $ (176) $ 1,104
======== ======== ============= ============= ============= =============

EPS DATA:
Earnings per share - basic ................. $ 1.06 $ 0.99 $ 1.06 $ 0.52 N/A N/A
Earnings per share - diluted ............... $ 1.01 $ 0.95 $ 1.03 $ 0.52 N/A N/A

BALANCE SHEET DATA:
Working capital ............................ $ 22,990 $ 21,208 $ 18,462 $ 17,558 $ 26,868 $ 29,882
Total assets ............................... 106,876 85,684 44,723 38,911 53,358 54,995
Long-term debt, including
current portion (1) .................... 26,402 19,216 17,222 17,926 -- --
Redeemable 8% cumulative
preferred stock ........................ 1,000 1,000 1,000 1,000 -- --
Common shareholders' equity ................ 31,797 26,494 7,018 2,919 -- --
</TABLE>
- - -----------------
(1)Prior to April 29, 1995, the Brunswick Technical Group was included as part
of Brunswick's consolidated financial statements. Brunswick did not allocate
any debt or interest expense to the Brunswick Technical Group.

(2)Reflects an extraordinary loss from debt refinancing, net of an income tax
benefit of $418,000.

13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the financial
statements of ATP and related notes contained elsewhere in this Annual Report on
Form 10-K.

TPG was formed in 1995 to acquire the Brunswick Business, which acquisition
was completed on April 28, 1995. The selected consolidated financial data for
1995 presents the four month period prior to the acquisition of the Brunswick
Business and the eight month period subsequent to such acquisition.

On October 31, 1997, TPG merged with Lunn under the name "Advanced Technical
Products, Inc." Immediately after the merger, the former stockholders of Lunn
owned approximately 26% of ATP and the former stockholders of TPG owned
approximately 74% of ATP. For accounting purposes, the merger was treated as a
purchase of Lunn by TPG and the results of operations of Lunn since November 1,
1997 have been included in the consolidated financial statements of ATP.

On May 29, 1998, ATP acquired all of the capital stock of Brigantine
Aircraft, a manufacturer of honeycomb products and engineered panels located in
France. The acquired company, renamed Alcore Brigantine, operates as a
subsidiary of Alcore, Inc., a division of the Company. The acquisition is
expected to expand the Company's access to the European aerospace and commercial
markets. The Company's consolidated financial statements include the operating
results for Alcore Brigantine since the date of the acquisition.

Historically, approximately 60% to 80% of ATP's products and services have
been sold to the United States government through prime contracts directly with
governmental agencies, primarily the DOD, or through subcontracts with other
governmental contractors. During the mid-1980s, the defense industry began to be
negatively impacted by a perceived reduction of threats from the former Soviet
Union and affiliated countries in eastern Europe. In addition, increased
competition for the United States federal budget dollars resulted in a reduction
in real dollars in the United States defense budget over the last decade.
Defense spending has recently begun to stabilize and management of ATP believes
that budgeted procurement spending will increase slightly over the next few
years.

The contraction of the defense budget over the last decade and the resulting
excess capacity and intensified competition among defense contractors has
resulted in significant industry consolidation. ATP's strategy includes the
pursuit of acquisitions which will increase its revenue base and improve its
cost competitiveness through reduced overhead costs, facility consolidations and
the elimination of other duplicative costs. Management of ATP believes continued
defense industry consolidations will create opportunities for selected
acquisitions that will allow ATP to further increase its revenue base and
enhance its cost-competitive position. However, because of the uncertainty of
the nature and size of these opportunities, as well as ATP's leverage, there can
be no assurances that the financing necessary to pay for acquisitions can be
obtained.

Although the long-term impact of industry consolidation and the defense
spending budget cannot be predicted with certainty, management of ATP believes
that it is positioned to further its presence in the United States defense
industry and increase its ongoing diversification efforts into foreign defense
markets and selected commercial markets.

The United States government's fiscal year begins on October 1 and contracts
and options on contracts are generally awarded just prior to its year end. The
lead time to perform the necessary design work, procure material and begin
production is generally several months, which can create a period of low
production, revenue and profits in the first half of each fiscal year of ATP.
Over the last five years, the percentage of sales and operating earnings
(excluding corporate general and administrative expenses) generated in the
second half of the year have been as follows:

14
<PAGE>
EARNINGS BEFORE
YEAR SALES INTEREST & TAXES
- - ---- ----- ----------------
1998 .......................................... 57% 69%
1997 .......................................... 57% 73%
1996 .......................................... 54% 62%
1995 .......................................... 56% 134%
1994 .......................................... 57% 80%

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the components of
the income statement expressed as a percentage of revenues.

1998 1997 1996
------ ------ ------

Revenues ......................................... 100.0% 100.0% 100.0%
Cost of revenues ................................. 76.7 76.5 74.6
------ ------ ------
Gross profit ..................................... 23.3 23.5 25.4
General and administrative expenses .............. 15.5 15.9 17.2
------ ------ ------
Operating income ................................. 7.8 7.6 8.2
Interest expense ................................. 2.2 1.9 1.9
------ ------ ------
Income before income taxes and
extraordinary item ........................... 5.6 5.7 6.3
Income taxes ..................................... 2.2 2.2 2.4
------ ------ ------
Income before extraordinary item ................ 3.4 3.5 3.9
Extraordinary loss from debt refinancing ......... -- -- 0.5
------ ------ ------
Net income ....................................... 3.4% 3.5% 3.4%
====== ====== ======

YEAR ENDED DECEMBER 31, 1998 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1997

Revenues increased $45.6 million, or 38.2% from $119.4 million in 1997 to
$165.1 million in 1998. Positive revenue variations in 1998 compared to 1997
include: (i) increased revenues of $24.8 million for Lunn operations, which were
included for the full year in 1998 compared to only the post-merger period (two
months) included in the 1997 results reported, (ii) increased shipments of NGV
fuel tanks and related products, (iii) increased sales on new aerospace /
defense programs, including new C-17 and chemical defense contracts, and (iv)
increased shipments on shelter contracts. These increases were partially offset
by reduced ordnance product sales resulting from the substantial completion of a
major ordnance delivery system contract in early 1998.

Gross profit as a percent of revenues was 23.3% in 1998 compared to 23.5% in
1997. The decrease in gross profit percentage was primarily attributable to a
slightly unfavorable product sales mix in 1998 compared to 1997.

15
<PAGE>
General and administrative expenses increased $6.6 million, or 34.5%, from
$19.0 million in 1997 to $25.6 million in 1998. The increase again reflects the
inclusion of Lunn operations for a full year in 1998 compared to two months in
1997. As a percent of revenues, general and administrative expenses decreased
from 15.9% in 1997 to 15.5% in 1998.

Interest expense in 1998 increased $1.3 million, or 57.5%, primarily because
of an increase in average loan balances as a result of (i) debt assumed from
Lunn in the merger and (ii) higher working capital and capital expenditures
driven by increasing revenue volume anticipated in 1999.

Income taxes increased $0.9 million, reflecting higher pre-tax earnings as
the effective tax rate was 38.5% for both years.

YEAR ENDED DECEMBER 31, 1997 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1996

Revenues decreased $7.1 million, or 5.6% from $126.5 in 1996 to $119.4
million in 1997. The decrease in 1997 was primarily due to (i) the completion of
a major chemical detection contract in late 1996; and (ii) the delay in the
production of a major shelter contract caused by design changes mandated by the
customer. These decreases were partially offset by the production related to an
ordnance contract in 1997.

Gross profit as a percent of revenues decreased from 25.4% in 1996 to 23.5%
in 1997. This was primarily attributable to the substantial completion of two
major contracts in 1996 which had gross margins substantially higher than those
of the contracts that replaced them in 1997. This was partially offset by
improved performance in the NGV business.

General and administrative expenses decreased $2.8 million, or 12.6% from
$21.8 million in 1996 to $19.0 in 1997. This decrease results primarily from a
decrease in incentive compensation expense from $1.5 million in 1996 to $0.0 in
1997. Additionally, in response to lower revenues, certain other general and
administrative expenses were eliminated. Excluding incentive compensation
expense, general and administrative expenses as a percent of revenues were
approximately 16% for both years.

Interest expense decreased approximately $0.1 million or 4.4%, as result of
lower interest rates obtained in a refinancing in late 1996, offset by higher
average loan balances.

The decrease of $0.5 million in income taxes from $3.1 million in 1996 to
$2.6 million in 1997 results from lower earnings as the effective rate remained
at 38.5%.

The extraordinary charge of $0.7 million in 1996 was the result of costs
incurred in connection with a refinancing in late 1996.

FINANCIAL CONDITION AND LIQUIDITY

Net cash flow provided by operations was $2.5 million for 1998 compared to
net cash used of $0.5 million for 1997, an increase of $3.0 million. Working
capital, excluding short-term debt balances, increased $11.1 million in 1998 to
$51.8 million. The increase was the result of (i) an increase of $5.5 million in
inventory, reflecting a build-up on several major aerospace composites programs
which are in the start-up phase, (ii) an increase of $1.2 million in accounts
receivable, reflecting the increased sales volume in the fourth quarter of 1998
compared to the same period in 1997, (iii) $1.3 million of net working capital
acquired in the acquisition of Alcore Brigantine (see Note 2 to the Consolidated
Financial Statements), (iv) an increase in deferred income taxes of $1.6 million
and (iv) a net increase in other working capital components of $1.5

16
<PAGE>
million. Cash flow of $12.7 million used in investing activities in 1998 was
primarily the result of significant capital expenditures for (i) equipment to
meet anticipated production requirements for new aerospace composites programs,
(ii) the increase of NGV production capacity in anticipation of an expanded
market for NGV fuel tanks and (iii) equipment necessary to enter the
non-metallic core production business, which is expected to complement the
Company's existing product lines. Investing activities also included cash
payments made in connection with the Alcore Brigantine acquisition.

In March 1998, the Company refinanced its revolving and term loans,
consolidating them with one lending institution. The March loan agreements were
amended in June 1998 to increase the capital expenditure line of credit
available to the Company. The credit facility in place prior to the refinancing
totaling $39.0 million was replaced with a $50.0 million credit facility
consisting of: (i) $27.0 million of revolving credit against eligible receivable
and inventory balances, (ii) an $18.0 million term loan and (iii) a $5.0 million
capital expenditure line of credit. The term loan is payable quarterly based on
a seven year amortization period. Interest rates will vary, depending on the
Company's performance, and through the end of 1998 have been favorable to the
previous rates in effect by an average of slightly over one full percentage
point. The credit facility will initially be in place for a period extending to
December 31, 2000. As of March 26, 1999, the Company had approximately $5.8
million of unused borrowing availability on the total credit facility.

As discussed above, the Company made substantial capital expenditures during
1998 which have been financed by a combination of cash flows from operations and
increased borrowings using the revolving and equipment loan portions of the
Company's credit facility.

The Company is continuing to look for acquisition candidates that will
enhance its operations. The timing, size or success of any acquisitions and the
resulting additional capital commitments are unpredictable. The Company expects
to fund future acquisitions primarily through a combination of issuances of
additional equity, working capital, cash flow from operations and borrowings,
including any unused portion of the credit facility. To the extent new sources
of financing are necessary to fund future acquisitions, there can be no
assurance that the Company can secure such additional financing if and when it
is needed or on terms deemed acceptable to the Company.

At December 31, 1998, the Company's backlog of orders and long-term contracts
was approximately $585 million compared to $552 million and $285 million at
December 31, 1997 and 1996, respectively. The backlog includes firm released
orders of approximately $191 million, $192 million and $120 million at December
31, 1998, 1997 and 1996, respectively. The increase in backlog over the last
three years reflects (i) a change in management's strategy in placing a greater
emphasis on obtaining longer-term contracts, (ii) improved economic conditions
in the aerospace industry and (iii) the military's commitment to combat chemical
warfare and develop new generation aircraft. Approximately 60% of the Company's
firm backlog at December 31, 1998 is expected to be delivered in 1999.

Management of ATP believes that cash flows from operations and the new $50
million credit facility are adequate to sustain ATP's current operating level
and future short-term growth. However, should circumstances arise affecting cash
flow or requiring capital expenditures beyond those anticipated by the Company,
there can be no assurance that such funds will be available.

FACTORS AFFECTING FUTURE OPERATING RESULTS

This Annual Report on Form 10-K contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. The
forward-looking statements are those that do not state historical facts and are
inherently subject to risk and uncertainties. The forward-looking statements
contained herein are based on current expectations and entail various risks and
uncertainties that could cause actual results to differ materially from

17
<PAGE>
those projected in such forward-looking statements. Some of such risks and
uncertainties are described below.

DEPENDENCE ON PRINCIPAL INDUSTRIES. The revenues of ATP are concentrated in
the aerospace and defense industries. Sales to non-aerospace and non-defense
industries, although growing, are anticipated to approximate 20% of total
revenues of ATP for the foreseeable future. ATP's success will be heavily
dependent on its ability to successfully obtain major new defense orders
currently planned to be released by the United States government and government
prime contractors, as well as the continued strength of the aerospace industry,
particularly the commercial aircraft industry. No assurances can be given that
ATP will be able to successfully obtain all or even a major portion of the
targeted defense industry orders anticipated to be placed. The commercial
aerospace industry is a cyclical business and the demand by commercial airlines
for new aircraft is highly dependent upon a variety of factors, which
historically have been related to the stability and health of the United States
and world economies. Although the aerospace and commercial aircraft industries
are currently enjoying a significant upturn in business coupled with receipt of
numerous major long-term orders, there can be no assurances that the situation
will continue in the future.

RISKS OF REDUCTIONS OR CHANGES IN MILITARY EXPENDITURES. The primary
customers of ATP are agencies of the DOD. Sales under contracts with the DOD or
under subcontracts that identify the DOD as the ultimate purchaser represented
approximately 61% of ATP's 1998 revenues. The United States defense budget has
declined in real terms since the mid-1980s, resulting in some delays in new
program starts, program stretch-outs and program cancellations. The United
States defense budget has begun to stabilize and even increase in real dollars
over the last several years. A major portion of ATP's DOD business is expected
to be funded by the procurement and research, development, test and evaluation
segments of the defense budget. Procurement and research, development, test and
evaluation funding has been significantly reduced over the last decade but is
expected to remain relatively stable or grow slightly over the next decade. A
significant portion of ATP's DOD business is also expected to be funded by the
operations and maintenance portion of the DOD budget, which has declined less
than the other segments. A further significant decline or reallocation of the
procurement, research, development, test and evaluation or operations and
maintenance segments of the DOD budget could materially and adversely affect
ATP's sales and earnings. The loss or significant curtailment of ATP's material
United States defense contracts would also materially and adversely affect ATP's
future sales and earnings.

18
<PAGE>
COMPETITION. The market for ATP's products is highly competitive. ATP
competes with numerous competitors, a number of which possess substantially
greater financial, marketing, personnel and other resources. Continued
consolidation of major aerospace companies could result in program cancellations
as well as increased demand for price concessions. This, together with increased
competition for available business, could translate into downward pressure on
gross margins with resulting lower overall profit margins. Vendor prices for
production materials such as resins, liquid and film adhesives, reinforcing
fiber materials and other materials and supplies could increase as demand for
aircraft parts and assemblies increase to match higher build rates for
commercial aircraft. Higher material prices and demand for lower aircraft part
and assembly prices could place increasing pressure on ATP's operating margins
and net income. Although management of ATP believes that the Merger has enhanced
ATP's competitiveness, there can be no assurance that ATP will be able to
compete successfully in the future.

FINANCIAL LEVERAGE. ATP has a significant amount of indebtedness, which could
make it difficult to obtain additional financing for working capital, capital
expenditures, acquisitions or other purposes. Moreover, the terms of ATP's
indebtedness impose various restrictions and covenants on ATP which could
potentially limit ATP's ability to respond to market conditions or to take
advantage of business opportunities. ATP's ability to meet its debt service
obligations and to reduce total debt will be dependent upon its future
performance, which, in turn, will be subject to general conditions in the
aerospace and defense industries and to financial, business and other factors
affecting the operations of ATP, many of which will be beyond its control.

YEAR 2000 ISSUES

ATP is currently in the process of evaluating its computer hardware and
software systems to ensure such programs and systems will be able to process
transactions in the year 2000 ("Y2K"). ATP is also currently identifying other
equipment which contains embedded electronics that may render the equipment
inoperable in the year 2000 and is evaluating the plans of its material
suppliers and vendors to become Y2K compliant. ATP has organized its efforts to
prepare for Y2K problems under a plan that involves four steps: assessment,
modification, testing and implementation. Each division has a core of full-time
individuals who have been assigned specific Y2K responsibilities, in addition to
their regular assignments. The Y2K readiness project is a company-wide effort
and is monitored centrally.

ATP has completed the assessment phase under its plan. ATP anticipates that
it will complete the modification, testing and implementation phases by the end
of 1999. ATP anticipates that it will be Y2K compliant by the end of 1999 with
respect to internal information technology ("IT") and non-IT systems that are
critical to its operations. ATP is currently evaluating the time table upon
which all other IT and non-IT systems can be made Y2K compliant and will target
a date when the evaluation is complete. However, ATP does not currently
anticipate any material adverse effect on its business operations, products or
financial prospects as a result of the Y2K problem.

Although it is not possible to accurately estimate the costs of this
information systems analysis, at this time ATP expects that such costs will not
be material to its financial position or results of operations. There can be no
assurance, however, that ATP, its suppliers and vendors or their respective
software vendors will complete all modifications to all material IT systems and
non-IT systems in a timely manner, or as to the costs associated with ATP
becoming Y2K compliant, or the costs of the failure of any of ATP's vendors
failing to become Y2K compliant.

Some of the possible consequences of non-compliance by ATP or significant
third parties include, among other things, temporary plant closings, delays in
the receipt and delivery of raw materials and

19
<PAGE>
products, invoice and collection errors, and obsolescence of inventory. Given
this risk, ATP intends to develop contingency plans to mitigate possible
disruption in business operations that may result from Y2K related
interruptions. Contingency plans may include increasing safety stocks of raw
materials, securing alternative suppliers or other appropriate measures.

ATP's Year 2000 activities are an ongoing process and the estimates of costs
and completion dates for various activities described above are subject to
change.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to changes in interest rates primarily relating to
it's $50 million credit facility. However, the carrying value of borrowings
under the credit facility generally approximate fair value due to the variable
rate nature of such borrowings. At December 31,1998, the Company had $44.4
million outstanding under the credit facility at a weighted-average interest
rate of 7.58%.

The Company has not entered into transactions which subject it to material
foreign currency transaction gains and losses.

20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Advanced Technical Products, Inc.

We have audited the accompanying consolidated balance sheets of Advanced
Technical Products, Inc. and subsidiaries (the "Company") as of December 31,
1998 and 1997, and the related consolidated statements of income, comprehensive
income and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Advanced
Technical Products, Inc. and subsidiaries at December 31, 1998 and 1997 and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.

KPMG LLP

Atlanta, Georgia
February 19, 1999 except
as to Note 7, which is
as of March 24, 1999

21
<PAGE>
INDEPENDENT AUDITOR'S REPORT

To the Shareholders of
TPG Holdings, Inc.

We have audited the accompanying consolidated balance sheets of TPG HOLDINGS,
INC. (a Delaware Corporation) AND SUBSIDIARIES as of December 31, 1996 and the
related consolidated statements of income and cash flows for the year ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of TPG Holdings, Inc. and
Subsidiaries as of December 31, 1996 and the results of their operations and
their cash flows for the year ended December 31, 1996 in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Chicago, Illinois
March 14, 1997

<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS 1998 1997
--------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ......................................................................... $ 2,030 $ 494
Accounts receivable (net of allowance for doubtful accounts of $722 in 1998 and
$449 in 1997) ................................................................................. 26,053 23,417
Inventories and costs relating to long-term contracts and programs in
process, net of progress payments ............................................................. 40,635 34,633
Prepaid expenses .................................................................................. 1,054 923
Deferred income taxes ............................................................................. 2,570 961
--------- --------
Total current assets .......................................................... 72,342 60,428
--------- --------
PROPERTY, PLANT AND EQUIPMENT:
Land .............................................................................................. 655 655
Buildings and improvements ........................................................................ 7,037 2,596
Machinery and equipment ........................................................................... 26,299 20,333
Construction in progress .......................................................................... 3,453 2,125
Less-Accumulated depreciation ..................................................................... (11,516) (8,150)
--------- --------
Net property, plant and equipment ............................................. 25,928 17,559
--------- --------

DEFERRED INCOME TAXES ................................................................................. -- 62

OTHER ASSETS .......................................................................................... 8,606 7,635
========= ========
Total assets .................................................................. $ 106,876 $ 85,684
========= ========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable .................................................................................. $ 12,665 $ 12,003
Accrued expenses .................................................................................. 7,626 7,637
Current portion of capital lease obligations ...................................................... 294 150
Short-term debt ................................................................................... 28,767 19,430
--------- --------
Total current liabilities ..................................................... 49,352 39,220

LONG-TERM LIABILITIES:
Long-term debt .................................................................................... 20,703 16,678
Capital lease obligations, net of current portion ................................................. 1,483 325
Deferred income taxes ............................................................................. 194 --
Other liabilities ................................................................................. 2,347 1,967
--------- --------
Total liabilities ............................................................. 74,079 58,190

Mandatorily redeemable preferred stock, 8% cumulative, redeemable, $1.00 par value,
1,000,000 shares authorized, issued and outstanding in 1998 and 1997 ............................. 1,000 1,000

SHAREHOLDERS' EQUITY:
Preferred stock, undesignated, 1,000,000 shares authorized, no shares issued and outstanding ...... -- --
Common stock, $.01 par value, 30,000,000 shares authorized, 5,240,188 shares in 1998 and
5,220,052 shares in 1997, issued and outstanding .............................................. 52 52
Additional paid-in capital ........................................................................ 16,522 16,506
Retained earnings ................................................................................. 15,983 10,376
Notes receivable from officers .................................................................... (135) (135)
Accumulated other comprehensive income - additional minimum pension liability ..................... (625) (305)
--------- --------
Total shareholders' equity .................................................... 31,797 26,494
--------- --------
Total liabilities and shareholders' equity .................................... $ 106,876 $ 85,684
========= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

23
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Revenues ......................................................................... $ 165,074 $ 119,433 $ 126,534

Cost of revenues ................................................................. 126,678 91,312 94,365

General and administrative expenses .............................................. 25,570 19,006 21,758
---------- ---------- -----------
Operating income ....................................................... 12,826 9,115 10,411
Interest expense ................................................................. 3,579 2,273 2,377
---------- ---------- -----------
Income before income taxes and extraordinary item ...................... 9,247 6,842 8,034

Income taxes ..................................................................... 3,560 2,634 3,093
---------- ---------- -----------
Income before extraordinary item ....................................... 5,687 4,208 4,941

Extraordinary loss from debt refinancing, net of income taxes of $418 ............ -- -- 667
---------- ---------- -----------
Net income ............................................................. $ 5,687 $ 4,208 $ 4,274
---------- ---------- -----------
Basic earnings per share:
Income before extraordinary item ....................................... $ 1.06 $ 0.99 $ 1.23
Extraordinary item, net ................................................ -- -- (0.17)
---------- ---------- -----------
Net income ..................................................... $ 1.06 $ 0.99 $ 1.06
---------- ---------- -----------
Diluted earnings per share:
Income before extraordinary item ....................................... $ 1.01 $ 0.95 $ 1.20
Extraordinary item, net ................................................ -- -- (0.17)
========== ========== ===========
Net income ..................................................... $ 1.01 $ 0.95 $ 1.03
========== ========== ===========
Weighted average number of common and common equivalent shares
outstanding:

Basic .......................................................... 5,270,520 4,157,111 3,943,830
========== ========== ===========
Diluted ........................................................ 5,526,130 4,362,035 4,058,830
========== ========== ===========

</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

(DOLLARS IN THOUSANDS)

1998 1997 1996
------- ------- -------

Net income ................................. $ 5,687 $ 4,208 $ 4,274
Other comprehensive income(loss) -
minimum pension liability adjustment.. (320) (210) (95)
------- ------- -------
Comprehensive income ....................... $ 5,367 $ 3,998 $ 4,179
======= ======= =======

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

25
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................................................... $ 5,687 $ 4,208 $ 4,274
Adjustments to reconcile net income to net cash provided by (used in)
operating activities-
Depreciation and amortization ............................................ 3,728 1,512 646
Loss on fixed asset disposal ............................................. -- 33 --
Deferred income taxes, net ............................................... (17) (523) (836)
Increase in accounts receivable .......................................... (1,205) (2,193) (2,273)
Increase in inventories .................................................. (5,526) (9,350) (986)
(Increase) decrease in prepaid expenses .................................. (121) 508 (92)
Increase (decrease) in accounts payable .................................. (261) 5,736 (1,492)
Increase (decrease) in accrued expenses .................................. 344 (305) 999
Increase in other noncurrent assets ...................................... (99) (119) (55)
-------- ------- --------
Net cash provided by (used in) operating activities .............. 2,530 (493) 185
-------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ..................................................... (9,784) (1,785) (1,755)
Cash payments for businesses acquired, net of cash acquired .............. (2,907) (1,187) (1,000)
-------- ------- --------
Net cash used in investing activities ............................ (12,691) (2,972) (2,755)
-------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of borrowings ................................................... 20,116 5,139 21,624
Repayments of borrowings ................................................. (8,084) (2,102) (19,078)
Proceeds from exercise of stock options and warrants ..................... 16 -- --
Cash dividends paid ...................................................... (40) (120) (93)
Payments under capital lease obligations ................................. (311) (17) --
-------- ------- --------
Net cash provided by financing activities ........................ 11,697 2,900 2,453
-------- ------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................................... 1,536 (565) (117)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ........................................... 494 1,059 1,176
-------- ------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR ................................................. $ 2,030 $ 494 $ 1,059
======== ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest ................................................... $ 3,635 $ 2,109 $ 2,567
Cash paid for income taxes ............................................... $ 3,776 $ 1,259 $ 3,043
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

26
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1998, 1997 AND 1996

1. SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Advanced Technical Products, Inc. (the "Company" or "ATP") and its
subsidiaries, all of which are 100% owned. The Company is
incorporated in the state of Delaware, with corporate headquarters
located in Roswell, Georgia. Principal manufacturing operations are
located in Marion, Virginia; Lincoln, Nebraska; Deland, Florida;
Belcamp and Edgewood, Maryland; Glen Cove, New York and Anglet,
France. The Company's subsidiaries include: Technical Products
Group, Inc., Alcore, Inc., Marion Properties, Inc., Lincoln
Properties, Inc., Deland Properties, Inc., and Alcore Brigantine.
All significant intercompany transactions and balances have been
eliminated.

REVENUE RECOGNITION
Revenues and anticipated profits under long-term fixed price
production contracts are recorded on a percentage of completion
method, principally using units-of- delivery as the measurement
basis for effort accomplished. Delivery of units are generally made
upon acceptance by the customer in accordance with contract terms.

Revenues under certain long-term fixed price contracts which require
a significant amount of development effort in relation to total
contract value are recorded based on the accomplishment of
milestones as specified by contract terms. Revenues under cost
reimbursable type contracts are recorded as costs are incurred.

Amounts representing contract change orders or claims are included
in estimates of future contract revenues used for preparing
estimates of contract profitability at completion only when
realization is probable and amounts can be reasonably estimated. At
December 31, 1998, the amount included in estimates of future
contract revenues for outstanding claims which had not been
finalized was approximately $4.0 million. Outstanding claim amounts
were not material as of December 31, 1997.

Estimated losses on contracts are recorded in full when identified.

27
<PAGE>
CASH AND CASH EQUIVALENTS
Cash equivalents consist of highly liquid instruments purchased with
an original maturity of three months or less.

RESEARCH AND DEVELOPMENT COSTS
Company-sponsored research and development costs are reported as
part of general and administrative expenses. Revenues and costs
incurred in connection with customer-sponsored research and
development contracts are accounted for as contract revenues and
costs.

INVENTORIES
Inventories are valued at the lower of first-in, first-out (FIFO)
cost or market (net realizable value). Inventory cost includes
material, labor and manufacturing overhead. Customer progress
payments received on long-term contracts are recorded as an offset
to related inventory balances.

USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. In particular,
accounting for long-term contracts requires management estimates of
future contract revenues and costs used for preparing estimates at
contract completion and determining contract profitability reflected
in the financial statements. Actual results could differ from those
estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's debt is estimated based upon the
cash flows discounted using the interest rates available to the
Company for debt with similar terms and remaining maturities. The
carrying value of the Company's debt approximates fair value due to
the variable rate nature of the borrowings and/or the short maturity
of the borrowings. The carrying value of all other financial
instruments approximates fair value due to the short-term nature of
such instruments.

28
<PAGE>
PROPERTY, PLANT AND EQUIPMENT
Property additions are recorded at cost. The costs of maintenance
and repairs are charged to operating results as incurred.
Depreciation is charged against operations over three to ten years
for machinery and equipment and seven to forty years for buildings
and improvements. Improvements to leased property are amortized over
the life of the lease or the estimated life of the improvement,
whichever is shorter. Straight-line and accelerated methods of
depreciation are used for financial reporting and accelerated
methods are used for tax purposes where permitted. Depreciation
expense for the years ended December 31, 1998, 1997 and 1996 is
$3,375,000, $1,415,000 and $569,000, respectively.

EARNINGS PER SHARE
Basic earnings per share is computed by dividing net earnings
available for common shares by the weighted-average number of shares
of common stock outstanding during the year. Diluted earnings per
share is computed by dividing net earnings available for common
shares by the sum of (1) the weighted-average number of shares of
common stock outstanding during the period, (2) the dilutive effect
of the assumed exercise of stock options using the treasury stock
method and (3) the dilutive effect of other potentially dilutive
securities.

STOCK OPTIONS
On January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, which permits entities to recognize as expense over
the vesting period the fair value of all stock-based awards on the
date of the grant. Alternatively, Statement 123 allows entities to
continue to apply the provisions of Accounting Principles Board
("APB") Opinion No. 25 and provide pro forma net income and pro
forma income per share disclosures for stock option grants made in
1995 and future years as if the fair-value-based method defined in
Statement 123 had been applied. The Company has elected to continue
to apply the provisions of APB Opinion No. 25 and provide the pro
forma disclosures of Statement 123.

29
<PAGE>
INCOME TAXES
Income taxes are accounted for using an asset and liability approach
whereby deferred tax assets and liabilities are recognized for the
expected future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
realized or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

GOODWILL
Goodwill, which represents the excess of purchase price over the
fair value of net assets acquired, is amortized on the straight-line
basis over the estimated useful life, but not in excess of 40 years.
The Company evaluates the possible impairment of goodwill at each
reporting period based on the undiscounted projected cash flows of
the applicable business units.

LONG-LIVED ASSETS
In accordance with Statement of Financial Accounting Standards No.
121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF, the Company reviews for the
impairment of long-lived assets whenever events or changes in
circumstances indicate the carrying amount of an asset may not be
recoverable. During 1998 and 1997, no such impairment losses have
been identified by the Company.

COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE
INCOME, which requires the reporting of other comprehensive income
in addition to net income from operations. Other comprehensive
income for the Company consists of changes to its additional minimum
pension liability. The Company has presented separate Consolidated
Statements of Comprehensive Income to conform to the requirements of
Statement 130.

30
<PAGE>
2. ACQUISITIONS

The Company was formed on October 31, 1997 when TPG Holdings, Inc. ("TPG")
merged with Lunn Industries, Inc. ("Lunn"), forming Advanced Technical
Products, Inc. Former TPG and Lunn common shareholders received 8.3028 and
0.1 shares of ATP stock respectively, in exchange for each share of the
former companies' stock. The merger agreement specified that 50% of the
common stock to be delivered to each former TPG common shareholder would
be held in escrow subject to cancellation pending the results of TPG's
1997 operations versus net income targets designated in the agreement.
TPG's 1997 net income exceeded the maximum target, and all of the escrowed
shares were released to the former TPG shareholders in April 1998.

The merger was accounted for as a purchase of Lunn assets by TPG. The
recorded purchase price of $17,582,000 consisted of (1) $14,358,000, the
market value of Lunn's outstanding stock at the time the intent to merge
was announced, (2) $1,200,000, the estimated value of Lunn's stock options
and warrants outstanding as of the merger valuation date and (3)
$2,024,000 direct merger costs incurred. As a result of the transaction,
the Company recorded $5,124,000 of goodwill as of December 31, 1997, which
is being amortized using the straight-line method over 40 years. As
discussed in Note 13, such amount was reduced in 1998 due to the
elimination of the valuation allowance for deferred tax assets which had
been recorded at the date of the acquisition.

The operating results of Lunn have been included in the Company's
consolidated financial statements since the date of the acquisition. The
following table presents unaudited pro forma consolidated operating
results for the Company for the year ended December 31, 1997 as if the
Lunn acquisition had occurred as of January 1, 1997 (in thousands, except
per share amounts):

Net revenues ......................... $ 138,958
Net income ........................... 5,090
Earnings per share - basic ........... 0.96
Earnings per share - diluted ......... 0.91

The unaudited pro forma consolidated operating results of the Company are
not necessarily indicative of the operating results that would have been
achieved had the merger been consummated at the beginning of the period
presented, and should not be construed as representative of future
operating results.

On May 29, 1998, the Company acquired all of the capital stock of
Brigantine SA, a manufacturer of honeycomb products and engineered panels
located in France. The acquired company, renamed Alcore Brigantine,
operates as a subsidiary of Alcore, Inc., a division of the Company. The
acquisition is expected to expand the Company's access to the European
aerospace and commercial markets. The acquisition was accounted for as a
purchase and the total purchase price of $3,329,000 consisted of (1)
$2,502,000, cash paid to the seller, (2) $500,000 in deferred payments
evidenced by a note payable and (3) $327,000, direct transaction costs. As
a result of the transaction, the Company recorded $2,307,000 of goodwill,
which is being amortized using the straight-line method over 40 years. The
Company's consolidated financial statements include the operating results
for Alcore Brigantine since the date of the acquisition. The pro forma
results of operations for 1998 and 1997, assuming the acquisition had been
made at the beginning of each year, would not be materially different from
reported results.

31
<PAGE>
The assets and liabilities of the acquired companies have been recorded in
the Company's consolidated financial statements at their estimated fair
values at the acquisition dates as follows (in thousands):

ALCORE
BRIGANTINE LUNN
----------- --------
Cash .................................... $ 317 $ --
Accounts receivable ..................... 1,431 4,076
Inventories ............................. 476 4,879
Prepaid and other assets ................ 10 681
Property, plant and equipment ........... 1,542 12,683
Other assets ............................ 195 644
Current liabilities ..................... (923) (7,007)
Capital lease obligations................ (1,196) --
Long-term debt .......................... (830) (3,498)
------- --------
Total ............................. $ 1,022 $ 12,458
======= ========

3. NATURE OF BUSINESS AND CUSTOMER CONCENTRATION

The Company is engaged principally in the design and manufacture of a wide
range of advanced composite, aerospace and defense products including
radomes for high-performance military and commercial aviation, lightweight
relocatable shelters, rocket motor cases, pressure vessels, fuel tanks for
military aircraft and commercial natural gas vehicles, advanced electronic
and electro-optical components, chemical warfare detection systems, metal
bonded panels and composite assemblies using honeycomb cores, fibers and
reinforced plastics.

Sales to the U.S. government on a prime or sub-contract basis during 1998,
1997 and 1996 were approximately 61%, 71% and 81%, respectively. More than
95% of sales were on a fixed-price basis for all periods reported.

As a government contractor, the Company is exposed to certain inherent
industry risks and uncertainties including technological obsolescence,
changes in government policies, dependence on the federal defense budget
and annual congressional appropriation and allotment of funds. Although
the Company's major programs have been well supported during recent years,
future spending reductions and funding limitations could negatively impact
future operations.

32
<PAGE>
4. SEGMENT REPORTING

Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE
AND RELATED INFORMATION, which establishes revised standards for the
manner in which public business enterprises report information about
operating segments. The Company has restated its segment disclosure for
periods reported prior to 1998 to conform to Statement No. 131.

The Company identifies its reportable segments based on similarities
between economic characteristics, customers, products, services and
regulatory environment. The Company's operations include one reportable
business segment: Aerospace / Defense. All other operating segments have
not met the quantitative thresholds for determining reportable segments. A
description and financial data for the segments are summarized below:

AEROSPACE / DEFENSE
The Aerospace / Defense markets served by the Company primarily consist of
the United States government, which the Company sells to on a prime and
subcontract basis, and the commercial aerospace market. The Company
designs, develops and manufactures a wide range of advanced composite
products, advanced electronic and electro-optical components and other
integrated defense systems for this market segment. This reportable
segment consists of five operating segments which have been aggregated for
segment reporting purposes.

OTHER
The remainder of the Company's business consists of four operating
segments which have not met the quantitative thresholds for determining
reportable segments. One of the segments is involved in the design and
manufacture of composite parts and components for the automotive, oil and
gas and other commercial industries, including fuel tanks for natural gas
vehicles, accumulator bottles, flexible drill pipe and other products. Two
of the segments produce aluminum and composite honeycomb core for
commercial markets (excluding aerospace). In addition, one segment
manufactures electrical power switching products for specialty vehicles
including recreational vehicles, motor homes, conversion vans,
over-the-road trucks and leisure boats.

33
<PAGE>
<TABLE>
<CAPTION>
Selected financial data by business segment as of and for the years ended
December 31, 1998, 1997 and 1996 follows (in thousands):

1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net revenues
Aerospace / Defense:
-from external customers ...... $ 136,881 $ 99,637 $ 110,847
-intersegment revenues ........ 645 -- --
Other operating segments:
-from external customers ...... 28,193 19,796 15,687
-intersegment revenues ........ -- -- --
Elimination of intersegment revenues (645) -- --
------------ ------------ ------------
Total ......................... $ 165,074 $ 119,433 $ 126,534
============ ============ ============
Operating income (loss)
Aerospace / Defense ................. $ 14,308 $ 10,342 $ 14,311
Other operating segments ............ 1,607 300 (423)
Corporate ........................... (3,089) (1,527) (3,477)
============ ============ ============
Total ......................... $ 12,826 $ 9,115 $ 10,411
============ ============ ============
Identifiable assets
Aerospace / Defense ................. $ 85,397 $ 65,540 $ 35,572
Other operating segments ............ 16,867 16,974 8,073
Corporate ........................... 4,612 3,170 1,078
------------ ------------ ------------
Total ......................... $ 106,876 $ 85,684 $ 44,723
============ ============ ============
Capital expenditures
Aerospace / Defense ................. $ 7,798 $ 1,569 $ 955
Other operating segments ............ 1,955 210 752
Corporate ........................... 31 6 48
------------ ------------ ------------
Total ......................... $ 9,784 $ 1,785 $ 1,755
============ ============ ============
Depreciation and amortization
Aerospace / Defense ................. $ 3,126 $ 1,149 $ 466
Other operating segments ............ 584 345 158
Corporate ........................... 18 18 22
------------ ------------ ------------
Total ......................... $ 3,728 $ 1,512 $ 646
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
The following table represents the locale of revenues and long-lived
assets as of and for the years ended December 31, 1998, 1997 and 1996 (in
thousands):

EXTERNAL REVENUES LONG-LIVED ASSETS
------------------------------ --------------------------
1998 1997 1996 1998 1997 1996
-------- -------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
United States ...... $142,327 $110,898 $119,189 $30,619 $25,194 $4,587
Foreign countries .. 22,747 8,535 7,345 3,915 -- --
-------- -------- -------- ------- ------- ------
Total ........ $165,074 $119,433 $126,534 $34,534 $25,194 $4,587
======== ======== ======== ======= ======= ======
</TABLE>
34
<PAGE>
MAJOR CUSTOMER INFORMATION
Sales to the U. S. government under prime contracts totaled approximately
16%, 31% and 45% of total Company sales for 1998, 1997 and 1996,
respectively. Approximately 14% of 1998 total sales were to The Boeing
Company, and approximately 17% of 1997 sales were to Lockheed Martin
Corporation. No other customers comprised 10% or more of total sales for
the periods reported. All major customer sales reported were included as
part of the Aerospace / Defense business segment.

5. INVENTORIES

Inventories at December 31, 1998 and 1997 consisted of the following (in
thousands):

1998 1997
-------- --------
Finished goods ....... $ 956 $ 1,236
Work in process ...... 26,113 18,035
Raw materials ........ 24,860 24,297
Progress payments .... (11,294) (8,935)
-------- --------
$ 40,635 $ 34,633
======== ========

6. LEASES
The Company has various lease agreements for offices, factories and
certain equipment. The longest lease obligation extends to 2013. Most
leases contain renewal options and some contain purchase options. No
leases contain restrictions on the Company's activities concerning
dividends, further leasing or additional debt.

The Company is obligated under various capital leases for certain
buildings, machinery and equipment that expire at various dates through
2013. The gross amount of buildings, machinery and equipment and related
accumulated amortization recorded under capital leases as of December 31,
1998 and 1997 were as follows (in thousands):

1998 1997
------- -----
Buildings ............... $ 1,167 $ --
Machinery and equipment . 1,147 729
Less accumulated amortization (242) (140)
------- -----
Net capital lease asset $ 2,072 $ 589
======= =====

Rent expense for the years ended December 31, 1998, 1997 and 1996
consisted of the following (in thousands):

1998 1997 1996
------- ------- -------
Basic expense . $ 2,036 $ 1,194 $ 1,085
Sublease income (253) (250) (250)
------- ------- -------
Rent expense, net $ 1,783 $ 944 $ 835
======= ======= =======

35
<PAGE>
Future minimum rental payments at December 31, 1998, under agreements
classified as operating leases with noncancelable terms in excess of one
year, and the present value of future minimum capital lease payments are
as follows (in thousands):

CAPITAL OPERATING
LEASES LEASES
------- ---------
Year ending December 31:
1999 ......................................... $ 358 $ 1,607
2000 ......................................... 313 905
2001 ......................................... 274 790
2002 ......................................... 236 752
2003 ......................................... 147 640
Beyond 2003 .................................. 997 2,566
------- ---------
Total minimum lease payments ................. 2,325 $ 7,260
=========
Less amounts representing interest
(at rates ranging from 4.6% to 18.2%) ....... (548)
-------
Net principal portion ........................ 1,777
Less portion due within one year ............. (294)
-------
Long-term portion ............................ $ 1,483
=======

During the first quarter of 1998, the Company entered into a ten year
lease agreement for a facility located at Edgewood, Maryland ("Edgewood"),
into which the existing Jessup, Maryland operation is being moved. It is
anticipated that the Edgewood facility will provide increased production
capability to facilitate future business expansion. The schedule of
operating lease obligations includes the new lease commitment. The
schedule does not include the remaining seven years and three months on
the lease agreement for the Company's Jessup facility. This lease
obligation totals approximately $2,161,000 over the seven year, three
month period. The Company plans to sublease the Jessup facility and
anticipates that the sublease income will offset the lease obligation
resulting in no significant net expense to be recognized in future
reporting periods.

7. DEBT
Short-term debt of the Company at December 31 consisted of the following
(in thousands):

1998 1997
------- -------
Revolving loans ...................... $24,845 $17,367
Current maturities of long-term debt . 3,922 2,063
------- -------
Total ................... $28,767 $19,430
======= =======

36
<PAGE>
Long-term debt of the Company at December 31 consisted of the following
(in thousands):

1998 1997
------- -------
Term loans ............................... $16,714 $12,500
Equipment loans .......................... 2,819 --
Deferred obligations ..................... 500 3,000
Bonds payable ............................ 2,400 2,473
Other long-term debt ..................... 2,192 768
------- -------
Total long-term debt ............... 24,625 18,741
Less current portion ..................... 3,922 2,063
------- -------
Long-term debt, net of current portion $20,703 $16,678
======= =======

Scheduled maturities of long-term debt are as follows (in thousands):

1999 ...................................... $ 3,922
2000 ...................................... 17,093
2001 ...................................... 715
2002 ...................................... 546
2003 ...................................... 551
Thereafter ................................ 1,798
-------
Total ............................... $24,625
=======

REVOLVING, TERM AND EQUIPMENT LOANS
In March 1998, the Company refinanced its revolving and term loans,
consolidating them with one lending institution. The financing agreement
was amended in June 1998 to increase the capital expenditure facility from
$3.0 million to $5.0 million. The Company's current credit facility totals
$50.0 million consisting of (1) $27.0 million of revolving credit against
eligible receivable and inventory balances, (2) an $18.0 million term loan
and (3) $5.0 million capital expenditure facility. In connection with the
refinancing, proceeds from the new loans were used in March 1998 to retire
the deferred obligation of $3.0 million which existed at December 31,
1997. As of December 31, 1998, the Company had approximately $4.2 million
of unused borrowing availability on the total credit facility.

On March 28, 1998 and September 30, 1998, the Company borrowed funds on
its capital expenditure facility resulting in equipment loans in the
amount of $700,000 and $2,300,000, respectively. Equipment loan principal
payments are made monthly based on a five-year amortization period. No
equipment loans existed as of December 31, 1997.

The revolving, term and equipment loans are secured by collateral
consisting of substantially all of the Company's assets including
inventory, equipment, receivables, general intangibles, investment
property and real property. The interest rates on the loans are set
quarterly based on the Company's performance against debt-to-earnings
ratios specified in the agreement. Interest rates can range from LIBOR
(the London Interbank Offered Rates) plus 2.25% to LIBOR plus 1.0% on the
revolving loan and from LIBOR plus 2.75% to LIBOR plus 1.5% on the term
and equipment loans. Alternatively, the Company may elect interest rates
based on the lending institution's prime rate with the revolving loan
fixed at prime plus 0.25% and the term and equipment loans fixed at prime
plus 0.50%. The weighted average interest rates in effect at December 31,
1998

37
<PAGE>
for the revolving, term and equipment loans were 7.42%, 7.76% and 7.94%,
respectively. Interest is paid monthly in arrears on all loans. The term
loan is payable quarterly based on a seven-year amortization period. The
initial term of the credit facility extends to December 31, 2000.

Under terms of two separate revolving loan agreements outstanding at
December 31, 1997, the Company could borrow up to $23.0 million on a
combined basis against the Company's eligible receivables, inventories and
equipment. Amounts borrowed on one line of credit (up to $17.0 million)
carried interest at an annual rate of 0.50% above the lender's prime rate
or, at the Company's option, 2.75% above LIBOR. The other line of credit
($6.0 million) was available at an annual interest rate of LIBOR plus
2.5%, with the first $3.0 million covered by an interest rate swap
agreement which fixed the interest rate at 8.65% to protect against the
risk of an increase in the LIBOR rate. At December 31, 1997, the Company's
various revolving loan balances (and annual interest rates in effect) were
as follows: $6,351,000 (9.0%), $6,000,000 (8.6563%), $3,000,000 (8.65%)
and $2,016,000 (8.2187%).

On December 27, 1996, the Company refinanced its revolving and term loans
with a different bank. The Company recorded an after-tax extraordinary
loss of $667,000 ($1.085 million pre-tax) during 1996 related to
prepayment fees, closing costs, origination fees and legal costs. Under
the term loan provisions of the new agreement, the Company borrowed $14.0
million on December 27, 1996, at an annual interest rate of .75% above
prime. The interest rate on all or a portion of the term loan was
convertible, at the Company's option, to 3.0% above LIBOR. Principal
payments totaled $500,000 per quarter beginning April 1, 1997. At December
31, 1997, the term loan principal balance totaled $12.5 million, $12.0
million of which carried LIBOR-based interest at an annual rate of 8.9063%
and $500,000 of which carried prime-based interest at 9.25%.

The Company is subject to several financial and nonfinancial covenants
under the $50.0 million credit facility. At December 31, 1998, the Company
was in violation of certain financial covenants. Such violations were
cured as a result of an agreement amendment dated March 24, 1999.

DEFERRED OBLIGATIONS
The deferred obligation of $500,000 at December 31, 1998 was incurred in
connection with the Brigantine SA acquisition (See Note 2) on May 29,
1998. The obligation, which bears no interest, is payable in three equal
annual installments beginning May 29, 1999. The deferred obligation of
$3,000,000 at December 31, 1997 was payable to Brunswick in connection
with the acquisition of businesses in 1995. The obligation was payable on
April 28, 2001, with interest of 8.0% per annum payable annually,
according to the original terms of the acquisition agreement. The
obligation was paid in full in March 1998.

BONDS PAYABLE AND OTHER DEBT
Bonds payable result from a financing agreement with the State of Maryland
dated May 14, 1997 to provide $2.6 million in 15 year tax-exempt
industrial development bonds bearing interest at a variable rate adjusted
weekly to finance the purchase of the Belcamp, Maryland honeycomb
manufacturing facility and an adjacent 3.2 acre parcel of

38
<PAGE>
land. The Company has entered into an interest rate hedge agreement with a
financial institution to fix the interest rate on the tax exempt bonds at
5.07% through the year 2012.

On July 7, 1997, in conjunction with the tax exempt bond financing, the
Company entered into a ten-year $810,000 Maryland Industrial and
Commercial Redevelopment Fund loan agreement with interest set at a fixed
rate of 5.1% annually, plus a five-year $60,000 loan from Harford County,
Maryland with interest set at a fixed rate of 5.5%. The unpaid balance of
these loans are reported as other long-term debt and totaled $773,000 and
$768,000 at December 31, 1998 and 1997, respectively.

The remainder of other long-term debt as of December 31, 1998 totals
$1,419,000 and consists of several loans of the Company's French
subsidiary, Alcore Brigantine. The weighted average interest rates on the
loans at December 31, 1998 was approximately 4.76%, and the remaining
duration ranged from two to nine years.

8. RETIREMENT AND EMPLOYEE BENEFIT COSTS

DEFINED CONTRIBUTION PLANS

The Company has retirement and savings plans for substantially all of the
Company's employees which allow participants to make contributions up to
15% of their base pay via payroll deductions pursuant to Section 401(k) of
the Internal Revenue Code. Under the plan, the Company may make
discretionary matching contributions. The Company's match for the 1998
plan year was 50% of each participant's pretax contributions, limited to
4% of their salary. The cost of the employer match for 1998, 1997 and 1996
was $630,000, $159,000 and $195,000, respectively.

Union employees at the Glen Cove, New York facility are covered by a
defined contribution retirement plan, the cost of which was $33,000 for
1998 and $5,000 for 1997 (post-merger period, only).

DEFINED BENEFITS PLANS

The majority of hourly union employees of the Company, other than those at
the Glen Cove, New York facility, are covered by defined benefit pension
plans with benefits generally based on negotiated rates and years of
service. The Company's funding policy is to contribute annually the
minimum required amount determined by its actuaries.

39
<PAGE>
The change in benefit obligation, change in plan assets and funded status
of the defined benefit plans for 1998 and 1997 is summarized as follows
(in thousands):

1998 1997
------- -------
CHANGE IN BENEFIT OBLIGATION:
Balance at beginning of year ....... $ 2,001 $ 550
Service cost ....................... 233 276
Interest cost ...................... 180 74
Plan amendments .................... -- 950
Actuarial loss ..................... 460 207
Benefits paid ...................... (71) (56)
------- -------
Balance at end of year ............. $ 2,803 $ 2,001
======= =======
CHANGE IN PLAN ASSETS:
Balance at beginning of year ....... $ 587 $ 104
Actual return on plan assets ....... 129 (34)
Employer contributions ............. 541 573
Benefits paid ...................... (71) (56)
------- -------
Balance at end of year ....... $ 1,186 $ 587
======= =======
FUNDED STATUS:
Funded status at end of year ....... $(1,617) $(1,414)
Unrecognized net actuarial loss .... 626 305
Unrecognized prior service cost .... 956 987
------- -------
Accrued benefit cost ............... $ (35) $ (122)
======= =======

The amounts recognized in the Consolidated Balance Sheets at December 31,
1998 and 1997 consist of (in thousands):

1998 1997
------- -------
Prepaid benefit cost ................... $ 11 $ --
Accrued benefit cost ................... (44) (122)
Additional minimum liability ........... (1,583) (1,292)
Intangible asset ....................... 956 987
Accumulated other comprehensive income . 625 305
------- -------
Accrued benefit cost ................... $ (35) $ (122)
======= =======

40
<PAGE>
The net periodic benefit cost of the defined benefit plans for the years
ended December 31, 1998, 1997 and 1996 by components was as follows (in
thousands):

1998 1997 1996
----- ----- ----
Service cost ....................... $ 233 $ 276 $293
Interest cost ...................... 180 74 37
Expected return on plan assets ..... (65) (24) --
Amortization of prior service cost . 82 3 --
Amortization of actuarial loss ..... 24 15 2
----- ----- ----
Net periodic benefit cost ........ $ 454 $ 344 $332
===== ===== ====

Assumptions used to measure the projected benefit obligation and the
expected long-term rate of return on plan assets as of December 31 were as
follows:

1998 1997 1996
------- ------- -------
Discount rate ................... 6.75% 7.25% 7.25%
Expected return on plan assets .. 8.00% 8.00% 8.00%

The Company does not have any significant postemployment or postretirement
medical or life insurance plans.

9. SHAREHOLDERS' EQUITY

41
<PAGE>
The activity in the equity accounts for the period January 1, 1996,
through December 31, 1998, is summarized as follows (in thousands):
<TABLE>
<CAPTION>
NOTES ACCUMULATED
COMMON STOCK ADDITIONAL RECEIVABLE OTHER COM-
-------------------- PAID-IN RETAINED FROM PREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS OFFICERS INCOME TOTAL
-------- -------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 .............. 1 $ 1 $ 999 $ 2,054 $ (135) $ -- $ 2,919

Common stock split (475-to-1) ......... 474 474 (474) -- -- -- --
Par value adjustment (common) ......... -- (470) 470 -- -- -- --
Net income ............................ -- -- -- 4,274 -- -- 4,274
Preferred dividends declared .......... -- -- -- (80) -- -- (80)
Additional minimum pension liability .. -- -- -- -- -- (95) (95)
-------- -------- ----------- ----------- ----------- ----------- --------
Balance, December 31, 1996 ............ 475 5 995 6,248 (135) (95) 7,018

Merger transactions:
Retirement of TPG stock ............. (475) (5) -- -- -- -- (5)
Conversion of TPG stock to ATP stock 3,944 39 -- -- -- -- 39
Conversion of Lunn stock to ATP stock 1,276 13 -- -- -- -- 13
Purchase accounting adjustment for
acquisition of Lunn ............. -- -- 15,511 -- -- -- 15,511
Net income ............................ -- -- -- 4,208 -- -- 4,208
Preferred dividends declared .......... -- -- -- (80) -- -- (80)
Additional minimum pension liability .. -- -- -- -- -- (210) (210)
-------- -------- ----------- ----------- ----------- ----------- --------
Balance, December 31, 1997 ............ 5,220 52 16,506 10,376 (135) (305) 26,494

Exercise of stock options and warrants. 20 -- 16 -- -- -- 16
Net income ............................ -- -- -- 5,687 -- -- 5,687
Preferred dividends declared .......... -- -- -- (80) -- -- (80)
Additional minimum pension liability .. -- -- -- -- -- (320) (320)
-------- -------- ----------- ----------- ----------- ----------- --------
Balance, December 31, 1998 ............ 5,240 $ 52 $ 16,522 $ 15,983 $ (135) $ (625) $ 31,797
======== ======== =========== =========== =========== =========== ========
</TABLE>
STOCK OPTION PLANS

In conjunction with the merger on October 31, 1997, the Company assumed
the outstanding obligations of the Lunn and TPG stock option plans. The
Company also adopted the 1997 Advanced Technical Products, Inc. Stock
Option Plan (the "1997 Plan") on the merger date. Under the 1997 Plan, the
Company may grant nonstatutory and incentive stock options to employees of
the Company for the purchase of the Company's common stock at an exercise
price equal to at least 100% of the fair market value as of the date of
grant (110% of such fair market value if the optionee owns more that 10%
of the combined voting power of all classes of stock of the Company). The
Company has authorized 300,000 shares of common stock for the 1997 Plan.
On November 6, 1997, 173,000 incentive stock options to acquire shares of
the Company's common stock were granted to key employees under the 1997
Plan. The options vest at the rate of 20% on each of the five anniversary
dates following the year of the grant. The exercise price of the options
is $15.00 per share.

On November 6, 1997, the Company adopted the Advanced Technical Products,
Inc. Non-Employee Director Stock Option Plan, the terms of which are the
same as

42
<PAGE>
the 1997 Plan, except that options are to be granted to only non-employee
members of the Company's board of directors. Stock options for 100,000
shares of common stock are authorized under this plan. On November 6,
1997, 43,000 nonqualified stock options at an exercise price of $15.00 per
share were granted under the plan. On May 14, 1998, an additional 6,000
nonqualified stock options at an exercise price of $14.25 per share were
granted under the plan. The options vest at a rate of 33 1/3 % on each day
preceding the annual meeting of the stockholders of the Company for the
three years subsequent to the option grant.

A summary of stock option transactions for 1998, 1997 and 1996 follows
(pre-merger amounts have been restated to reflect amounts on a post-merger
basis; shares are in thousands):

WEIGHTED
STOCK AVERAGE
OPTIONS EXERCISE
OUTSTANDING PRICE
----------- --------
At December 31, 1995 ..................... -- $ --
Options granted .......................... 208 0.41
----
At December 31, 1996 ..................... 208 0.41

Options granted .......................... 216 15.00
Options assumed in merger ................ 115 7.39
Options canceled ......................... (12) 0.41
----
At December 31, 1997 ..................... 527 7.91

Options granted .......................... 6 14.25
Options exercised ........................ (19) 0.88
----
At December 31, 1998 ..................... 514 $ 8.24
==== ========

The following table summarizes information about stock options outstanding
at December 31, 1998 (pre-merger amounts have been restated to reflect
amounts on a post-merger basis; shares are in thousands):

<TABLE>
<CAPTION>
EXERCISABLE
NUMBER WEIGHTED- WEIGHTED- -----------------------------
OF SHARES AVERAGE AVERAGE NUMBER WEIGHTED-
RANGE OF SUBJECT REMAINING EXERCISE OF AVERAGE
EXERCISE PRICES TO OPTION LIFE PRICE SHARES EXERCISE PRICE
- - --------------- ----------- ----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
$ 0.41 - $ 4.99 179 7.5 years $ 0.41 65 $ 0.41
$ 5.00 - $10.00 109 4.4 years 7.22 109 7.22
$10.01 - $15.00 226 8.8 years 14.95 53 14.86

</TABLE>

The weighted average fair value of options granted in 1998, 1997 and 1996
was $8.00, $8.40 and $0.20 per share, respectively, as estimated using the
Black Scholes option-pricing model with the following assumptions:

1998 and
1997 1996
-------- --------
Risk free interest rate ....... 5.95% 6.82%
Expected dividend yield ....... 0% 0%
Expected stock volatility ..... 45% 100%
Expected option life .......... 7 years 10 years

43
<PAGE>
The Company accounts for these plans under APB Opinion No. 25, under which
no compensation cost has been recognized. Had compensation cost for these
plans been determined based on the fair value at grant date under the
fair-value-based method in Statement of Financial Accounting Standards No.
123, ACCOUNTING FOR STOCK-BASED COMPENSATION, the Company's net income
would have been reduced to the pro forma amounts indicated below:

1998 1997 1996
--------- --------- ---------
Net income:
As reported ..................... $ 5,687 $ 4,208 $ 4,274
Pro forma ....................... 5,428 4,166 4,248

Net income per share:
As reported:
Basic ......................... $ 1.06 $ 0.99 $ 1.06
Diluted ....................... 1.01 0.95 1.03

Pro forma:
Basic ......................... $ 1.01 $ 0.98 $ 1.06
Diluted ....................... 0.97 0.94 1.03

STOCK WARRANTS

The Company assumed obligations of outstanding Lunn stock warrants as of
the merger on October 31, 1997. A summary of stock warrant transactions
for 1998 and 1997 follows (pre-merger amounts have been restated to
reflect amounts on a post-merger basis; shares are in thousands):

WEIGHTED
STOCK AVERAGE
OPTIONS EXERCISE
OUTSTANDING PRICE
----------- --------
At December 31, 1996 ..................... -- $ --
Warrants assumed in merger ............... 66 6.85
---
At December 31, 1997 ..................... 66 6.85

Warrants exercised ....................... (2) 5.00
---
At December 31, 1998 ..................... 64 $ 6.91
=== =======

There were no stock warrant transactions during 1996.

Certain warrant agreements contain anti-dilutive provisions providing for
certain adjustments in the exercise price and the number of shares to be
received upon exercise

44
<PAGE>
in the event of subsequent sales of stock by the Company below the initial
warrant exercise price.

EMPLOYEE STOCK PURCHASE PLAN
On October 29, 1998, the Company adopted the 1998 Advanced Technical
Products, Inc. Employee Stock Purchase Plan to encourage employees of the
Company to maintain in its employ and to have an opportunity to acquire a
proprietary interest in the Company. Under the plan, employees may elect
payroll withholdings to acquire shares of the Company's common stock at a
per share price reflecting fair market value at the beginning or end of
each calendar quarter, whichever is lower. At December 31, 1998, 1,000,000
shares of common stock are authorized under the plan. The initial offering
period under the plan was the two months ending December 31, 1998, and no
shares were issued as of the end of 1998. The plan has not been approved
by the stockholders of the Company as of December 31, 1998.

10. MANDATORILY REDEEMABLE PREFERRED STOCK

The preferred stock is 8% cumulative and redeemable with a $1.00 par value
and 1,000,000 shares are authorized, issued and outstanding. In case of
liquidation, the holders of preferred stock will be paid out of the assets
of the Company in cash equal to $1.00 per share, plus any accumulated and
unpaid dividends, before the common stockholders.

The Company may, at its option, redeem any or all of the outstanding
shares of the preferred stock for cash equal to $1.00 per share, plus any
accumulated and unpaid dividends. The preferred shares are subject to
mandatory redemption at the above-stated value on the earlier of April 28,
2001, or the date on which occurs a change in the ownership of 50% or more
of the assets or the common stock of the Company.

11. RELATED-PARTY TRANSACTIONS

At December 31, 1998 and 1997, certain officers of the Company have
outstanding promissory notes in the aggregate amount of $134,865, which
were issued to the Company as consideration for the paid-in capital in
excess of par value for the shares of stock they own.

Common shares of the Company owned by each employee have been pledged as
collateral to secure the payment of the promissory notes. The notes carry
an interest rate of the lesser of 8% and the highest rate permitted by
applicable law. Principal and accrued interest payments are due in full
upon maker's sale of any pledged stock or on April 28, 2001, if earlier.
The notes may be repaid at any time at the option of the maker without
penalty.

45
<PAGE>
12. TECHNOLOGICAL EXPENDITURES

Technological expenditures, excluding reimbursed projects, for the years
ended December 31, 1998, 1997 and 1996 consisted of the following (in
thousands):

1998 1997 1996
------ ------ ------
Research and development $ 864 $1,063 $1,213
Engineering and other 138 654 1,256
------ ------ ------
Total ......... $1,002 $1,717 $2,469
====== ====== ======

The Company was also reimbursed $11.3 million, $3.9 million and $4.3
million under federally funded research and development contracts during
the years ended December 31, 1998, 1997 and 1996, respectively.

13. INCOME TAXES

The combined provision for U.S. federal and state income taxes for the
years ended December 31, 1998, 1997 and 1996 consisted of the following
(in thousands):

1998 1997 1996
------- ------- -------
Current .................. $ 3,577 $ 3,157 $ 3,511
Deferred ................. (17) (523) (836)
------- ------- -------
Total income tax provision $ 3,560 $ 2,634 $ 2,675
======= ======= =======

The federal statutory tax rate for the years ended December 31, 1998, 1997
and 1996 is reconciled to the effective tax rate as follows:

1998 1997 1996
------ ------ ------

Federal statutory rate ......... 34.0% 34.0% 34.0%
State and local taxes, net
of federal benefit ........... 3.7 4.0 3.8
Other, net ..................... 0.8 0.5 0.7
------ ------ ------
Effective tax rate ............. 38.5% 38.5% 38.5%
====== ====== ======

46
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1998
and 1997 are as follows (in thousands):

1998 1997
------ ------
DEFERRED TAX ASSETS-
Excess of tax over book capitalized
inventory costs ................... $ 309 $ 327
Reserves not deductible until paid .. 1,985 854
Allowance for doubtful accounts ..... 224 95
Net operating loss carryforwards .... 1,013 2,183
------ ------
Total deferred tax assets .. 3,531 3,459

DEFERRED TAX LIABILITIES-
Depreciation ........................ 1,155 978
------ ------
NET DEFERRED TAX ASSET BEFORE
VALUATION ALLOWANCE .................. 2,376 2,481
VALUATION ALLOWANCE .................... -- 1,458
------ ------
NET DEFERRED TAX ASSET ................. $2,376 $1,023
====== ======

The Company has net operating loss carryforwards of $2,980,000 which were
generated from Lunn operations prior to the merger. Such carryforwards may
be applied against future taxable income and expire at varying dates
between 2002 and 2011. As a result of the merger and the subsequent
ownership change of Lunn, the timing of the realization of the Company's
net operating loss carryforwards is subject to Section 382 of the Internal
Revenue Code ("Section 382"). Section 382 generally provides that, if a
corporation undergoes an ownership change, the amount of taxable income
that the corporation may offset with net operating loss carryforwards is
subject to an annual limitation. The Company's estimated annual limitation
under Section 382 is $1,020,000.

The valuation allowance of $1,458,000 at December 31, 1997 primarily
represents a reserve for the net deferred tax assets assumed from Lunn in
the merger. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal
of deferred tax assets and liabilities, projected future taxable income
and tax planning strategies in making this assessment. Based on these
factors and the Section 382 limitation on the annual utilization of net
operating loss carryforwards, management did not believe that it was more
likely than not that the Company would realize the benefits of all these
deductible differences as of December 31, 1997. As of December 31, 1998,
it is management's assessment that it is more likely than not that the
Company will realize the benefits of all the deductible differences
recorded at that date. As such, the valuation allowance was eliminated in
1998, with a corresponding decrease to goodwill recognized as a result of
the merger of TPG and Lunn.

47
<PAGE>
14. EARNINGS PER SHARE

A reconciliation of the numerators and denominators used in calculating
basic and diluted earnings per share ("EPS") for the years ended December
31, 1998, 1997 and 1996 follows (in thousands, except share information):
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
NUMERATORS USED FOR BASIC AND DILUTED EPS

EPS BEFORE EXTRAORDINARY ITEMS:
Income before extraordinary items .......... $ 5,687 $ 4,208 $ 4,941
Less: preferred stock dividends declared .. (80) (80) (80)
----------- ----------- -----------
Income available for common shares ......... $ 5,607 $ 4,128 $ 4,861
=========== =========== ===========
EPS:
Net income ................................. $ 5,687 $ 4,208 $ 4,274
Less: preferred stock dividends declared .. (80) (80) (80)
----------- ----------- -----------
Net income available for common shares ..... $ 5,607 $ 4,128 $ 4,194
=========== =========== ===========
DENOMINATORS USED FOR BASIC AND DILUTED EPS
BASIC EPS:
Weighted average number of common shares
outstanding .............................. 5,270,520 4,157,111 3,943,830

DILUTED EPS:
Add: assumed stock conversions, net of
assumed treasury stock purchases:
-stock options ........................... 220,589 198,379 115,000
-stock warrants .......................... 35,021 6,545 --
----------- ----------- -----------
Weighted average number of common shares and
common equivalent shares ................. 5,526,130 4,362,035 4,058,830
=========== =========== ===========
</TABLE>
15. ACCRUED EXPENSES

Accrued expenses at December 31, 1998 and 1997 consisted of the following
(in thousands):

1998 1997
------ ------
Payroll and other compensation $4,678 $4,025
Medical expenses ......... 587 449
Interest expense ......... 297 353
Income taxes ............. 1,108 1,324
Other .................... 956 1,486
------ ------
Total ................ $7,626 $7,637
====== ======

48
<PAGE>
16. OTHER NONCURRENT ASSETS

Other noncurrent assets as of December 31, 1998 and 1997 are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Goodwill, net of accumulated amortization
of $230 in 1998 and $60 in 1997 ................... $6,180 $5,385
Intangible asset - defined benefit pension plans .... 956 987
Assets of non-qualified deferred compensation plan .. 765 675
Other ............................................... 705 588
------ ------
Total ........................................... $8,606 $7,635
====== ======
</TABLE>

49
<PAGE>
17. SUMMARY OF QUARTERLY INFORMATION (UNAUDITED)

(In thousands,
except per share data)
<TABLE>
<CAPTION>
1998 QUARTERS
------------------------------------------
FIRST SECOND THIRD FOURTH
-------- ------- ------- ----------
<S> <C> <C> <C> <C>
Revenues ................. $ 30,813 $39,632 $47,801 $ 46,828
Operating income ......... 986 2,949 4,129 4,762
Net income ............... 111 1,302 1,949 2,325
Earnings per common share -
diluted .............. $ 0.02 $ 0.23 $ 0.35 $ 0.42
<CAPTION>
1997 QUARTERS
------------------------------------------
FIRST SECOND THIRD FOURTH (a)
-------- ------- ------- ----------
Revenues ................. $ 23,822 $28,110 $28,608 $ 38,893
Operating income ......... 159 2,213 2,253 4,490
Net income (loss) ........ (196) 1,049 1,017 2,338
Earnings (loss) per common
share - diluted ...... $ (0.06) $ 0.25 $ 0.24 $ 0.46
</TABLE>

(a) The fourth quarter of 1997 includes the results of Lunn operations for
the two months following the merger creating Advanced Technical
Products, Inc. on October 31, 1997.

50
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not Applicable.

51
<PAGE>
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

For information concerning directors and executive officers of the Company,
see the information set forth following the caption "ELECTION OF DIRECTORS" in
the Company's definitive proxy statement to be filed no later than 120 days
after the end of the fiscal year covered by this Form 10-K (the "Proxy
Statement"), which information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information set forth following the caption "EXECUTIVE COMPENSATION" in
the Company's Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information set forth following the caption "ELECTION OF DIRECTORS" in
the Company's Proxy Statement is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information set forth following the caption "TRANSACTIONS WITH DIRECTORS,
OFFICERS AND AFFILIATES" in the Company's Proxy Statement is incorporated herein
by reference.

52
<PAGE>
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

1. Financial Statements:

Reports of independent public accountants

Consolidated balance sheets at December 31, 1998 and 1997

Consolidated statements of income for the years ended December 31, 1998,
1997 and 1996

Consolidated statements of comprehensive income for the years ended
December 31, 1998, 1997 and 1996

Consolidated statements of cash flows for the years ended December 31,
1998, 1997, and 1996

Notes to consolidated financial statements

2. Financial Statement Schedules:

None

3. Exhibits:

EXHIBIT
NO. DESCRIPTION
- - -------------------------------------------------------------------------------
2.1 Agreement and Plan of Merger dated June 6, 1997 by and between
Lunn Industries, Inc. and TPG Holdings, Inc., as amended by
Amendment to Agreement and Plan of Merger dated August 22, 1997 by
and between Lunn Industries, Inc. and TPG Holdings, Inc. (exhibits
and schedules omitted) (incorporated by reference to Exhibit 2.1
to the Company's Current Report on Form 8-K dated
November 14, 1997).

3.1 Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3 to the Company's Quarterly
Report on Form 10-QSB for the period ended
September 30, 1997).

3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2 of
the Company's Quarterly Report on Form 10-QSB for the period ended
September 30, 1996).

10.1 Lease covering the Jessup, Maryland Plant (incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992).

10.2 Lease for the Company's facilities located in Glen Cove, New York
dated January 1, 1995 between Grill Leasing Corp. and Lunn
Industries, Inc. (incorporated by reference to Exhibit 10.12 to
the Company's Quarterly Report on Form 10-QSB for the period ended
March 31, 1995).

10.3 Amendment to the Company's 1994 Stock Incentive Plan adopted at
the 1996 Annual Shareholders Meeting on September 26, 1996
(incorporated by reference to Exhibit 10.1

53
<PAGE>
to the Company's Quarterly Report on Form 10-QSB for the period
ended September 30, 1996).

10.4 Engagement letter dated February 21, 1996 between the Company and
J.E. Sheehan & Co., Inc. for the placement of 3.5 million shares
of the Company's common stock in a private placement (incorporated
by reference to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-QSB for period ended March 31, 1996).

10.5 Credit Agreement dated November 22, 1996 between Lunn Industries,
Inc. and Alcore, Inc. and First Union National Bank of Maryland
(incorporated by reference to Exhibit 10.26 to the Company's
Annual Report on Form 10-KSB for the year ended December 31,
1996).

10.6 Promissory Note dated November 15, 1996 payable to the order of
First Union National Bank of Maryland (incorporated by reference
to Exhibit 10.27 to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1996).

10.7 Security Agreement dated November 22, 1996 between Lunn
Industries, Inc. and Alcore, Inc. and First Union National Bank of
Maryland (incorporated by reference to Exhibit 10.28 to the
Company's Annual Report on Form 10-KSB for the year ended December
31, 1996).

10.9 Trust Indenture dated as of May 1, 1997 by and among Maryland
Industrial Development Financing Authority, First Union National
Bank of Virginia and Branch Banking and Trust Company
(incorporated by reference to Exhibit 10.3 to the Company's
Current Report on Form 8-K dated June 2, 1997).

10.10 Promissory Note dated May 15, 1997 payable to Maryland Industrial
Development Financing Authority for the sum of $2.6 million
(incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K dated June 2, 1997).

10.11 Guaranty Agreement dated May 1, 1997 made by Lunn Industries, Inc.
in favor of First Union National Bank of North Carolina
(incorporated by reference to Exhibit 10.4 to the Company's
Current Report on Form 8-K dated June 2, 1997).

10.12 Letter of Credit and Reimbursement Agreement by and between
Alcore, Inc. and First Union National Bank of North Carolina dated
May 1, 1997 (incorporated by reference to Exhibit 10.5 to the
Company's Current Report on Form 8-K dated June 2, 1997).

10.13 Security Agreement dated as of May 1, 1997 by and among Alcore,
Inc., Lunn Industries, Inc., First Union Bank of North Carolina,
The Maryland Industrial Development Financing Authority and First
Union National Bank of Maryland (incorporated by reference to
Exhibit 10.2 to the Company's Current Report on Form 8-K dated
June 2, 1997).

10.14 Loan and Security Agreement dated December 27, 1996, by and among
Fleet Capital Corporation and Technical Products Group, Inc.,
Marion Properties, Inc., Deland Properties, Inc. and Lincoln
Properties, Inc. (incorporated by reference to Exhibit 10.14 to

54
<PAGE>
the Company's Annual Report on Form 10-K for the year ended
December 31, 1997).

10.15 First Amendment to Loan and Security Agreement dated June 10,
1997, by and among Fleet Capital Corporation and Technical
Products Group, Inc., Marion Properties, Inc., Deland Properties,
Inc. and Lincoln Properties, Inc. (incorporated by reference to
Exhibit 10.15 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997).

10.16 Second Amendment to Loan and Security Agreement dated October 31,
1997, by and among Fleet Capital Corporation and Technical
Products Group, Inc., Marion Properties, Inc., Deland Properties,
Inc. and Lincoln Properties, Inc. (incorporated by reference to
Exhibit 10.16 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997).

10.17 Secured Promissory Note payable to Fleet Capital Corporation
executed by Technical Products Group, Inc., Marion Properties,
Inc., Deland Properties, Inc. and Lincoln Properties, Inc.
(incorporated by reference to Exhibit 10.17 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997).

10.18 Equipment Promissory Note payable to Fleet Capital Corporation
executed by Technical Products Group, Inc., Marion Properties,
Inc., Deland Properties, Inc. and Lincoln Properties, Inc.
(incorporated by reference to Exhibit 10.18 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997).

10.19 Form of Commercial Net Building and Ground Lease of Lincoln Air
Park West by and between Brunswick Corporation and Airport
Authority of the City of Lincoln, Nebraska, together with form of
Lease Extension Agreement, regarding various facilities of the
Lincoln Composites Division located in Lincoln, Nebraska
(incorporated by reference to Exhibit 10.19 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997).

10.20 Lease dated October 15, 1997 by and between LPR Partnership and
Technical Products Group, Inc., through the Lincoln Composites
Division, regarding premises located in Lincoln, Nebraska
(incorporated by reference to Exhibit 10.20 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997).

10.21** Amended and Restated Employment Agreement dated November 1, 1997
by and between the Company and James S. Carter (incorporated by
reference to Exhibit 10.21 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997).

10.22** Amended and Restated Employment Agreement dated November 1, 1997
by and between the Company and Garrett L. Dominy (incorporated by
reference to Exhibit 10.22 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997).

10.23** 1997 Advanced Technical Products, Inc. Stock Option Plan
(incorporated by reference to Exhibit 10.23 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997).

10.24** Form of Incentive Stock Option Agreement for options granted under
Advanced Technical Products, Inc. Stock Option Plan (incorporated
by reference to Exhibit 10.24 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1997).

55
<PAGE>
10.25** Advanced Technical Products, Inc. Non-Employee Directors Stock
Option Plan (incorporated by reference to Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1997).

10.26** Form of Nonqualified Stock Option Agreement for options granted
under Advanced Technical Products, Inc. Non-Employee Directors
Stock Option Plan (incorporated by reference to Exhibit 10.26 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1997).

10.27** Technical Products Group, Inc. Deferred Compensation Plan
(incorporated by reference to Exhibit 10.27 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997).

10.28** Rabbi Trust Agreement executed in connection with Technical
Products Group, Inc. Deferred Compensation Plan (incorporated by
reference to Exhibit 10.28 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997).

10.29 Lease Agreement dated January 21, 1998 by and between FRP Lakeside
L.P., as landlord, and Alcore, Inc., as tenant (incorporated by
reference to Exhibit 10.29 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended April 3, 1998).

10.30 Lease Agreement dated April 14, 1998 by and between Mansell
Overlook 200, LLC, and Advanced Technical Products, Inc.
(incorporated by reference to Exhibit 10.29 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
April 3, 1998).

10.31 Amended and Restated Loan and Security Agreement dated March 31,
1998 between Advanced Technical Products, Inc., Alcore,Inc.,
Technical Products Group, Inc., Marion Properties, Inc., Deland
Properties, Inc. and Lincoln Properties, Inc., collectively, as
borrower, and Fleet Capital Corporation, as lender (incorporated
by reference to Exhibit 10.31 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended July 3, 1998).

10.32 First Amendment to Amended and Restated Loan and SecurityAgreement
dated June 26, 1998 by and between Advanced Technical Products,
Inc., Alcore, Inc., Technical Products Group, Inc., Marion
Properties, Inc., Deland Properties, Inc. and Lincoln Properties,
Inc., collectively, as borrower, and Fleet Capital Corporation, as
lender (incorporated by reference to Exhibit 10.32 to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended July 3, 1998).

10.33 Second Amended and Restated Equipment Promissory Note dated June
26, 1998, executed by Advanced Technical Products, Inc., Alcore,
Inc., Technical Products Group, Inc., Marion Properties, Inc.,
Deland Properties, Inc. and Properties, Inc. (incorporated by
reference to Exhibit 10.33 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended July 3, 1998).

10.34 Lease Agreement dated May 11, 1998 by and between George W.
Hendricks and Barbara J. Hendricks and the Lincoln Composites
Division of Advanced Technical Products, Inc. (incorporated by
reference to Exhibit 10.34 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended October 2, 1998).

56
<PAGE>
21.1* List of subsidiaries of Advanced Technical Products, Inc.

23.1* Consent of KPMG LLP.

23.2* Consent of Arthur Andersen LLP.

27.0* Financial Data Schedule.

- - -------------------------------------------------------------------------------
* Filed herewith.

** Indicates management contract or compensatory plan or arrangement.

(B) REPORTS ON FORM 8-K:

A current report on Form 8-K dated March 12, 1998 reporting under Item 5-
Other Events was filed announcing ATP's earnings for the year ended
December 31, 1997.

57
<PAGE>
SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Atlanta, State of Georgia, on March 29, 1999

ADVANCED TECHNICAL PRODUCTS, INC.

/s/ JAMES S. CARTER
James S. Carter
CHAIRMAN OF THE BOARD, CHIEF
EXECUTIVE OFFICER
AND PRESIDENT

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ JAMES S. CARTER CHAIRMAN OF THE BOARD, March 29, 1999
James S. Carter CHIEF EXECUTIVE OFFICER AND
PRESIDENT
(PRINCIPAL EXECUTIVE OFFICER)
AND DIRECTOR

/S/ GARRETT L. DOMINY EXECUTIVE VICE PRESIDENT, March 29, 1999
Garrett L. Dominy FINANCIAL OFFICER, ASSISTANT
SECRETARY AND TREASURER
(PRINCIPAL FINANCIAL OFFICER AND
PRINCIPAL ACCOUNTING OFFICER)
AND DIRECTOR

___________________________ DIRECTOR
Alan W. Baldwin

/s/ ROBERT C. SIGRIST DIRECTOR March 29, 1999
Robert C. Sigrist

/s/ LAWRENCE E. WESNESKI DIRECTOR March 29, 1999
Lawrence E. Wesneski

<PAGE>
_____________________________ DIRECTOR
Sam P. Douglass

/s/ GARY L. FORBES DIRECTOR March 29, 1999
Gary L. Forbes

/s/ JOHN M. SIMON DIRECTOR March 29, 1999
John M. Simon

58
<PAGE>

EXHIBIT INDEX

3.1 Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3 to the Company's Quarterly
Report on Form 10-QSB for the period ended
September 30, 1997).

3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2 of
the Company's Quarterly Report on Form 10-QSB for the period ended
September 30, 1996).

10.1 Lease covering the Jessup, Maryland Plant (incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992).

10.3 Amendment to the Company's 1994 Stock Incentive Plan adopted at
the 1996 Annual Shareholders Meeting on September 26, 1996
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-QSB for the period ended September 30,
1996).

10.8 Loan Agreement dated as of May 1, 1997 between Maryland Industrial
Development Authority and Alcore, Inc. (incorporated by reference
to Exhibit 10.2 to the Company's Current Report on Form 8-K dated
June 2, 1997).
<PAGE>
10.9 Trust Indenture dated as of May 1, 1997 by and among Maryland
Industrial Development Financing Authority, First Union National
Bank of Virginia and Branch Banking and Trust Company
(incorporated by reference to Exhibit 10.3 to the Company's
Current Report on Form 8-K dated June 2, 1997).

10.19 Form of Commercial Net Building and Ground Lease of Lincoln Air
Park West by and between Brunswick Corporation and Airport
Authority of the City of Lincoln, Nebraska, together with form of
Lease Extension Agreement, regarding various facilities of the
<PAGE>
Lincoln Composites Division located in Lincoln, Nebraska
(incorporated by reference to Exhibit 10.19 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997).

10.23** 1997 Advanced Technical Products, Inc. Stock Option Plan
(incorporated by reference to Exhibit 10.23 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997).

10.25** Advanced Technical Products, Inc. Non-Employee Directors Stock
Option Plan (incorporated by reference to Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1997).

10.27** Technical Products Group, Inc. Deferred Compensation Plan
(incorporated by reference to Exhibit 10.27 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997).

10.31 Amended and Restated Loan and Security Agreement dated March 31,
1998 between Advanced Technical Products, Inc., Alcore,Inc.,
Technical Products Group, Inc., Marion Properties, Inc., Deland
Properties, Inc. and Lincoln Properties, Inc., collectively, as
<PAGE>
borrower, and Fleet Capital Corporation, as lender (incorporated
by reference to Exhibit 10.31 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended July 3, 1998).

21.1* List of subsidiaries of Advanced Technical Products, Inc.

23.1* Consent of KPMG LLP.

23.2* Consent of Arthur Andersen LLP.

27.0* Financial Data Schedule.

- - -------------------------------------------------------------------------------
* Filed herewith.

** Indicates management contract or compensatory plan or arrangement.

EXHIBIT 21.1

List of Subsidiaries of Advanced Technical Products, Inc.

STATE OR JURISDICTION
NAME OF SUBSIDIARY OF INCORPORATION
------------------ ----------------------
Technical Products Group, Inc. Delaware
Alcore, Inc. Delaware
Lincoln Properties, Inc. Delaware
Marion Properties, Inc. Delaware
Deland Properties, Inc. Delaware
Alcore Brigantine France

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors
Advanced Technical Products, Inc.

We consent to incorporation by reference in the registration statements
(No. 333-19759, 333-52885 and 333-66817) on Form S-8 of Advanced Technical
Products, Inc. of our report dated February 19, 1999, except as to Note 7, which
is as of March 24, 1999, relating to the consolidated balance sheets of Advanced
Technical Products, Inc. and subsidiaries as of December 31, 1998 and 1997, and
the related consolidated statements of income, comprehensive income, and cash
flows for the years then ended, which report appears in the December 31, 1998
annual report on Form 10-K of Advanced Technical Products, Inc.

/s/ KPMG LLP

Atlanta, Georgia
March 30, 1999

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation by
reference in this Form 10-K of our report dated March 14, 1997, included in
Registration Statement File No. 333-30009. It should be noted that we have not
audited any financial statements of the company subsequent to December 31, 1996,
or performed any audit procedures subsequent to the date of our report.

/s/ ARTHUR ANDERSEN LLP

Chicago, Illinois
March 26, 1999

<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTIANS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,030
<SECURITIES> 0
<RECEIVABLES> 26,775
<ALLOWANCES> 722
<INVENTORY> 40,635
<CURRENT-ASSETS> 72,342
<PP&E> 37,444
<DEPRECIATION> 11,516
<TOTAL-ASSETS> 106,876
<CURRENT-LIABILITIES> 49,352
<BONDS> 2,400
1,000
0
<COMMON> 52
<OTHER-SE> 31,745
<TOTAL-LIABILITY-AND-EQUITY> 106,876
<SALES> 165,074
<TOTAL-REVENUES> 165,074
<CGS> 126,678
<TOTAL-COSTS> 152,248
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,579
<INCOME-PRETAX> 9,247
<INCOME-TAX> 3,560
<INCOME-CONTINUING> 5,687
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,687
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.01

</TABLE>