Avcorp Industries Inc.

CA

The equipment, technologies, systems and processesconsisting of a BaaN enterprise resource planning (ERP) system, computer-aided design systems, approved quality assurance procedures, modern machining centres, presses, routers, anthropomorphic robots, assembly jigs and process equipment, chemical processing, painting and metal bonding facilitiesare sufficient to meet market demands for conventional aircraft parts and structures. The Company reviews emerging technologies and periodically considers its opportunities for research and development programs in such fields as advanced composites, high-speed machining and further automation of assembly. The Company has an established strategy of investing in its core competencies while outsourcing its remaining business requirements. This is reflected in the continued research in automated assembly, along with a recent investment in high-speed, 5-axis machining.

In 1998, Avcorp invested over CDN$24 million in equipment and in a new, 300, 000 sq. ft. state-of- the-art, high-tech facility designed for cellular manufacturing in a fully-integrated environment. It was a milestone year for company growth and activity, which included implementing a BaaN enterprise-wide resource planning system and organizing the new facility into multi-functional manufacturing cells based on lean manufacturing initiatives. Development and installation of an anthropomorphic robotics assembly cell*the first Dassault Aviation synchronized robotic cell of its kind in North America one of the innovative applications Avcorp is using to ensure global competitiveness in the years ahead. Automated Empennage Assembly:

During 1998, Avcorp worked with Dassault Aviation to engineer the manufacture and assembly of end- effectors and ancillary equipment necessary for the robotic installation. The equipment, which replicates human motion, was initially developed to fasten skins to the vertical and horizontal stabilizers of Bombardier's newest aircraft model, the Regional Jet, Series 700 (CRJ-700) Avcorp's largest design/build contract awarded in April 1997 worth CDN$170 million. The automated assembly cell uses two robotic systems positioned on opposing sides of a structure. Each of the robotic systems performs both coordinated movements (for fastening operations) and independent movements (for drilling, riveting and sealant application), providing enormous operational flexibility. Unique to Avcorp, is the versatile design of these robotic cells, which enables them to work on more than one type of assembly (i. e. vertical stabilizer, horizontal stabilizer, wing, etc), unlike those more-commonly confined to only one application. The use of robotics in aerospace manufacturing is increasing as benefits are realized. Robotic assembly time to apply skins to the CRJ-700 horizontal stabilizer is estimated to be 67% less than manual assembly time, 50% less for the vertical stabilizer. Lower assembly time means cost reductions for both the aerostructures supplier and ultimately, the aircraft operator. Robotic assembly results in improved process quality due to the lower number of manual operations required and removes the need for additional automated machinery. In the future, the opportunity exists to utilize the robotic equipment in more complicated structural assemblies. This year's comprehensive research and integration of the new robotics system enhances Avcorp's position as a world-class leader in innovative and aerostructures assembly solutions.

Boeing - Bombardier - Cessna

We chose Avcorp for their expertise, capability, management, quality and best overall value for Cessna. We consider Avcorp to be more than a supplierthey are a partner. Ron Alberti, Senior Vice President, Integrated Supply Chain, Cessna Aircraft Company

'Boeing has a long-established relationship with Canadian companies. Our supplier base in Canada has always proved to be reliable, on time and excellent quality. We want to make Avcorp a bigger part of that relationship.' Boeing Executive Vice President Fred Mitchell,

'Avcorp is a D1-9000A supplier that is very quality conscious. In the four years that Boeing has been receiving shipments from them, only one part has been returned due to a rejection in our manufacturing area. It is rare to find a supplier with this type of commitment to quality workmanship. It is team members like Avcorp that enable us to provide quality product to our customer.' Boeing Senior Subcontract Administrator Kathy Lyons, Material Matters, October 1998

'We are constantly on the lookout for suppliers who can provide quality products at competitive prices, and who can deliver on time. Avcorp, with support from its skilled labour force, has been able to meet all those requirements.' Bombardier Chairman Laurent Beaudoin

'We were quite surprised it went so well. With the first unit, two pieces that have never been put together physically, the tight tolerances, you expect more problems. But it went very well.' Canadair (Bombardier) Senior Assembler Methods John Arventis, 1st CRJ-700 Horizontal Stabilizer Installation, February 1999

300, 000 sq ft

The Company is making significant efforts to ensure that it has the appropriate human resources at all levels of the organization. The Board of Directors has considerable investment and financial expertise. The management team is experienced in the industry and in all aspects of operations. All employees have appropriate qualifications and experience to perform their duties and the Company provides ongoing training and work opportunities for employee growth.

The number of employees at September 30, 2005 was 611 (September 30, 2004: 458). The increase in the number of employees over last year is attributable to human resources allocated to new program growth. It is envisaged that additional employees will continue to be hired during the last quarter of 2005 to satisfy production requirements. The Companys compensation system consists of wages and salaries, benefit programs, and stock options (note 9). The Company continually reviews its compensation practices to ensure it can attract and retain employees with the necessary skills.

The Companys collective agreement with its labour force expired on September 30, 2005. There exists bridging language that extends the current contract until a new agreement is ratified. The Company is re-negotiating a new agreement and expects those discussions to complete within an acceptable time frame.

336410

ISO 9001

1560-Aircraft Structural Components

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