##### 









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|           |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended December 31, 2005                                                 
|          
|OR        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

Commission File
No. 333-124394


STANDARD AERO HOLDINGS, INC.


(Exact name of registrant as specified in its charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 98-0432892                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)
|                                                                  
|500-1780 Wellington Avenue,
    Winnipeg, Manitoba, Canada         |  | R3H 1B3(Zip Code)                       
|(Address of principal executive office)                            |  |                                         

Registrants telephone number, including area code:


(204) 987-8860


o þ


o þ


þ o


S-K 10-K 10-K. þ


12b-2


o o þ


12b-2 o þ












---



##### 



|           |  |                                                                                                                   |  |   
|---------- |  | ----------------------------------------------------------------------------------------------------------------- |  | --
|PART I    
|Item 1.    |  | Business                                                                                                          |  | 1 
|Item 1A.   |  | Risk Factors                                                                                                      |  | 11
|Item 1B.   |  | Unresolved Staff Comments                                                                                         |  | 27
|Item 2.    |  | Properties                                                                                                        |  | 27
|Item 3.    |  | Legal Proceedings                                                                                                 |  | 27
|Item 4.    |  | Submission of Matters to vote of Security Holders                                                                 |  | 28
|          
|PART II   
|Item 5.    |  | Market for Registrants Common Equity, Related Stockholders
    Matters and Issuer Purchases of Equity Securities |  | 28
|Item 6.    |  | Selected Financial Data                                                                                           |  | 29
|Item 7.    |  | Managements Discussion and Analysis of Financial Condition
    and Results of Operations                         |  | 31
|Item 7A.   |  | Quantitative and Qualitative Disclosures about Market Risk                                                        |  | 51
|Item 8.    |  | Financial Statements and Supplementary Data                                                                       |  | 52
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and
    Financial Disclosure                          |  | 52
|Item 9A.   |  | Controls and Procedures                                                                                           |  | 52
|Item 9B.   |  | Other Information                                                                                                 |  | 55
|          
|PART III  
|Item 10.   |  | Directors and Executive Officers of the Registrant                                                                |  | 55
|Item 11.   |  | Executive Compensation                                                                                            |  | 57
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management
    and Related Stockholders Matters               |  | 62
|Item 13.   |  | Certain Relationships and Related Transactions                                                                    |  | 64
|Item 14.   |  | Principal Accountant Fees and Services                                                                            |  | 65
|          
|PART IV   
|Item 15.   |  | Exhibits and Financial Statement Schedules                                                                        |  | 66
|Signatures |  | 122                                                                                                              



---



##### 



Restatement






|                                  |                                     |                    |         |         |                   |                |         |                    |  |   |                     |        |  |                    |        |        |          |   |         |            |  |    |          |         |  |            |         |         |          |   |         |         |  |   |         |         |  |   |         |         | 
|--------------------------------- | ----------------------------------- | ------------------ | ------- | ------- | ----------------- | -------------- | ------- | ------------------ |  | - | ------------------- | ------ |  | ------------------ | ------ | ------ | -------- | - | ------- | ---------- |  | -- | -------- | ------- |  | ---------- | ------- | ------- | -------- | - | ------- | ------- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                                  |                                     | 2004 Post-         |         |         | Aug 25  Sept 30, |                |         |                    |  |   |                     |       
|                                  |                                     | Acquisition Period |         |         | 2004 Period       |                |         | First Quarter 2005 |  |   | Second Quarter 2005 |        |  | Third Quarter 2005 |       
|                                  |                                     |                    |         |         |                   |                |         |                    |  |   |                     |        |  |                    |       
|                                  |                                     |                    |         |         |                   | (in thousands) |         |                    |  |   |                    
|                                  |                                     | As                 |         |         |                   |                | As      |                    |  |   |                     | As     |  |                    |        |        | As       |   |         |            |  | As |          |         | 
|                                  |                                     | originally         |         |         | As                |                |         | originally         |  |   | As                  |        |  | originally         |        |        | As       |   |         | originally |  |    | As       |         |  | originally |         |         | As       |  
|                                  |                                     | reported           |         |         | restated          |                |         | reported           |  |   | restated            |        |  | reported           |        |        | restated |   |         | reported   |  |    | restated |         |  | reported   |         |         | restated |  
|                                  |                                     |                    |         |         |                   |                |         |                    |  |   |                     |        |  |                    |        |        |          |   |         |            |  |    |          |         |  |            |         |         |          |  
|Revenues                          |                                     | $                  | 284,116 |         |                   | $              | 284,116 |                    |  | $ | 75,478              |        |  | $                  | 75,478 |        |          | $ | 187,414 |            |  | $  | 187,414  |         |  | $          | 171,781 |         |          | $ | 171,781 |         |  | $ | 198,267 |         |  | $ | 198,267 |        
|                                  |                                     |                    |         |         |                   |                |         |                    |  |   |                     |        |  |                    |        |        |          |   |         |            |  |    |          |         |  |            |         |         |          |  
|Operating Expenses:               |                                     |                    |         |         |                   |                |         |                    |  |   |                     |        |  |                    |        |        |          |   |         |            |  |    |          |         |  |            |         |         |          |   |         |         |  |   |         |         |  |   |         |        
|                                  | Cost of Revenues                    |                    |         | 251,099 |                   |                |         | 249,710            |  |   |                     | 64,645 |  |                    |        | 63,870 |          |   |         | 154,305    |  |    |          | 153,903 |  |            |         | 145,264 |          |   |         | 144,591 |  |   |         | 165,735 |  |   |         | 163,668 | 
|                                  | Selling, general and administrative |                    |         | 20,964  |                   |                |         | 20,974             |  |   |                     | 8,092  |  |                    |        | 8,092  |          |   |         | 12,544     |  |    |          | 12,538  |  |            |         | 12,851  |          |   |         | 12,838  |  |   |         | 12,032  |  |   |         | 12,086  | 
|                                  | Amortization of intangible assets   |                    |         | 3,262   |                   |                |         | 3,262              |  |   |                     | 830    |  |                    |        | 830    |          |   |         | 2,446      |  |    |          | 2,446   |  |            |         | 2,446   |          |   |         | 2,446   |  |   |         | 2,346   |  |   |         | 2,346   | 
|                                  | Restructuring costs                 |                    |         |        |                   |                |         |                   |  |   |                     |       |  |                    |        |       |          |   |         |           |  |    |          |        |  |            |         |        |          |   |         |        |  |   |         | 3,215   |  |   |         | 3,215   | 
|                                  |                                     |                    |         |         |                   |                |         |                    |  |   |                     |        |  |                    |        |        |          |   |         |            |  |    |          |         |  |            |         |         |          |  
|Total operating expenses          |                                     |                    | 275,325 |         |                   |                | 273,946 |                    |  |   | 73,567              |        |  |                    | 72,792 |        |          |   | 169,295 |            |  |    | 168,887  |         |  |            | 160,561 |         |          |   | 159,875 |         |  |   | 183,328 |         |  |   | 181,315 |        
|                                  |                                     |                    |         |         |                   |                |         |                    |  |   |                     |        |  |                    |        |        |          |   |         |            |  |    |          |         |  |            |         |         |          |  
|Income from operations            |                                     |                    | 8,791   |         |                   |                | 10,170  |                    |  |   | 1,911               |        |  |                    | 2,686  |        |          |   | 18,119  |            |  |    | 18,527   |         |  |            | 11,220  |         |          |   | 11,906  |         |  |   | 14,939  |         |  |   | 16,952  |        
|Interest expense                  |                                     |                    | 13,706  |         |                   |                | 14,005  |                    |  |   | 3,700               |        |  |                    | 3,784  |        |          |   | 8,928   |            |  |    | 9,101    |         |  |            | 8,547   |         |          |   | 8,721   |         |  |   | 8,938   |         |  |   | 9,072   |        
|                                  |                                     |                    |         |         |                   |                |         |                    |  |   |                     |        |  |                    |        |        |          |   |         |            |  |    |          |         |  |            |         |         |          |  
|Income (loss) before income taxes |                                     |                    | (4,915  | )       |                   |                | (3,835  | )                  |  |   | (1,789              | )      |  |                    | (1,098 | )      |          |   | 9,191   |            |  |    | 9,426    |         |  |            | 2,673   |         |          |   | 3,185   |         |  |   | 6,001   |         |  |   | 7,880   |        
|Income tax expense (benefit)      |                                     |                    | (233    | )       |                   |                | 66      |                    |  |   | 229                 |        |  |                    | 478    |        |          |   | 2,713   |            |  |    | 2,868    |         |  |            | (126    | )       |          |   | 39      |         |  |   | 3,059   |         |  |   | 3,685   |        
|                                  |                                     |                    |         |         |                   |                |         |                    |  |   |                     |        |  |                    |        |        |          |   |         |            |  |    |          |         |  |            |         |         |          |  
|Net Income (loss)                 |                                     |                    | (4,682  | )       |                   |                | (3,901  | )                  |  |   | (2,018              | )      |  |                    | (1,576 | )      |          |   | 6,478   |            |  |    | 6,558    |         |  |            | 2,799   |         |          |   | 3,146   |         |  |   | 2,942   |         |  |   | 4,195   |        
|                                  |                                     |                    |         |         |                   |                |         |                    |  |   |                     |        |  |                    |        |        |          |   |         |            |  |    |          |         |  |            |         |         |          |  







---



##### 















| |         |                                                                                          
| | ------- | -----------------------------------------------------------------------------------------
| | Item 7 | Managements Discussion and Analysis of Financial Condition
    and Results of Operations





Forward Looking Statement; Private Securities Litigation
Reform Act Safe Harbor Statement










| |   |                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to design, implement and maintain controls and
    procedures designed to prevent additional material weaknesses,
    which could cause us to fail to meet our periodic reporting
    obligations or result in additional errors or restatements;
|
| |  | the resolution of our dispute regarding our subcontract with
    Kelly Aviation Center, L.P.;                                                                                                                                                                
|
| |  | general conditions in the military, regional or business
    aviation industry;                                                                                                                                                                              
|
| |  | military spending and outsourcing trends;                                                                                                                                                                                                                    
|
| |  | the size and age of the installed base of engines that we
    service;                                                                                                                                                                                       
|
| |  | inflation, interest rates, exchange rates, market and monetary
    fluctuations and other risks related to our international
    operations;                                                                                                                 
|
| |  | the effect of, and changes in, regulation and government policy;                                                                                                                                                                                             
|
| |  | our ability to increase market share and control expenses;                                                                                                                                                                                                   
|
| |  | our ability to keep pace with technological changes;                                                                                                                                                                                                         
|
| |  | the impact of general economic conditions on our customers;                                                                                                                                                                                                  
|
| |  | our ability to obtain new contracts and authorizations to
    service existing and new engines;                                                                                                                                                              
|
| |  | returns on our investment in new engine programs; and                                                                                                                                                                                                        
|
| |  | our success at managing the risks of the foregoing.                                                                                                                                                                                                          







---



##### 








|        |          
|------- | ---------
|Item 1. | Business.



12-month


Our Company








10-year 10-year


1



---



##### 





13-year


10-year 2-year C-130 F-16


Business Segments








2



---



##### 



Our MRO Services






Engine platforms serviced.


|                             |  |               |       |  |                     |  |           |                   |  |  |                      |  |  |                                                                                                                                                       
|---------------------------- |  | ------------- | ----- |  | ------------------- |  | --------- | ----------------- |  |  | -------------------- |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|                             |  | 2005          |       |  | Date Introduced/    |  |           |                   |  | 
|                             |  | Revenues      |       |  | Date First Serviced |  |           | Estimated Product |  |  |                     
|Engine                       |  | (In millions) |       |  | by us               |  |           | Life-Cycle Stage  |  |  | Primary Applications
|                             |  |               |       |  |                     |  |           |                   |  |  |                     
|Aviation                     |  |               |       |  |                     |  |           |                   |  |  |                      |  |  |                                                                                                                                                       
|Rolls-Royce T56              |  | $             | 306.1 |  |                     |  | 1954/1960 |                   |  |  | Declining            |  |  | Military aircraft including C-130 A-H Hercules; P-3 Orion; E-2C
    Hawkeye                                                                           
|                            
|Rolls-Royce AE3007           |  | $             | 104.8 |  |                     |  | 1996/1997 |                   |  |  | Mature               |  |  | Embraer RJ135/140/145 regional jets; Cessna Citation X business
    jets                                                                              
|                            
|Rolls-Royce Model 250        |  | $             | 62.4  |  |                     |  | 1967/1967 |                   |  |  | Mature               |  |  | Wide range of commercial and military helicopters, including the
    Bell Jet Ranger and OH-58 Kiowa                                                  
|                            
|Rolls-Royce AE2100           |  | $             | 24.4  |  |                     |  | 1991/1993 |                   |  |  | Growth               |  |  | Military and regional aircraft including C-130J Hercules, C-27
    Spartan, Saab 2000                                                                 
|                            
|General Electric CF34        |  | $             | 40.0  |  |                     |  | 1995/2002 |                   |  |  | Growth               |  |  | Bombardier regional and business jets; Embraer ERJ170/190
    regional jets                                                                           
|                            
|Pratt & Whitney Canada PT6A  |  | $             | 81.2  |  |                     |  | 1964/1986 |                   |  |  | Mature               |  |  | Wide range of commercial and military turboprop aircraft,
    including Raytheon King Air series business turboprops; T-6A
    Texan military trainers
|                            
|Pratt & Whitney Canada PW100 |  | $             | 82.3  |  |                     |  | 1984/1993 |                   |  |  | Mature               |  |  | ATR 42/72, Embraer 120 and Dash 8 series regional turboprops                                                                                          

3



---



##### 



Repair and overhaul process.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Disassembly, cleaning, and parts inspection. After we
    receive an engine for repair and overhaul, our technicians
    disassemble the unit into its parts, a process that requires
    special tooling and expertise. Each part is identified to ensure
    traceability throughout the MRO process. The parts are then
    cleaned and inspected in accordance with specifications for
    serviceable material condition, structural integrity, and
    dimensional tolerances. Our technicians record the condition of
    the parts, prepare work orders for repairable parts, and order
    replacement parts as required. The information we gather during
    inspection of the engine parts enables us to prepare a detailed
    cost estimate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Parts re-manufacturing and replacement. The next phase of
    the MRO process involves the re-manufacturing of repairable
    parts, issue of replacement parts from our inventory, and
    procurement of any parts we do not routinely stock. We seek to
    remanufacture parts or offer used serviceable replacement parts
    to our customers as an alternative to new parts. Our parts
    re-manufacturing capabilities include extensive machining,
    welding, brazing, metalizing, heat treatment, metal reshaping,
    surface refinishing and coating processes. Repairs to individual
    parts are performed in accordance with OEM and
    government-approved specifications and may involve more than
    fifty discrete process steps to complete. Although we
    subcontract a small number of processes to third parties, the
    majority of the re-manufacturing work is done in our own
    facilities. Re-manufacturing parts in lieu of new parts
    generally lowers customer costs and increases our margins, when
    compared to an engine overhaul that consists exclusively of new
    parts. In addition, these re-manufacturing and service
    capabilities are integral to our competitive position because
    they enable us to maintain or increase the quality of work we
    perform and significantly reduce costs and turn around times. An
    on-line master schedule and visual scheduling boards are used to
    coordinate the production activities required to meet our turn
    around time commitments. On-line business systems are also used
    by technicians to record the completion of all production tasks
    in accordance with our quality system requirements, to collect
    labor costs, and to track the location of parts and assemblies
    throughout the MRO process.
|
| |  | Re-assembly, engine testing, and outbound logistics. The
    engine is then reassembled, with technicians recording the
    completion of all tasks and documenting the results of
    inspections that impact engine performance. The engine is then
    installed in a test fixture and tested in accordance with OEM
    and government approved specifications to check for leakages,
    fuel efficiency, operating temperature range and power output.
    An engine which has gone through a complete overhaul must meet
    the OEMs performance and safety specifications. It is then
    classified as a zero time engine, meaning that it can operate
    for the same number of hours before the next major maintenance
    event as a new engine. Upon successfully completing all
    performance tests and final inspection criteria, the engine is
    packaged for outbound shipment to the customer. Engines are
    generally shipped via third party ground transportation carriers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

Engine leasing program.


Repair and overhaul facilities.


4



---



##### 



OEM Authorizations and Licenses








Customers and Significant Contracts








| |   |                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | time and material contracts, where we charge our customer a
    price based on the specific work to be performed;                                                                            
|
| |  | fixed price per maintenance or service event contracts, where
    pre-negotiated fixed prices are charged for specific MRO or
    redesign services; and                                     
|
| |  | fixed price per engine hour/cycle contracts, where a flat rate
    based on engine-hours/cycles used is charged for any and all MRO
    service requirements during the term of the contract.





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Kelly Air Force Base T56 subcontract: In February 1999, a
    team comprised of Oklahoma City Air Logistics Center
    (OC-ALC) and KAC won a contract pursuant to which
    the U.S. Air Force outsourced its engine MRO operations at
    the former Kelly Air Force Base in San Antonio, Texas. As
    the prime contractor, OC-ALC subcontracts all Rolls-Royce T56
    engine MRO services at the facility to KAC, which then
    subcontracts such services to us. The original subcontract,
    awarded in 1999, was for MRO labor services only. In October
    2003, the scope of the subcontract was expanded to include the
    supply of materials. The subcontracts original term ran
    through 2006 with the potential to earn performance-based annual
    extensions through 2014. We believe KAC has been awarded
    extensions through February 2009. We have been awarded one
    extension through February 2007. On January 25,

5



---



##### 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2006, we were notified by KAC that they do not intend to issue
    to us additional options under the subcontract beyond February
    2007. We believe we are entitled to those additional options and
    intend to protect our rights while we pursue our legal and
    contractual options in regard to the decision by KAC not to
    award contract extensions beyond 2007. For further discussion,
    see Item 1A Risk Factors and Item 7
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations  Kelly Air Force
    Base Subcontract.                                                                  
|
| | U.S. Navy T56 contract: In December 2003, the
    U.S. Navy awarded us an indefinite delivery, indefinite
    quantity one-year contract with four optional renewal years to
    provide MRO services for its fleet of T56 engines. These
    services are performed at our San Antonio and Winnipeg
    facilities. This contract features a fixed price per maintenance
    event. We estimate that aggregate revenues from this contract
    will exceed $120 million over its potential
    5-year term, assuming
    all renewal options are exercised. We have received three option
    renewals under this contract.                                
|
| | SkyWest CF34 contract: In November 2004, the Company
    signed an exclusive contract with SkyWest Airlines of St.
    George, Utah to service their fleet of CF34-8 engines powering
    their new CRJ-700 regional jets. This contract was amended in
    March 2006 to add additional
    CF34-8 engines and to
    extend the agreement by five years. We expect that this contract
    will generate approximately $500 million of revenues during
    its 20-year term, with
    scheduled maintenance events expected to commence in 2007.                                                                                                           
|
| | Oklahoma City Air Logistics Center contract: In April
    2005, the United States Air Force awarded Battelle a
    10-year
    $500 million, indefinite delivery, indefinite quantity
    contract to design, develop, construct, install, implement and
    deliver a lean and cellular transformation of the aircraft,
    engines and commodities maintenance, repair and overhaul process
    and industrial facilities at the Oklahoma City Air Logistics
    Center. Our Enterprise Services business has been chosen to be
    the prime subcontractor to Battelle to provide a significant
    portion of the redesign services under this contract.

Competitive Strengths






| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Industry leading service provider. We believe our MRO
    services are among the best in the industry in terms of quality
    of work, turnaround times, reliability after overhaul, technical
    support and overall customer satisfaction. We provide our
    customers with in-house part repair and overhaul services, which
    frequently avoids delays associated with outsourcing part
    repairs and provides a lower cost alternative to sourcing new
    replacement parts from OEMs. Additionally, our short turnaround
    times help our customers reduce downtime and enhance their fleet
    utilization. We also provide our customers with a broad range of
    service offerings, including advanced engine diagnostics and
    monitoring, fleet MRO maintenance programs and spare engines so
    that customers can continue to operate their aircraft or non
    aviation application during the MRO service.
|
| | Leading market positions. We rank in the top three in the
    worldwide MRO market for each of the principal engine platforms
    that we service and are the only OEM authorized provider to
    service both the Rolls-Royce AE3007 and the General Electric
    CF34 regional jet engines. Our market share allows us to develop
    a depth of experience and capabilities that improve our
    operations, reduce turnaround times and lower costs. We also
    believe that our leading market positions, extensive experience,
    existing OEM authorizations, technology and expertise
    differentiate us from many of our competitors in the eyes of our
    customers and play a key role in securing additional long-term
    contracts and OEM authorizations.                                                                                                                                                         
|
| | High barriers to entry. The dynamics of the MRO industry
    make it difficult for new competitors to enter the market. New
    entrants to the industry must obtain extensive approvals and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

6



---



##### 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | certifications from both customers and government regulators and
    demonstrate conformity with complex and sophisticated materials
    tracking capabilities, quality system and production process
    controls and other operational system requirements. In addition,
    OEM service authorizations, which enable MRO providers to
    receive discounts on parts, technical information, OEM warranty
    support and use of the OEM name in marketing, are difficult to
    obtain. Obtaining these certifications, approvals and
    authorizations requires sophisticated technological
    capabilities, experience-based industry knowledge and
    substantial capital investment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | Regulated maintenance requirements provide demand for our MRO
    services. A substantial portion of our revenues are
    generated under government-regulated maintenance programs based
    on engine usage and operating cycles. We expect that the large
    and growing installed base of many of the engines we service and
    increasing hours used will combine to provide our company with a
    base of recurring revenues. Furthermore, we are the depot level
    provider to the U.S. military under contracts for the T56
    and AE2100 engines, which power the C-130 Hercules tactical
    transport aircraft. There is no anticipated replacement in the
    foreseeable future for the C-130, which is an important element
    of the U.S. militarys tactical airlift capability. We
    believe that, due to the C-130s increasing age and
    important military function, MRO services on the engines that
    power the C-130 will continue. Depot level support for
    U.S. military T56 engines is predominantly provided under
    the Kelly Air Force Base subcontract. For further discussion,
    see Item 1A Risk Factors and Item 7
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations  Kelly Air Force
    Base Subcontract.                                                                                                                                                                  
|
| | Well-positioned to benefit from current industry trends.
    We believe that we are well positioned to benefit from current
    industry trends. Moreover, we believe that our success in
    transforming the former Kelly Air Force Base facility and
    delivering substantially improved war-readiness rates and
    reduced costs to the U.S. military position us to compete
    effectively for future military outsourcing and MRO facility
    redesign contracts. Additionally, as the only OEM-authorized
    provider of MRO services for both of the Rolls-Royce AE3007 and
    the General Electric CF34 engines, our investment in advanced
    facilities to handle current and future MRO demand for these
    engines positions us to benefit from anticipated engine MRO
    growth in the regional jet sector. Finally, because many
    military, regional and business aircraft share related engine
    platforms, such as GEs CF34 (for deployment on commercial
    aircraft) and TF34 (for deployment on military aircraft), we
    believe that we are well-positioned to adapt our MRO
    capabilities and facilities for additional applications without
    incurring significant additional fixed costs. For example, we
    were awarded a contract by the U.S. Army to service the
    Rolls-Royce T703 engines that power its OH-58 Kiowa Warrior
    helicopters, building on our experience with that engine in
    commercial applications.
|
| | Experienced management team with proven track record. Our
    operations are led by an executive management team that has been
    working together for approximately 18 years and whose
    members have an average of over 21 years of industry
    experience. Our management team has a proven record in winning
    new business, reducing costs, improving working capital
    management and implementing other initiatives to increase
    operating efficiencies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

Business Strategy






| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Win new business. We will continue to focus on expanding
    our market share in our existing engine programs and will
    selectively seek to enter new MRO programs. We are seeking to
    take advantage of our authorizations and our advanced MRO
    facilities by bidding on numerous new contracts with regional
    aircraft operators and pursuing new business with OEMs. We have
    secured long-term contracts with SkyWest Airlines and GoJet
    Airlines to provide CF34 MRO services. We

7



---



##### 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | continue to leverage our military, business aviation and
    regional airline customer relationships to grow our core APU
    business and expand into new engine models. We believe that our
    achievements under our military contracts, our relationships
    with OEMs and our reputation for excellent quality and service
    place us in a favorable position to obtain business servicing
    additional engine platforms. We are also working to expand our
    Enterprise Services business and are actively seeking
    opportunities to provide redesign services to other MRO
    facilities.                                                                                 
|
| | Capitalize on our advanced facilities. We intend to
    capitalize on the significant investments that we have made in
    our MRO facilities, including our CF34 facility. We believe that
    the resulting capacity available at our facilities positions us
    to handle increased MRO volume without substantial additional
    investment. We also intend to further distinguish ourselves from
    our competitors by increasing our operational efficiency at all
    of our facilities by further reducing our turnaround times,
    developing unique MRO intellectual property on repairs and
    processes and improving our parts inventory and working capital
    management.
|
| | Pursue selected acquisition opportunities. We intend to
    evaluate and pursue selected opportunities to acquire aerospace
    and defense services businesses. Our objective is to identify
    acquisition opportunities that will benefit our existing
    operations by enhancing economies of scale and our technological
    strengths and by adding new customers, services and product
    lines.                                                                                                                                                                                                                                                                                   

Competitive Environment






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Service divisions of OEMs. We estimate that the service
    divisions of OEMs, including Rolls-Royce, General Electric,
    Pratt & Whitney Canada and Honeywell, comprise
    approximately one-half of the market for all MRO services.
    Service divisions of OEMs compete on the basis of their
    affiliations with OEMs, which may give them design authority,
    brand recognition, strong and long-term customer relationships
    beginning with the original sale of the engines, which may
    include a MRO service agreement, the ability to adapt quickly to
    customer requirements involving technical specification changes,
    a diverse product and service base, significant financial
    resources, control over product certification and control over
    sources of approved parts.
|
| |  | Other independent MRO service providers. Most of the
    independent MRO service providers that compete with us also
    operate under authorizations from OEMs, and include Vector
    Aerospace Corporation, BBA Group plc, MTU Aero Engines and Rolls
    Wood Group. We also compete with independent MRO service
    providers that do not have authorization from the OEMs or hold
    limited approvals or licensing agreements from the OEMs that
    only allow for the repair of certain components of engines such
    as Chromalloy Gas Turbines. These competitors may have strong
    and long-term customer relationships and greater financial
    resources than us.                                                                                                                              
|
| |  | In-house maintenance services. While recently there has
    been an increasing trend among commercial airlines to outsource
    their engine MRO needs, some of the large commercial airlines
    maintain in-house MRO service divisions. These service divisions
    often provide MRO services externally but do not have the
    benefit of holding OEM authorizations to provide MRO services to
    third parties. These competitors include Lufthansa Technik, Air
    Canada Technical Services and the MRO division of Delta
    Airlines. In-house maintenance services have several competitive
    advantages, including captive engine fleets, and may have
    greater financial resources than us.                                                                                                  

8



---



##### 



Sales and Marketing








Employees




Raw Materials






Research and Development, Patents, Trademarks and Licenses






9



---



##### 









Governmental Regulation of the Aerospace and Defense
Industry








Environmental Matters






10



---



##### 










|         |              
|-------- | -------------
|Item 1A. | Risk Factors.

You should read the following risks described below together
with the other information contained in this report. The risks
described below are not the only risks facing us. Additional
risks and uncertainties not currently known to us or that we
currently deem to be immaterial may also materially adversely
affect our business, financial condition or results of
operations. Any of the following risks could materially
adversely affect our business, financial condition or results of
operations.


A significant portion of our revenues are derived under a
single contract that has been the subject of a dispute and that
may be terminated in certain circumstances, some of which are
beyond our control.




A significant portion of our revenues are derived from
contracts, directly or indirectly, with the U.S. military
that are subject to U.S. Government contracting rules and
regulations.




11



---



##### 







A further decline in the operational tempo of the
U.S. military would affect the frequency with which the
engines used in military aircraft reach scheduled intervals for
maintenance events, which would adversely affect our results of
operations.




Decreases in spending or outsourcing by our military
end-users could materially reduce our revenues and adversely
affect our financial condition.






A significant portion of our revenues from regional and
business aviation customers are derived from services we provide
on behalf of OEMs as a subcontractor for services they provide
to their customers. As a result, we could be adversely affected
by changes in demand by OEMs or their customers.




12



---



##### 





We have incurred significant costs to obtain
authorizations for new engine platforms, including the CF34 and
AE3007, and to establish facilities for servicing such
platforms. We may not realize all of the revenues or profit
margins expected from these engine platforms now or in the
future or recover the significant capital we have
expended.






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The current CF34 engine MRO market is currently based on
    unscheduled maintenance events and General Electric-sponsored
    upgrade campaigns, which results in uncertainty in revenues. We
    do not anticipate scheduled MRO activity on this engine platform
    until 2007 when the first significant volume of expected
    scheduled maintenance events come due.                                                                                                                                                                                                                                                                                                                                         
|
| |  | Because customers of CF34 MRO services are limited in number and
    because the contracts for these services could be long term in
    nature, to the extent that these customers enter into contracts
    with other MRO providers, we could effectively be precluded from
    competing for this business for a significant period of time.                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | The CF34 engine has proven to be significantly more reliable
    than most other small turbofan engines, with the first major
    required MRO event for CF34 engines occurring between 9,000 and
    18,000 cycles, depending on the model, as compared to
    4,000-6,000 hours/cycles for other turbofan engines. As a
    result, our service volumes for the CF34 engine may be lower
    than for other engines with higher scheduled maintenance
    frequencies.                                                                                                                                                                                                                                            
|
| |  | We are currently the only independent authorized MRO provider
    for the CF34 in North America. Our ability to win new business
    for this platform could be adversely affected by increased
    competitive pressure if General Electric authorizes additional
    independent service providers or if General Electric expands its
    existing in-house MRO capabilities.                                                                                                                                                                                                                                                                                                                                     
|
| |  | We depend on Rolls-Royce for a significant portion of our AE3007
    business as we provide services for Rolls-Royce on certain
    engines for which they have
    power-by-the-hour
    contracts with the end-user. Rolls-Royce maintains its own MRO
    facility and may elect to service a greater proportion of AE3007
    engines in-house or further change the pricing or level of
    workscopes that we receive.                                                                                                                                                                                                                                                                                      
|
| |  | We have based our business plan, in part, on the assumption that
    the worldwide regional jet fleet and the associated maintenance
    requirements will continue to grow. Over time our anticipated
    returns from our regional jet business could be adversely
    affected if new production demand or passenger traffic results
    in lower than anticipated engine production in this market.                                                                                                                                                                                                                                                                                                             
|
| |  | Our regional airline customers and end users operate under
    service agreements with the major airlines. We depend on these
    regional airlines for a significant portion of our CF34 and
    AE3007 revenues. Our anticipated returns from our regional jet
    business may be impacted by the financial stability of the major
    airlines and their regional partners. We may be adversely
    affected by early termination of aircraft leases, inability to
    re-market surplus aircraft, reduction in aircraft utilization,
    early termination of MRO service agreements, deferral of
    maintenance requirements and inability of our airline customers
    to honor their financial commitments.

13



---



##### 





The prices that we charge under our fixed-price contracts
are predetermined and we bear the risk that our costs may exceed
our estimates.




Material weaknesses in our internal control over financial
reporting resulted in material misstatements in our financial
statements that required us to restate certain of our historical
financial statements. If we fail to maintain effective internal
control over financial reporting at a reasonable assurance
level, we may not be able to accurately report our financial
results or prevent fraud.




10-K


14



---



##### 



A significant portion of our revenues is generated from
engine platforms that are mature or declining. If we are unable
to offset the resulting declines in revenues as engines are
retired, our results of operations will be adversely
affected.




Competition in our business is intense and concentrated
given the small market in which we participate and the narrow
range of services that we provide within that market.






| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Service divisions of OEMs. We estimate that the service
    divisions of OEMs, including Rolls-Royce, General Electric,
    Pratt & Whitney Canada and Honeywell, comprise
    approximately one-half of the market for MRO services. Service
    divisions of OEMs compete on the basis of their affiliations
    with OEMs, which may give them design authority, brand
    recognition, strong and long-term customer relationships
    beginning with the original sale of the engines, the ability to
    adapt more quickly to customer requirements involving technical
    specification changes, a diverse product and service base,
    significant financial resources, control over certification and
    control over sources of approved parts. OEMs are attempting, or
    may in the future attempt, to perform a greater portion of the
    repair and overhaul services related to the engines they
    manufacture themselves or change the pricing or level of
    workscopes that we receive.
|
| | Other independent MRO service providers. Most of the
    independent MRO service providers that compete with us also
    operate under authorizations from OEMs. Certain of these
    competitors may have certain stronger and longer-term customer
    relationships and greater financial resources. We also compete
    with independent MRO service providers that do not have
    authorization from the OEMs or hold limited approvals or
    licensing agreements from the OEMs that only allow for the
    repair of certain components of engines. These competitors may
    have strong and long-term customer relationships and greater
    financial resources than us.                                                                                                                                                                                                                                                                                                                              
|
| | Independent MRO service providers, who currently do not compete
    with us, such as Kelly Aviation Center L.P., may decide or
    attempt to provide MRO services on engines that we currently
    service and for which they may or may not have OEM
    authorization. These potential competitors may have strong and
    long term customer relationships and greater financial resources
    than us. For further discussion, Item 7
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations  Kelly Air Force
    Base Subcontract.                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | In-house maintenance services of the commercial airlines.
    While recently there has been an increasing trend among
    commercial carriers to outsource engine MRO, some of the large
    commercial airlines maintain in-house MRO service divisions.
    These service divisions often provide MRO services externally
    but do not have the benefit of holding OEM authorizations to
    provide MRO services to                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

15



---



##### 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | third parties. In-house maintenance services have several
    competitive advantages over us, including captive engine fleets,
    and may have greater financial resources than us.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | We believe that providers of MRO services have traditionally
    competed on the basis of price, quality and the ability to
    perform repairs and overhauls rapidly. Developing and
    maintaining a competitive advantage will require continued
    investments in technology, engineering, operations, customer
    service and sales and marketing. We may not have sufficient
    resources to make the necessary investments and we may not be
    able to compete effectively. Furthermore, our business, results
    of operations and financial condition may be materially
    adversely affected by changes in the competitive environment,
    including any intensification of competition, which could lead
    to a loss of business and a decline in our margins.

If we fail to obtain or maintain engine service
authorizations from OEMs, our revenues, cash flows and
profitability may be materially adversely affected.








| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | our failure to comply with applicable specifications provided to
    us by OEMs;                              
|
| |  | a material breach by us under our OEM authorizations or
    termination or expiration of those authorizations;
|
| |  | a change of control of our company without consent or approval
    from OEMs where required;                  
|
| |  | our failure to obtain or comply with applicable governmental
    regulatory approvals; and                    
|
| |  | a significant service failure for which we are found to be
    responsible.                                   

A majority of our parts are procured from OEMs and their
affiliates. If we are unable to purchase component parts or raw
materials from these or other of our key suppliers, our business
and results of operations may be materially adversely
affected.




16



---



##### 







| |   |                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| |  | destruction of our suppliers facilities or their
    distribution infrastructure or the failure of essential
    equipment at their facilities;
|
| |  | a work stoppage or strike by our suppliers employees;                                                                                          
|
| |  | failure of our suppliers to provide materials of requisite
    quality;                                                                         
|
| |  | a failure or shortage of supply of raw materials to our
    suppliers; and                                                                      
|
| |  | contractual amendments and disputes with respect to pricing and
    other terms with our suppliers.                                             



Our profitability will be adversely affected if we are
unable to reduce costs or increase prices in response to
fluctuations in demand for our services.




We rely on intellectual property in our business and our
business could be adversely affected if we lose our intellectual
property rights.




The regional and business aviation industry may experience
disruptions as a result of terrorist threats or attacks and
other exogenous factors beyond our control that could materially
adversely affect our results of operations and financial
condition in future periods.






17



---



##### 







| |   |                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Downturns in commercial air travel may contribute to excess
    capacity in the MRO market and increased competition for MRO
    work. We may not have sufficient resources to compete
    effectively and our profit margins may be negatively impacted;
|
| |  | Changes in passenger travel patterns may require commercial
    airlines to retire some of the aircraft that use engine
    platforms that we service; and                                                                                               
|
| |  | Continued increases in fuel prices may result in the retirement
    of older engines that we service in favor of newer, more
    fuel-efficient models.                                                                                                  



We will not be able to operate our business if we fail to
comply with or obtain and maintain the necessary regulatory
approvals.






| |   |                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------
| |  | periodically undergo extensive inspections and audits of our
    facilities and practices;                                               
|
| |  | obtain and maintain certifications from regulatory authorities
    to provide service for commercially operated aircraft
    engines; and
|
| |  | obtain and maintain recognized quality approvals, such as
    ISO-9000 and ISO-9001.                                                     



Our operations depend on our facilities, which are subject
to physical and other risks that could disrupt our
business.




18



---



##### 





Changes in foreign exchange rates could have adverse
effects on our results of operations and financial
condition.






Our international operations are exposed to various risks,
which could have a material adverse effect on our results of
operations and financial condition.


non-U.S.




| |   |                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the burden of complying with multiple and possibly conflicting
    laws and any unexpected changes in regulatory requirements;                                                                                                                            
|
| |  | exchange controls, import and export restrictions and tariffs
    and other trade protection measures;                                                                                                                                                    
|
| |  | political risks, including risks of loss due to civil
    disturbances, acts of terrorism, acts of war, guerilla
    activities and insurrection;                                                                                                         
|
| |  | unstable economic, financial and market conditions and increased
    expenses as a result of inflation, or higher interest rates;                                                                                                                         
|
| |  | potentially adverse tax consequences from changes in tax laws,
    requirements relating to withholding taxes on remittances and
    other payments by subsidiaries and restrictions on our ability
    to repatriate dividends from our subsidiaries; and
|
| |  | exposure to liabilities under the U.S. Foreign Corrupt
    Practices Act.                                                                                                                                                                                 



We may face large liability claims, which could have a
material adverse effect on our results of operations and
financial condition.






| |   |                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------
| |  | the failure of an aircraft on which an engine for which we
    provided MRO services has been installed;

19



---



##### 





| |   |                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------
| |  | the reliability and skills of the operators of our
    customers aircraft; and                     
|
| |  | the type and amount of maintenance on aircraft and component
    systems performed by our customers.



Our operations may prove harmful to the environment, which
could expose us to fines and damages and could require expensive
remediation.






| |   |                                                                                      
| | - | -------------------------------------------------------------------------------------
| |  | the generation, storage, handling, use and transportation of
    hazardous materials;
|
| |  | emissions and discharges to air, soil and water;                                     
|
| |  | the health and safety of our employees; and                                          
|
| |  | other environmental matters.                                                         





Any expansion by acquisition may prove risky for
us.






| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the incurrence of any debt or contingent liabilities and an
    increase in interest expense, amortization expense related to
    intangible assets, and possible goodwill impairment charges;
|
| |  | our failure to discover liabilities of the acquired company for
    which we may be responsible as a successor owner or operator
    despite any investigation we make before the acquisition;
|
| |  | our inability to integrate the operations, technology and
    personnel of the acquired company;                                                                                              

20



---



##### 





| |   |                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | the diversion of managements attention from our core
    operations as they attend to any business integration issues
    that may arise;
|
| |  | our loss of key personnel of the acquired company; and                                                                                    
|
| |  | our becoming subject to material liabilities as a result of
    failure to negotiate adequate indemnification rights.                     





Failure to retain certain of our executive officers or
attract and retain the services of certain qualified employees
may materially adversely affect our business and results of
operations.






We are controlled by Carlyle, whose interests in our
business may differ from the interests of our other
investors.




Our substantial indebtedness could adversely affect our
ability to raise additional capital to fund our operations,
limit our ability to react to changes in the economy or our
industry and prevent us from fulfilling our obligations under
our notes.






| |   |                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our senior credit facilities, consisting of an eight-year term
    loan facility, under which we had outstanding indebtedness of
    $250.0 million, and a $50.0 million six-year revolving
    credit facility, under which we had $2.0 million
    outstanding indebtedness;
|
| |  | $2.2 million in capital lease obligations; and                                                                                                                                                                                                                                
|
| |  | $200.0 million in aggregate principal amount of our
    81/4% senior subordinated notes due 2014.                                                                                                                                                                             

21



---



##### 







| |   |                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | make it more difficult for us to satisfy our obligations with
    respect to our notes;                                                                                                                                                                                                                                                   
|
| |  | increase our vulnerability to a downturn in general economic and
    industry conditions or in our business;                                                                                                                                                                                                                              
|
| |  | require us to dedicate a substantial portion of our cash flow
    from operations to payments on our indebtedness, thereby
    reducing the availability of our cash flow to fund working
    capital, capital expenditures, research and development efforts,
    future business opportunities and other general corporate
    purposes;
|
| |  | limit our flexibility in planning for, or reacting to market
    conditions, including changes in our business and the industry
    in which we operate and place us at a competitive disadvantage
    compared to other providers of MRO services that have less debt;                                                                   
|
| |  | restrict us from making strategic acquisitions or exploiting
    business opportunities;                                                                                                                                                                                                                                                  
|
| |  | limit our ability to make capital expenditures that are
    important to our growth and to our ability to maintain our
    facilities in good working order and repair; and                                                                                                                                                               
|
| |  | limit, among other things, our ability to borrow additional
    funds or dispose of assets.                                                                                                                                                                                                                                               



If we default on our obligations to pay our indebtedness
we may not be able to make payments on our notes.




To service our indebtedness, we require a significant
amount of cash. Our ability to generate cash depends on many
factors beyond our control.




22



---



##### 









Despite current indebtedness levels, we, and our
subsidiaries are able to incur substantially more debt, which
would further exacerbate the risks associated with our
substantial leverage.




Our note holders right to receive payments on our
notes and the guarantees is subordinated to the borrowings under
our senior credit facilities and possibly all our future
borrowings.








23



---



##### 







Our note holders ability to receive payments on
their notes is junior to those lenders who have a security
interest in our assets.




Restrictive covenants in our senior credit facilities and
the indenture governing our notes may restrict our ability to
pursue our business strategies.






| |   |                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | incur, assume or guarantee additional indebtedness or contingent
    obligations;                                                                                                                    
|
| |  | make restricted payments, including, without limitation, pay
    dividends or make distributions to our stockholders, make loans
    and redeem debt that is junior in right of payment to our notes;
|
| |  | repurchase or redeem our stock;                                                                                                                                                                      
|
| |  | make investments;                                                                                                                                                                                    
|
| |  | grant liens;                                                                                                                                                                                         
|
| |  | make capital expenditures;                                                                                                                                                                           
|
| |  | enter into transactions with our affiliates;                                                                                                                                                         
|
| |  | issue redeemable or preferred stock;                                                                                                                                                                 
|
| |  | enter into agreements that restrict dividends from subsidiaries;                                                                                                                                     
|
| |  | change our business;                                                                                                                                                                                 
|
| |  | sell assets; and                                                                                                                                                                                     
|
| |  | acquire the assets of, or merge or consolidate with, other
    companies or sell or otherwise dispose of substantially all of
    our assets.                                                        

24



---



##### 





Certain subsidiaries are not subsidiary guarantors of our
indebtedness under our notes.






Our variable rate indebtedness subjects us to interest
rate risk, which could cause our debt service obligations to
increase significantly.




Federal and state fraudulent transfer laws permit a court
to void our notes and the guarantees, and, if that occurs, our
note holders will not receive any payments on our notes.






| |   |                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------
| |  | we or any of our guarantors were or was insolvent or rendered
    insolvent by reason of the incurrence of the
    indebtedness; or

25



---



##### 





| |   |                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------
| |  | payment of the consideration left us or any of our guarantors
    with an unreasonably small amount of capital to carry on the
    business; or
|
| |  | we or any of our guarantors intended to, or believed that we or
    it would, incur debts beyond our or its ability to pay as they
    mature. 







| |   |                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the sum of its debts, including contingent liabilities, was
    greater than the fair market value of all its assets; or                                                                                                                             
|
| |  | the present fair market value of its assets was less than the
    amount that would be required to pay its probable liability on
    its existing debts and liabilities, including contingent
    liabilities, as they become absolute and mature; or
|
| |  | it could not pay its debts as they become due.                                                                                                                                                                                                       





We are a holding company and may not have access to
sufficient cash to make payments on our notes.






26



---



##### 










|         |                           
|-------- | --------------------------
|Item 1B. | Unresolved Staff Comments.








|        |            
|------- | -----------
|Item 2. | Properties.



|                         |  |              |         |  |                  |  |              |     |  |                                
|------------------------ |  | ------------ | ------- |  | ---------------- |  | ------------ | --- |  | -------------------------------
|                         |  | Approximate  |         |  |                  |  |             
|                         |  | Area (Square |         |  | Type of Property |  |              |    
|Location                 |  | Feet)        |         |  | Interest Held    |  |              | Use
|                         |  |              |         |  |                  |  |              |    
|Winnipeg, Canada         |  |              | 540,000 |  |                  |  | Owned/Leased |     |  | Repair and overhaul            
|San Antonio, TX          |  |              | 370,000 |  |                  |  | Leased       |     |  | Repair and overhaul            
|Maryville, TN            |  |              | 120,000 |  |                  |  | Owned        |     |  | Repair and overhaul            
|Tilburg, the Netherlands |  |              | 77,000  |  |                  |  | Owned        |     |  | Repair and overhaul            
|Sydney, Australia        |  |              | 32,000  |  |                  |  | Leased       |     |  | Repair and overhaul            
|Singapore                |  |              | 23,000  |  |                  |  | Leased       |     |  | Repair and overhaul            
|Vancouver, Canada        |  |              | 7,000   |  |                  |  | Leased       |     |  | Sales, repair and field service
|Concord, NC              |  |              | 6,900   |  |                  |  | Leased       |     |  | Sales, repair and field service
|Southlake, TX            |  |              | 5,500   |  |                  |  | Leased       |     |  | Sales, repair and field service
|Montreal, Canada         |  |              | 4,000   |  |                  |  | Leased       |     |  | Sales, repair and field service
|Oklahoma City, OK        |  |              | 3,000   |  |                  |  | Leased       |     |  | Enterprise Services            
|Ogden, UT                |  |              | 2,700   |  |                  |  | Leased       |     |  | Enterprise Services            
|Calgary, Canada          |  |              | 1,200   |  |                  |  | Leased       |     |  | Sales and field service        
|Seattle, WA              |  |              | 1,000   |  |                  |  | Leased       |     |  | Sales and field service        
|Van Nuys, CA             |  |              | 700     |  |                  |  | Leased       |     |  | Sales and field service        
|Godstone, UK             |  |              | 300     |  |                  |  | Leased       |     |  | Sales                          
|Allentown, PA            |  |              | 300     |  |                  |  | Leased       |     |  | Sales and field service        
|Salisbury, NC            |  |              | 300     |  |                  |  | Leased       |     |  | Sales                          
|Lafayette, LA            |  |              | 300     |  |                  |  | Leased       |     |  | Sales                          
|Fort Lauderdale, FL      |  |              | 290     |  |                  |  | Leased       |     |  | Sales                          








|        |                   
|------- | ------------------
|Item 3. | Legal Proceedings.



27



---



##### 












|        |                                                         
|------- | --------------------------------------------------------
|Item 4. | Submission of matters to a Vote of Security
    Holders.








|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities



28



---



##### 








|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



|                                                             |                                              |                               |         |               |               |   |          |             |  |   |                         |         |  |      |         |         |      |   |         |         |  |   |         |         | 
|------------------------------------------------------------ | -------------------------------------------- | ----------------------------- | ------- | ------------- | ------------- | - | -------- | ----------- |  | - | ----------------------- | ------- |  | ---- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                                                             |                                              | Year Ended                    |         |               | August 25    |   |          | January 1  |  |   | Year Ended December 31, |        
|                                                             |                                              | December 31,                  |         |               | December 31,  |   |          | August 24,  |  |   |                         |        
|                                                             |                                              | 2005                          |         |               | 2004          |   |          | 2004        |  |   | 2003                    |         |  | 2002 |         |         | 2001 |  
|                                                             |                                              |                               |         |               |               |   |          |             |  |   |                         |         |  |      |         |         |      |  
|                                                             |                                              | (Successor)                   |         |               | (Predecessor) |  
|                                                             |                                              |                               |         | (restated)(1) |               |   |         
|                                                             |                                              | (In thousands, except ratios) |        
|Statements of operations data:                               |                                              |                               |         |               |               |   |          |             |  |   |                         |         |  |      |         |         |      |   |         |         |  |   |         |        
|Revenues                                                     |                                              | $                             | 760,707 |               |               | $ | 284,116  |             |  | $ | 509,385                 |         |  | $    | 545,029 |         |      | $ | 461,173 |         |  | $ | 436,830 |        
|                                                             |                                              |                               |         |               |               |   |          |             |  |   |                         |         |  |      |         |         |      |  
|Operating Expenses                                           |                                              |                               |         |               |               |   |          |             |  |   |                         |         |  |      |         |         |      |   |         |         |  |   |         |        
|                                                             | Cost of revenues                             |                               |         | 662,239       |               |   |          | 249,710     |  |   |                         | 423,368 |  |      |         | 456,058 |      |   |         | 382,484 |  |   |         | 370,420 | 
|                                                             | Selling, general and administrative expenses |                               |         | 51,530        |               |   |          | 20,974      |  |   |                         | 30,317  |  |      |         | 37,942  |      |   |         | 34,268  |  |   |         | 38,008  | 
|                                                             | Amortization of intangible assets            |                               |         | 9,385         |               |   |          | 3,262       |  |   |                         | 1,835   |  |      |         | 2,752   |      |   |         | 2,752   |  |   |         | 3,895   | 
|                                                             | Restructuring costs                          |                               |         | 3,215         |               |   |          |            |  |   |                         |        |  |      |         |        |      |   |         |        |  |   |         |        | 
|                                                             | Goodwill impairment                          |                               |         | 47,377        |               |   |          |            |  |   |                         |        |  |      |         |        |      |   |         |        |  |   |         |        | 
|                                                             | Amortization of goodwill                     |                               |         |              |               |   |          |            |  |   |                         |        |  |      |         |        |      |   |         |        |  |   |         | 2,033   | 
|                                                             |                                              |                               |         |               |               |   |          |             |  |   |                         |         |  |      |         |         |      |  
|Total operating expenses                                     |                                              |                               | 773,746 |               |               |   | 273,946  |             |  |   | 455,520                 |         |  |      | 496,752 |         |      |   | 419,504 |         |  |   | 414,356 |        
|                                                             |                                              |                               |         |               |               |   |          |             |  |   |                         |         |  |      |         |         |      |  
|Income (loss) from operations                                |                                              |                               | (13,039 | )             |               |   | 10,170   |             |  |   | 53,865                  |         |  |      | 48,277  |         |      |   | 41,699  |         |  |   | 22,474  |        
|Interest expense, net                                        |                                              |                               | 36,440  |               |               |   | 14,005   |             |  |   | 4,835                   |         |  |      | 8,118   |         |      |   | 11,689  |         |  |   | 14,618  |        
|                                                             |                                              |                               |         |               |               |   |          |             |  |   |                         |         |  |      |         |         |      |  
|Income (loss) before income taxes                            |                                              |                               | (49,479 | )             |               |   | (3,835   | )           |  |   | 49,030                  |         |  |      | 40,159  |         |      |   | 29,980  |         |  |   | 7,856   |        
|Income tax expense (benefit)                                 |                                              |                               | (298    | )             |               |   | 66       |             |  |   | 15,822                  |         |  |      | 15,163  |         |      |   | 12,310  |         |  |   | 2,628   |        
|                                                             |                                              |                               |         |               |               |   |          |             |  |   |                         |         |  |      |         |         |      |  
|Net income (loss)                                            |                                              | $                             | (49,181 | )             |               | $ | (3,901   | )           |  | $ | 33,208                  |         |  | $    | 24,996  |         |      | $ | 17,670  |         |  | $ | 5,228   |        
|                                                             |                                              |                               |         |               |               |   |          |             |  |   |                         |         |  |      |         |         |      |  
|Other financial and ratio data:                              |                                              |                               |         |               |               |   |          |             |  |   |                         |         |  |      |         |         |      |   |         |         |  |   |         |        
|Capital expenditures, net                                    |                                              | $                             | 13,542  |               |               | $ | 6,385    |             |  | $ | 11,710                  |         |  | $    | 16,417  |         |      | $ | 29,194  |         |  | $ | 43,881  |        
|Depreciation and amortization                                |                                              |                               | 25,300  |               |               |   | 8,825    |             |  |   | 14,229                  |         |  |      | 19,685  |         |      |   | 18,928  |         |  |   | 17,778  |        
|Net cash provided by operating activities                    |                                              |                               | 20,859  |               |               |   | 19,760   |             |  |   | 36,966                  |         |  |      | 66,655  |         |      |   | 495     |         |  |   | 31,089  |        
|Net cash used in investing activities                        |                                              |                               | (13,485 | )             |               |   | (670,396 | )           |  |   | (11,598                 | )       |  |      | (16,320 | )       |      |   | (28,895 | )       |  |   | (43,796 | )      
|Net cash provided by (used in) financing activities          |                                              |                               | (10,487 | )             |               |   | 678,468  |             |  |   | (11,841                 | )       |  |      | (45,088 | )       |      |   | 12,994  |         |  |   | 29,435  |        
|Effect of exchange rate changes on cash and cash equivalents |                                              |                               | (722    | )             |               |   | 59       |             |  |   | (525                    | )       |  |      | (2,356  | )       |      |   | 1,383   |         |  |   | (4      | )      

29



---



##### 



|                           |  |                 |         |               |      |               |         |  |      |  |   |         |  |  |      |         |  |  |   |         | 
|-------------------------- |  | --------------- | ------- | ------------- | ---- | ------------- | ------- |  | ---- |  | - | ------- |  |  | ---- | ------- |  |  | - | ------- | 
|                           |  | At December 31, |        
|                           |  |                 |        
|                           |  | 2005            |         |               | 2004 |               |         |  | 2003 |  |   | 2002    |  |  | 2001 |        
|                           |  |                 |         |               |      |               |         |  |      |  |   |         |  |  |      |        
|                           |  | (Successor)     |         |               |      | (Predecessor) |        
|                           |  |                 |         | (restated)(1) |      |               |         | 
|                           |  | (In thousands)  |        
|Balance sheet data:        |  |                 |         |               |      |               |         |  |      |  |   |         |  |  |      |         |  |  |   |         | 
|Cash and cash equivalents  |  | $               | 24,056  |               |      | $             | 27,891  |  |      |  | $ | 22,698  |  |  | $    | 19,807  |  |  | $ | 33,830  | 
|Total assets               |  |                 | 843,038 |               |      |               | 947,162 |  |      |  |   | 582,973 |  |  |      | 578,898 |  |  |   | 543,572 | 
|Long term debt             |  |                 | 470,000 |               |      |               | 487,261 |  |      |  |   | 171,419 |  |  |      | 168,202 |  |  |   | 135,614 | 
|Total stockholders equity |  |                 | 161,979 |               |      |               | 211,151 |  |      |  |   | 245,417 |  |  |      | 257,080 |  |  |   | 270,589 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Our consolidated financial statements as of December 31,
    2004 and for the 2004 Post-Acquisition Period have been
    restated. See Item 7. Managements Discussion
    and Analysis of Financial Condition and Results for
    Operation  Restatement and
    Note 1  Nature of Operations 
    Restatement in the Notes to Financial Statements included
    elsewhere in this report.

30



---



##### 








|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations.

Basis of Presentation






Overview








| |   |                                                               
| | - | --------------------------------------------------------------
| |  | the number of engines in operation (the installed
    base);
|
| |  | the age of the installed base; and                            
|
| |  | the utilization rate of the installed base.                   





31



---



##### 



Restatement


10-Q 10-Q


Error in Recording Loss Contract. Business
Combinations Accounting for Contingencies






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes to our opening consolidated balance sheet as of the date
    of the Acquisition to reflect an increase in the carrying amount
    of a liability related to the Loss Contract of $3.3 million
    representing the present value of the Loss Contract as of the
    date of the Acquisition (the Loss Contract
    Liability) partially offset by an increase of
    $2.1 million in the carrying value of goodwill, net of
    $1.2 million of deferred taxes;
|
| |  | changes to the Companys consolidated balance sheet at the
    end of each of the restated periods to reflect (1) the
    re-measured present value of the Loss Contract Liability over
    the life of the Loss Contract and (2) reductions in the
    carrying amount of the Loss Contract Liability as costs are
    incurred in excess of the net realizable value of inventory;                                                                                     
|
| |  | changes to our cost of revenues for each of the restated periods
    reflecting the elimination of the actual losses recognized prior
    to the identification of the error and changes to non-cash
    interest expense reflecting the present value accretion
    associated with the Loss Contract Liability; and                                                                                                                                                    
|
| |  | a charge or credit to our cost of revenues in each of the
    restated periods to reflect changes in the re-measured carrying
    value of the Loss Contract Liability over those periods.                                                                                                                                                                                                                                                                               

Accounts Receivable Error.


32



---



##### 









| |   |                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes to our consolidated balance sheets to reflect the
    elimination of approximately $1.5 million in overstated
    accounts receivable at December 31, 2004 and at the end of
    each of the first three quarters of 2005;
|
| |  | a $1.5 million increase in our cost of revenues for the
    year ended December 31, 2004 reflecting the elimination of
    the overstated accounts receivable at period end; and                                                  
|
| |  | a credit of $0.6 million to our income tax expense for the
    period ended December 31, 2004 reflecting the income tax
    effect of the decrease in operating income caused by the
    increase in cost of revenues.            

Other adjustment.






|                                            |  |                    |        |   |                    |   |             |                |  |                    |               |    |             |                    |         |   |          |   |         |            |  |    |          |  |  |            |         |   |          |   |         |  |  |   |         |  |  |   |         | 
|------------------------------------------- |  | ------------------ | ------ | - | ------------------ | - | ----------- | -------------- |  | ------------------ | ------------- | -- | ----------- | ------------------ | ------- | - | -------- | - | ------- | ---------- |  | -- | -------- |  |  | ---------- | ------- | - | -------- | - | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                            |  |                    |        |   |                    |   |             |                |  | Three Months Ended |              
|                                            |  |                    |        |   |                    |   |            
|                                            |  | August 25, 2004 to |        |   | August 25, 2004 to |   |             |                |  |                    |               |   
|                                            |  | September 30, 2004 |        |   | December 31, 2004  |   |             | March 31, 2005 |  |                    | June 30, 2005 |    |             | September 30, 2005 |        
|                                            |  |                    |        |   |                    |   |             |                |  |                    |               |    |             |                    |        
|                                            |  | (unaudited)        |        |   |                    |   | (unaudited) |                |  | (unaudited)        |               |    | (unaudited) |                   
|                                            |  | As                 |        |   |                    |   | As          |                |  |                    |               | As |             |                    |         |   | As       |   |         |            |  | As |          |  | 
|                                            |  | previously         |        |   | As                 |   |             | previously     |  |                    | As            |    |             | previously         |         |   | As       |   |         | previously |  |    | As       |  |  | previously |         |   | As       |  
|                                            |  | reported           |        |   | restated           |   |             | reported       |  |                    | restated      |    |             | reported           |         |   | restated |   |         | reported   |  |    | restated |  |  | reported   |         |   | restated |  
|                                            |  |                    |        |   |                    |   |             |                |  |                    |               |    |             |                    |         |   |          |   |         |            |  |    |          |  |  |            |         |   |          |  
|Cost of revenues                            |  | $                  | 64,645 |   |                    | $ | 63,870      |                |  | $                  | 251,099       |    |             | $                  | 249,710 |   |          | $ | 154,305 |            |  | $  | 153,903  |  |  | $          | 145,264 |   |          | $ | 144,591 |  |  | $ | 165,735 |  |  | $ | 163,668 | 
|Selling, general and administrative expense |  |                    | 8,092  |   |                    |   | 8,092       |                |  |                    | 20,964        |    |             |                    | 20,974  |   |          |   | 12,544  |            |  |    | 12,538   |  |  |            | 12,851  |   |          |   | 12,838  |  |  |   | 12,032  |  |  |   | 12,086  | 
|Total operating expenses                    |  |                    | 73,567 |   |                    |   | 72,792      |                |  |                    | 275,325       |    |             |                    | 273,946 |   |          |   | 169,295 |            |  |    | 168,887  |  |  |            | 160,561 |   |          |   | 159,875 |  |  |   | 183,328 |  |  |   | 181,315 | 
|Income from operations                      |  |                    | 1,911  |   |                    |   | 2,686       |                |  |                    | 8,791         |    |             |                    | 10,170  |   |          |   | 18,119  |            |  |    | 18,527   |  |  |            | 11,220  |   |          |   | 11,906  |  |  |   | 14,939  |  |  |   | 16,952  | 
|Interest expense                            |  |                    | 3,700  |   |                    |   | 3,784       |                |  |                    | 13,706        |    |             |                    | 14,005  |   |          |   | 8,928   |            |  |    | 9,101    |  |  |            | 8,547   |   |          |   | 8,721   |  |  |   | 8,938   |  |  |   | 9,072   | 
|Income before income taxes                  |  |                    | (1,789 | ) |                    |   | (1,098      | )              |  |                    | (4,915        | )  |             |                    | (3,835  | ) |          |   | 9,191   |            |  |    | 9,426    |  |  |            | 2,673   |   |          |   | 3,185   |  |  |   | 6,001   |  |  |   | 7,880   | 
|Income tax expense (benefit)                |  |                    | 229    |   |                    |   | 478         |                |  |                    | (233          | )  |             |                    | 66      |   |          |   | 2,713   |            |  |    | 2,868    |  |  |            | (126    | ) |          |   | 39      |  |  |   | 3,059   |  |  |   | 3,685   | 
|Net income                                  |  |                    | (2,018 | ) |                    |   | (1,576      | )              |  | $                  | (4,682        | )  |             | $                  | (3,901  | ) |          | $ | 6,478   |            |  | $  | 6,558    |  |  | $          | 2,799   |   |          | $ | 3,146   |  |  | $ | 2,942   |  |  | $ | 4,195   | 

33



---



##### 





|                                           |  |                   |         |             |                |   |             |               |  |             |                    |    |  |            |         |  |          |   |         |            |  |   |          |  |  |   |         |  |  |   |         | 
|------------------------------------------ |  | ----------------- | ------- | ----------- | -------------- | - | ----------- | ------------- |  | ----------- | ------------------ | -- |  | ---------- | ------- |  | -------- | - | ------- | ---------- |  | - | -------- |  |  | - | ------- |  |  | - | ------- | 
|                                           |  | December 31, 2004 |         |             | March 31, 2005 |   |             | June 30, 2005 |  |             | September 30, 2005 |   
|                                           |  |                   |         |             |                |   |             |               |  |             |                    |   
|                                           |  |                   |         | (unaudited) |                |   | (unaudited) |               |  | (unaudited) |                   
|                                           |  | As                |         |             |                |   | As          |               |  |             |                    | As |  |            |         |  | As       |   |         |           
|                                           |  | previously        |         |             | As             |   |             | previously    |  |             | As                 |    |  | previously |         |  | As       |   |         | previously |  |   | As       | 
|                                           |  | reported          |         |             | restated       |   |             | reported      |  |             | restated           |    |  | reported   |         |  | restated |   |         | reported   |  |   | restated | 
|                                           |  |                   |         |             |                |   |             |               |  |             |                    |    |  |            |         |  |          |   |         |            |  |   |          | 
|                                           |  | (In thousands)    |        
|ASSETS                                     |  |                   |         |             |                |   |             |               |  |             |                    |    |  |            |         |  |          |   |         |            |  |   |          |  |  |   |         |  |  |   |         | 
|Accounts receivable                        |  | $                 | 111,992 |             |                | $ | 110,492     |               |  | $           | 109,125            |    |  | $          | 105,619 |  |          | $ | 102,022 |            |  | $ | 100,522  |  |  | $ | 118,605 |  |  | $ | 117,105 | 
|Inventories                                |  |                   | 146,875 |             |                |   | 146,403     |               |  |             | 153,784            |    |  |            | 152,815 |  |          |   | 150,026 |            |  |   | 149,013  |  |  |   | 146,035 |  |  |   | 145,524 | 
|Prepaid Expenses and other current assets  |  |                   | 10,994  |             |                |   | 10,994      |               |  |             | 3,766              |    |  |            | 5,772   |  |          |   | 7,705   |            |  |   | 7,705    |  |  |   | 4,921   |  |  |   | 4,921   | 
|Income taxes receivable                    |  |                   | 4,563   |             |                |   | 4,563       |               |  |             | 6,038              |    |  |            | 5,062   |  |          |   | 7,225   |            |  |   | 6,262    |  |  |   | 7,587   |  |  |   | 6,570   | 
|Total current assets                       |  |                   | 306,433 |             |                |   | 304,461     |               |  |             | 290,829            |    |  |            | 287,384 |  |          |   | 270,645 |            |  |   | 267,169  |  |  |   | 286,917 |  |  |   | 283,889 | 
|Deferred income taxes  long-term          |  |                   | 3,856   |             |                |   | 5,197       |               |  |             | 3,751              |    |  |            | 5,043   |  |          |   | 3,545   |            |  |   | 4,642    |  |  |   | 3,162   |  |  |   | 3,618   | 
|Property, plant and equipment, net         |  |                   | 136,140 |             |                |   | 136,439     |               |  |             | 135,665            |    |  |            | 135,964 |  |          |   | 139,740 |            |  |   | 140,039  |  |  |   | 139,852 |  |  |   | 140,151 | 
|Goodwill                                   |  |                   | 240,490 |             |                |   | 242,570     |               |  |             | 240,490            |    |  |            | 242,570 |  |          |   | 240,490 |            |  |   | 242,570  |  |  |   | 240,490 |  |  |   | 242,570 | 
|Total assets                               |  | $                 | 945,414 |             |                | $ | 947,162     |               |  | $           | 924,845            |    |  | $          | 925,071 |  |          | $ | 904,740 |            |  | $ | 904,740  |  |  | $ | 917,051 |  |  | $ | 916,858 | 
|LIABILITIES AND STOCKHOLDERS EQUITY       |  |                   |         |             |                |   |             |               |  |             |                    |    |  |            |         |  |          |   |         |            |  |   |          |  |  |   |         |  |  |   |         | 
|Accounts payable                           |  | $                 | 106,419 |             |                | $ | 102,423     |               |  | $           | 104,624            |    |  | $          | 90,266  |  |          | $ | 77,614  |            |  | $ | 74,028   |  |  | $ | 86,166  |  |  | $ | 82,213  | 
|Other accrued liabilities                  |  |                   | 24,015  |             |                |   | 28,498      |               |  |             | 13,864             |    |  |            | 27,982  |  |          |   | 23,481  |            |  |   | 26,285   |  |  |   | 19,220  |  |  |   | 20,960  | 
|Income taxes payable                       |  |                   | 8,608   |             |                |   | 8,980       |               |  |             | 11,027             |    |  |            | 10,523  |  |          |   | 6,640   |            |  |   | 6,106    |  |  |   | 7,277   |  |  |   | 6,728   | 
|Total current liabilities                  |  |                   | 163,261 |             |                |   | 164,120     |               |  |             | 152,760            |    |  |            | 152,017 |  |          |   | 131,344 |            |  |   | 130,028  |  |  |   | 140,084 |  |  |   | 137,322 | 
|Deferred income taxes  long-term          |  |                   | 84,522  |             |                |   | 84,630      |               |  |             | 83,239             |    |  |            | 83,347  |  |          |   | 82,193  |            |  |   | 82,301   |  |  |   | 83,144  |  |  |   | 83,252  | 
|Total liabilities                          |  |                   | 735,044 |             |                |   | 736,011     |               |  |             | 707,918            |    |  |            | 707,283 |  |          |   | 685,107 |            |  |   | 683,899  |  |  |   | 694,442 |  |  |   | 691,788 | 
|Retained earnings/ (deficit)               |  |                   | (4,682  | )           |                |   | (3,901      | )             |  |             | 1,796              |    |  |            | 2,657   |  |          |   | 4,595   |            |  |   | 5,803    |  |  |   | 7,537   |  |  |   | 9,998   | 
|Total stockholders equity                 |  |                   | 210,370 |             |                |   | 211,151     |               |  |             | 216,927            |    |  |            | 217,788 |  |          |   | 219,633 |            |  |   | 220,841  |  |  |   | 222,609 |  |  |   | 225,070 | 
|Total liabilities and stockholders equity |  | $                 | 945,414 |             |                | $ | 947,162     |               |  | $           | 924,845            |    |  | $          | 925,071 |  |          | $ | 904,740 |            |  | $ | 904,740  |  |  | $ | 917,051 |  |  | $ | 916,858 | 



Kelly Air Force Base Subcontract








Changes to Segment Reporting and Restructuring


Disclosures about Segments of
an Enterprise and Related Information.


34



---



##### 











Trends Affecting Our Business


Military MRO.






10-year


35



---



##### 





end-to


Regional Jet Engine MRO.








Turboprop MRO.


36



---



##### 





Goodwill and Intangible Assets; Impairment














37



---



##### 













Financial statement presentation




Revenues.


Cost of revenues.


Selling, general and administrative expense.


Critical accounting policies




38



---



##### 





Revenue recognition.


Provision for unfavorable contract.


Reserve for warranty costs.


Reserve for doubtful accounts receivable.


Goodwill and intangible assets.


39



---



##### 



Impairment of long-lived assets. Accounting for the Impairment or
Disposal of Long-Lived Assets.


Inventory. first-in


Income taxes. Accounting for Income Taxes.


Results of Operations






40



---



##### 





|                                            |  |                |         |               |              |            |               |              |            |   |               |   |  |               |         |  |  |   |         | 
|------------------------------------------- |  | -------------- | ------- | ------------- | ------------ | ---------- | ------------- | ------------ | ---------- | - | ------------- | - |  | ------------- | ------- |  |  | - | ------- | 
|                                            |  |                |         |               |              | August 25, |               |              | January 1, |   |               |  
|                                            |  | Year Ended     |         |               | Year Ended   |            |               | 2004 to      |            |   | 2004 to       |   |  | Year Ended    |        
|                                            |  | December 31,   |         |               | December 31, |            |               | December 31, |            |   | August 24,    |   |  | December 31,  |        
|                                            |  | 2005           |         |               | 2004(1)      |            |               | 2004         |            |   | 2004          |   |  | 2003          |        
|                                            |  |                |         |               |              |            |               |              |            |   |               |   |  |               |        
|                                            |  | (Successor)    |         |               | (Combined)   |            |               | (Successor)  |            |   | (Predecessor) |   |  | (Predecessor) |        
|                                            |  |                |         | (restated)(2) |              |            | (restated)(2) |              |            |   |               |  
|                                            |  | (In thousands) |        
|Revenues                                    |  | $              | 760,707 |               |              | $          | 793,501       |              |            | $ | 284,116       |   |  | $             | 509,385 |  |  | $ | 545,029 | 
|Cost of revenues                            |  |                | 662,239 |               |              |            | 673,078       |              |            |   | 249,710       |   |  |               | 423,368 |  |  |   | 456,058 | 
|                                            |  |                |         |               |              |            |               |              |            |   |               |   |  |               |        
|Gross Profit                                |  |                | 98,468  |               |              |            | 120,423       |              |            |   | 34,406        |   |  |               | 86,017  |  |  |   | 88,971  | 
|Selling, general and administrative expense |  |                | 51,530  |               |              |            | 51,291        |              |            |   | 20,974        |   |  |               | 30,317  |  |  |   | 37,942  | 
|Amortization of intangible assets           |  |                | 9,385   |               |              |            | 5,097         |              |            |   | 3,262         |   |  |               | 1,835   |  |  |   | 2,752   | 
|Restructuring costs                         |  |                | 3,215   |               |              |            |              |              |            |   |              |   |  |               |        |  |  |   |        | 
|Goodwill impairment                         |  |                | 47,377  |               |              |            |              |              |            |   |              |   |  |               |        |  |  |   |        | 
|                                            |  |                |         |               |              |            |               |              |            |   |               |   |  |               |        
|Income (loss) from operations               |  |                | (13,039 | )             |              |            | 64,035        |              |            |   | 10,170        |   |  |               | 53,865  |  |  |   | 48,277  | 
|Interest expense                            |  |                | 36,440  |               |              |            | 18,840        |              |            |   | 14,005        |   |  |               | 4,835   |  |  |   | 8,118   | 
|                                            |  |                |         |               |              |            |               |              |            |   |               |   |  |               |        
|Income (loss) before income taxes           |  |                | (49,479 | )             |              |            | 45,195        |              |            |   | (3,835        | ) |  |               | 49,030  |  |  |   | 40,159  | 
|Income tax expense (benefit)                |  |                | (298    | )             |              |            | 15,888        |              |            |   | 66            |   |  |               | 15,822  |  |  |   | 15,163  | 
|                                            |  |                |         |               |              |            |               |              |            |   |               |   |  |               |        
|Net income (loss)                           |  | $              | (49,181 | )             |              | $          | 29,307        |              |            | $ | (3,901        | ) |  | $             | 33,208  |  |  | $ | 24,996  | 
|                                            |  |                |         |               |              |            |               |              |            |   |               |   |  |               |        






|    |                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents the combination of the Successor and Predecessor
    periods for comparative purposes only.                                                                                                                                                                                      
|   
|(2) | Our consolidated financial statements as of December 31,
    2004 and for the 2004 Post-Acquisition Period have been
    restated. See  Restatement and
    Note 1  Nature of Operations 
    Restatement in the Notes to Financial Statements included
    elsewhere in this report.



| |                                                                              
| | -----------------------------------------------------------------------------
| | Year Ended December 31, 2005 compared to the Year
    Ended December 31, 2004

Revenues.


Gross profit.


41



---



##### 



Selling, general and administration expense.


Amortization of intangible assets.


Restructuring costs.


Goodwill impairment.


Income (loss) from operations.


Interest expense.




| |                                                                              
| | -----------------------------------------------------------------------------
| | Year Ended December 31, 2004 compared to the Year
    Ended December 31, 2003

Revenues.


Gross profit.


42



---



##### 



Selling, general and administration expense.


Amortization of intangible assets.


Income from operations.


Interest expense.


Segment Results of Operations




|                                       |                                |                |        |               |              |            |               |              |            |  |               |         |   |               |       |         |   |  |       |         |  
|-------------------------------------- | ------------------------------ | -------------- | ------ | ------------- | ------------ | ---------- | ------------- | ------------ | ---------- |  | ------------- | ------- | - | ------------- | ----- | ------- | - |  | ----- | ------- | -
|                                       |                                |                |        |               |              | August 25, |               |              | January 1, |  |               |        
|                                       |                                | Year Ended     |        |               | Year Ended   |            |               | 2004 to      |            |  | 2004 to       |         |   | Year Ended    |      
|                                       |                                | December 31,   |        |               | December 31, |            |               | December 31, |            |  | August 24,    |         |   | December 31,  |      
|                                       |                                | 2005           |        |               | 2004(1)      |            |               | 2004         |            |  | 2004          |         |   | 2003          |      
|                                       |                                |                |        |               |              |            |               |              |            |  |               |         |   |               |      
|                                       |                                | (Successor)    |        |               | (Combined)   |            |               | (Successor)  |            |  | (Predecessor) |         |   | (Predecessor) |      
|                                       |                                |                |        | (restated)(2) |              |            | (restated)(2) |              |            |  |               |        
|                                       |                                | (In thousands) |       
|Revenues:                              |                                |                |        |               |              |            |               |              |            |  |               |         |   |               |       |         |   |  |       |        
|                                       | Aviation MRO                   |                | $      | 751,526       |              |            | $             | 786,455      |            |  | $             | 282,376 |   |               | $     | 504,079 |   |  | $     | 542,341 |  
|                                       | Enterprise Services            |                |        | 9,181         |              |            |               | 7,046        |            |  |               | 1,740   |   |               |       | 5,306   |   |  |       | 2,688   |  
|                                       |                                |                |        |               |              |            |               |              |            |  |               |         |   |               |      
|                                       | Total revenue                  |                |        | 760,707       |              |            |               | 793,501      |            |  |               | 284,116 |   |               |       | 509,385 |   |  |       | 545,029 |  
|                                       |                                |                |        |               |              |            |               |              |            |  |               |         |   |               |      
|Segment Income (Loss) from Operations: |                                |                |        |               |              |            |               |              |            |  |               |         |   |               |       |         |   |  |       |        
|                                       | Aviation MRO                   |                |        | 6,725         |              |            |               | 101,425      |            |  |               | 39,170  |   |               |       | 62,255  |   |  |       | 52,162  |  
|                                       | Enterprise Services            |                |        | (3,896        | )            |            |               | (4,856       | )          |  |               | (1,746  | ) |               |       | (3,110  | ) |  |       | (407    | )
|                                       |                                |                |        |               |              |            |               |              |            |  |               |         |   |               |      
|                                       | Segment income from operations |                |        | 2,829         |              |            |               | 96,569       |            |  |               | 37,424  |   |               |       | 59,145  |   |  |       | 51,755  |  
|Corporate expenses                     |                                |                | 15,868 |               |              |            | 32,534        |              |            |  | 27,254        |         |   |               | 5,280 |         |   |  | 3,478 |        
|Interest expense                       |                                |                | 36,440 |               |              |            | 18,840        |              |            |  | 14,005        |         |   |               | 4,835 |         |   |  | 8,118 |        
|                                       |                                |                |        |               |              |            |               |              |            |  |               |         |   |               |      

43



---



##### 



|                                  |  |                |         |               |              |            |               |              |            |   |               |   |  |               |        |  |  |   |        | 
|--------------------------------- |  | -------------- | ------- | ------------- | ------------ | ---------- | ------------- | ------------ | ---------- | - | ------------- | - |  | ------------- | ------ |  |  | - | ------ | 
|                                  |  |                |         |               |              | August 25, |               |              | January 1, |   |               |  
|                                  |  | Year Ended     |         |               | Year Ended   |            |               | 2004 to      |            |   | 2004 to       |   |  | Year Ended    |       
|                                  |  | December 31,   |         |               | December 31, |            |               | December 31, |            |   | August 24,    |   |  | December 31,  |       
|                                  |  | 2005           |         |               | 2004(1)      |            |               | 2004         |            |   | 2004          |   |  | 2003          |       
|                                  |  |                |         |               |              |            |               |              |            |   |               |   |  |               |       
|                                  |  | (Successor)    |         |               | (Combined)   |            |               | (Successor)  |            |   | (Predecessor) |   |  | (Predecessor) |       
|                                  |  |                |         | (restated)(2) |              |            | (restated)(2) |              |            |   |               |  
|                                  |  | (In thousands) |        
|Income (loss) before income taxes |  |                | (49,479 | )             |              |            | 45,195        |              |            |   | (3,835        | ) |  |               | 49,030 |  |  |   | 40,159 | 
|Income tax expense (benefit)      |  |                | (298    | )             |              |            | 15,888        |              |            |   | 66            |   |  |               | 15,822 |  |  |   | 15,163 | 
|                                  |  |                |         |               |              |            |               |              |            |   |               |   |  |               |       
|Net income (loss)                 |  | $              | (49,181 | )             |              | $          | 29,307        |              |            | $ | (3,901        | ) |  | $             | 33,208 |  |  | $ | 24,996 | 
|                                  |  |                |         |               |              |            |               |              |            |   |               |   |  |               |       






|    |                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents the combination of the Successor and Predecessor
    periods for comparative purposes only.                                                                                                                                                                                      
|   
|(2) | Our consolidated financial statements as of December 31,
    2004 and for the 2004 Post-Acquisition Period have been
    restated. See  Restatement and
    Note 1  Nature of Operations 
    Restatement in the Notes to Financial Statements included
    elsewhere in this report.

Aviation MRO




| |                                                                              
| | -----------------------------------------------------------------------------
| | Year Ended December 31, 2005 compared to the Year
    Ended December 31, 2004

Revenues.


Segment income from operations.




| |                                                                              
| | -----------------------------------------------------------------------------
| | Year Ended December 31, 2004 compared to the Year
    Ended December 31, 2003

Revenues.


44



---



##### 



Segment income from operations.


Enterprise Services




| |                                                                              
| | -----------------------------------------------------------------------------
| | Year Ended December 31, 2005 compared to the Year
    Ended December 31, 2004

Revenues.


Segment income (loss) from operations.




| |                                                                              
| | -----------------------------------------------------------------------------
| | Year Ended December 31, 2004 compared to the Year
    Ended December 31, 2003

Revenues.


Segment income (loss) from operations.


Liquidity and capital resources




| |                       
| | ----------------------
| | Liquidity requirements









| |   |                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our senior credit facilities, consisting of an eight-year term
    loan facility, under which we had outstanding indebtedness of
    $270.0 million, and a $50.0 million six-year revolving
    credit facility, under which $2.0 million was drawn at
    April 12, 2006;
|
| |  | $2.6 million in capital lease obligations; and                                                                                                                                                                                                                            
|
| |  | $200.0 million in aggregate principal amount of our
    81/4% senior subordinated notes due 2014.                                                                                                                                                                         

45



---



##### 







| |                         
| | ------------------------
| | Senior credit facilities

non-U.S.








|                |  |                                    |  |                                |  |                               
|--------------- |  | ---------------------------------- |  | ------------------------------ |  | ------------------------------
|Notional Amount |  | Term                               |  | Floor Strike Rate              |  | Cap Strike Rate               
|                |  |                                    |  |                                |  |                               
|$75,000,000     |  | March 27, 2006  December 27, 2006 |  | 2.40% (plus applicable margin) |  | 5.25% (plus applicable margin)



| |                                            
| | -------------------------------------------
| | Senior credit agreement covenant compliance



46



---



##### 











47



---



##### 





|                                                        |  |               |       |               |              |            |               |              |            |   |               |   |  |   |      | 
|------------------------------------------------------- |  | ------------- | ----- | ------------- | ------------ | ---------- | ------------- | ------------ | ---------- | - | ------------- | - |  | - | ---- | 
|                                                        |  |               |       |               |              | August 25, |               |              | January 1, |  
|                                                        |  | Year Ended    |       |               | Year Ended   |            |               | 2004 to      |            |   | 2004 to       |  
|                                                        |  | December 31,  |       |               | December 31, |            |               | December 31, |            |   | August 24,    |  
|                                                        |  | 2005          |       |               | 2004         |            |               | 2004         |            |   | 2004          |  
|                                                        |  |               |       |               |              |            |               |              |            |   |               |  
|                                                        |  | (Successor)   |       |               | (Combined)   |            |               | (Successor)  |            |   | (Predecessor) |  
|                                                        |  |               |       | (restated)(5) |              |            | (restated)(5) |              |            |  
|                                                        |  | (In millions) |      
|Net income                                              |  | $             | (49.2 | )             |              | $          | 29.3          |              |            | $ | (3.9          | ) |  | $ | 33.2 | 
|Add:                                                    |  |               |       |               |              |            |               |              |            |   |               |   |  |   |      | 
|Depreciation and amortization                           |  |               | 25.3  |               |              |            | 23.1          |              |            |   | 8.8           |   |  |   | 14.3 | 
|Interest expense, net                                   |  |               | 36.4  |               |              |            | 18.8          |              |            |   | 14.0          |   |  |   | 4.8  | 
|Provision for income taxes                              |  |               | (0.3  | )             |              |            | 15.9          |              |            |   | 0.1           |   |  |   | 15.8 | 
|Expenses associated with the Acquisition(1)             |  |               |       |               |              |            | 4.7           |              |            |   | 2.4           |   |  |   | 2.3  | 
|Effect of write-up of inventory and work in progress(2) |  |               |      |               |              |            | 21.4          |              |            |   | 21.4          |   |  |   |     | 
|Non-recurring expenses(3)                               |  |               | 6.9   |               |              |            |              |              |            |   |              |   |  |   |     | 
|Non-recurring impairment(4)                             |  |               | 77.1  |               |              |            |              |              |            |   |              |   |  |   |     | 
|Management fee                                          |  |               | 1.6   |               |              |            | 0.5           |              |            |   | 0.5           |   |  |   |     | 
|                                                        |  |               |       |               |              |            |               |              |            |   |               |  
|Adjusted EBITDA                                         |  | $             | 97.8  |               |              | $          | 113.7         |              |            | $ | 43.3          |   |  | $ | 70.4 | 
|                                                        |  |               |       |               |              |            |               |              |            |   |               |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As a result of the Acquisition and the requirements of purchase
    accounting, our assets and liabilities, including the amounts
    recorded for inventory and work in process, were adjusted to
    their fair market values as of the closing date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(2) | As a result of the Acquisition and the requirements of purchase
    accounting, our assets and liabilities, including the amounts
    recorded for inventory and work in process, were adjusted to
    their fair market values as of the closing date. These adjusted
    valuations caused an increase in cost of revenue during the
    period following the closing (August 25, 2004) through
    December 31, 3004 due to the increased carrying value of
    inventory and increased depreciation of property, plant and
    equipment. Income from operations decreased approximately
    $21.4 million during the period due to the
    write-up of inventory
    and work in process to fair value at the time of the closing.
|   
|(3) | We also incurred $3.9 million in employee severance costs
    during the period ended December 31, 2005, and
    $3.0 million in non-recurring professional fees associated
    with contractual review, potential acquisitions and the exchange
    offer of our senior subordinated notes.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(4) | We incurred $77.1 million in goodwill and intangible asset
    impairment in accordance with SFAS 144 and SFAS 142
    related to the potential loss of, or changes to, the Kelly Air
    Force Base subcontract.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(5) | Our consolidated financial statements as of December 31,
    2004 and for the 2004 Post-Acquisition Period have been
    restated. See Restatement and
    Note 1  Nature of Operations 
    Restatement in the Notes to Financial Statements included
    elsewhere in this report.                                                                                                                                                                                                                                                                                                                                                                                                                                            



| |                          
| | -------------------------
| | Senior subordinated notes

1 4


48



---



##### 





| |           
| | ----------
| | Cash flows



|                                                             |  |                |         |               |              |   |               |              |  |   |               |   |  |               |         |   |  |   |         |  
|------------------------------------------------------------ |  | -------------- | ------- | ------------- | ------------ | - | ------------- | ------------ |  | - | ------------- | - |  | ------------- | ------- | - |  | - | ------- | -
|                                                             |  | Year Ended     |         |               | Year Ended   |   |               | August 25   |  |   | January 1    |   |  | Year Ended    |        
|                                                             |  | December 31,   |         |               | December 31, |   |               | December 31, |  |   | August 24,    |   |  | December 31,  |        
|                                                             |  | 2005           |         |               | 2004         |   |               | 2004         |  |   | 2004          |   |  | 2003          |        
|                                                             |  |                |         |               |              |   |               |              |  |   |               |   |  |               |        
|                                                             |  | (Successor)    |         |               | (Combined)   |   |               | (Successor)  |  |   | (Predecessor) |   |  | (Predecessor) |        
|                                                             |  |                |         | (restated)(1) |              |   | (restated)(1) |              |  |   |               |  
|                                                             |  | (In thousands) |        
|Net cash provided by (used in) operating activities          |  | $              | 20,859  |               |              | $ | 56,726        |              |  | $ | 19,760        |   |  | $             | 36,966  |   |  | $ | 66,655  |  
|Net cash used in investing activities                        |  |                | (13,485 | )             |              |   | (681,994      | )            |  |   | (670,396      | ) |  |               | (11,598 | ) |  |   | (16,320 | )
|Net cash provided from (used in) financing activities        |  |                | (10,487 | )             |              |   | 666,627       |              |  |   | 678,468       |   |  |               | (11,841 | ) |  |   | (45,088 | )
|Effect of exchange rate changes on cash and cash equivalents |  |                | (722    | )             |              |   | (466          | )            |  |   | 59            |   |  |               | (525    | ) |  |   | (2,356  | )
|                                                             |  |                |         |               |              |   |               |              |  |   |               |   |  |               |        
|Net increase (decrease) in cash and cash equivalents         |  |                | (3,835  | )             |              | $ | 40,893        |              |  | $ | 27,891        |   |  | $             | 13,002  |   |  | $ | 2,891   |  
|                                                             |  |                |         |               |              |   |               |              |  |   |               |   |  |               |        






|    |                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Our consolidated financial statements as of December 31,
    2004 and for the 2004 Post-Acquisition Period, have been
    restated. See Restatement and
    Note 1  Nature of Operations 
    Restatement in the Notes to Financial Statements included
    elsewhere in this report.



| |                                                    
| | ---------------------------------------------------
| | Net cash provided by (used in) operating activities







| |                                      
| | -------------------------------------
| | Net cash used in investing activities



49



---



##### 





| |                                                    
| | ---------------------------------------------------
| | Net cash provided by (used in) financing activities



1 4


Commitments




|                              |  |                        |       |           |        |   |      |       |  |     |       |  |       |         |      |  |  |   |       | 
|----------------------------- |  | ---------------------- | ----- | --------- | ------ | - | ---- | ----- |  | --- | ----- |  | ----- | ------- | ---- |  |  | - | ----- | 
|                              |  | Payments Due by Period |      
|                              |  |                        |      
|                              |  |                        |       | Less Than |        |   | 1-3  |       |  | 4-5 |       |  | After |        
|                              |  | Total                  |       |           | 1 Year |   |      | Years |  |     | Years |  |       | 5 Years |     
|                              |  |                        |       |           |        |   |      |       |  |     |       |  |       |         |     
|                              |  | (In millions)          |      
|Term loan(1)                  |  | $                      | 374.3 |           |        | $ | 17.0 |       |  | $   | 34.0  |  |       | $       | 34.0 |  |  | $ | 289.3 | 
|Capital lease obligations     |  |                        | 2.7   |           |        |   | 2.7  |       |  |     |      |  |       |         |     |  |  |   |      | 
|Senior subordinated notes(2)  |  |                        | 348.5 |           |        |   | 16.5 |       |  |     | 33.0  |  |       |         | 33.0 |  |  |   | 266.0 | 
|Capital commitments           |  |                        | 0.6   |           |        |   | 0.6  |       |  |     |      |  |       |         |     |  |  |   |      | 
|Operating lease obligations   |  |                        | 11.7  |           |        |   | 7.8  |       |  |     | 2.2   |  |       |         | 0.6  |  |  |   | 1.1   | 
|                              |  |                        |       |           |        |   |      |       |  |     |       |  |       |         |     
|Total contractual obligations |  | $                      | 737.8 |           |        | $ | 44.6 |       |  | $   | 69.2  |  |       | $       | 67.6 |  |  | $ | 556.4 | 
|                              |  |                        |       |           |        |   |      |       |  |     |       |  |       |         |     






|    |                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes required interest payments based on an interest rate at
    December 31, 2005 of 6.81%. Scheduled payments have been
    included in the interest payment calculation.
|   
|(2) | Includes required interest payments at 8.25%.                                                                                                                                  

Inflation




Seasonality




Recent Accounting Pronouncements




50



---



##### 














|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk



Interest rate risks.


Currency risks. i.e.


51



---



##### 








|        |                                             
|------- | --------------------------------------------
|Item 8. | Financial Statements and Supplementary Data.








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure.








|         |                         
|-------- | ------------------------
|Item 9A. | Controls and Procedures.

Evaluation of Disclosure Controls and Procedures








Internal Control over Financial Reporting






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We failed to maintain effective controls over the valuation
    and presentation of our loss-contract accrued liability.
    Specifically, our controls over the application and monitoring
    of accounting policies with respect to loss contracts acquired
    in connection with a purchase business combination were
    ineffective to ensure that such contracts were recorded in
    accordance with generally accepted accounting principles.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In connection with the audit of our financial statements for the
    year ended December 31, 2005 and the preparation of our
    Annual Report on Form 10-K for 2005, our independent registered
    public accounting firm, PricewaterhouseCoopers LLP
    (PwC), identified errors with respect to our
    valuation and accounting for a loss-making contract at the time
    of the Acquisition in August 2004 and our recording of losses
    under that loss-contract in subsequent periods. Our management
    determined that these errors resulted because our controls over
    the application and monitoring of accounting policies applicable
    to loss contracts acquired in purchase business combinations were

52



---



##### 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ineffective to ensure that such contracts were recorded in
    accordance with generally accepted accounting principles. This
    control deficiency resulted in the restatement of our
    consolidated financial statements for the restated periods as
    well as an audit adjustment to the 2005 annual consolidated
    financial statements. Additionally, this control deficiency
    could result in a misstatement of the inventory, goodwill,
    accrued liabilities, cost of revenues and interest expense
    accounts that would result in a material misstatement to the
    annual or interim consolidated financial statements that would
    not be prevented or detected. Accordingly, management determined
    that this control deficiency constitutes a material weakness.



| |   |                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We failed to maintain effective controls over the valuation
    of discounts for parts that are recorded within our accounts
    receivable account. Specifically, we lacked effective controls,
    including monitoring, to ensure that our receivable account
    relating to the embodiment discount was appropriately valued and
    recorded.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | During the fourth quarter of 2005 our senior accounting staff
    identified errors that occurred in the fourth quarter of 2004
    with respect to the calculation of a discount that we receive
    from one of our major parts manufacturers that is recorded
    within our accounts receivable account. Our management
    determined that these errors resulted because our controls and
    procedures in effect at the time of the miscalculation, which
    required that the calculation of the discount to be reconciled
    and confirmed on a monthly basis by a member of our accounting
    staff located outside of our corporate headquarters in Winnipeg,
    were not being observed. Our management also determined that our
    senior accounting staff in Winnipeg failed to monitor the
    operation of the control that was in place, and as a result the
    error remained undetected until almost a year after it occurred.
    This control deficiency resulted in the restatement of our
    consolidated financial statements for 2004 and each of the first
    three quarters of 2005. Additionally, this control deficiency
    could result in a misstatement of accounts receivable and cost
    of revenues that would result in a material misstatement of our
    annual or interim consolidated financial statements that would
    not be prevented or detected. Accordingly, management determined
    that this control deficiency constitutes a material weakness.

Plans for Remediation






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | that certain members of our accounting staff receive training
    regarding the application of SFAS 141;                                                                                                                                                                                                                                                                                                                                                       
|
| |  | our accounting staff to take prescribed steps in the event of
    certain non-routine transactions, which steps will include:
    engaging external accounting advisors, establishing working
    groups, action plans, or monitoring meetings based on the nature
    of the event, in each case in an effort to ensure that
    individuals from the appropriate departments are involved,
    communication is thorough, and action items are addressed; and
|
| |  | that significant and nonrecurring events be brought to the
    attention of the audit committee.                                                                                                                                                                                                                                                                                                                                                               





| |   |                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | that the calculation of the discount be performed by a member of
    our accounting team and be confirmed by our assistant controller
    and that each of them be properly trained with respect to such
    calculation and confirmation;
|
| |  | that the discount calculation and confirmation functions be
    centralized in Winnipeg; and                                                                                                                                              
|
| |  | that issues arising with respect to calculation of the discount
    be brought to the attention of the audit committee.                                                                                                                   

53



---



##### 





Disclosure Controls and Procedures as of the End of
Previously Reported Periods


10-Q 10-Q) 10-Q) 10-Q 10-Q 10-Q


10-Q 10-Q.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | as disclosed in the Second
    Quarter 10-Q, our
    disclosure controls and procedures were not effective at
    June 30, 2005 due to the material weakness identified in
    the Second
    Quarter 10-Q and
    that the material weaknesses identified herein were also in
    existence at June 30, 2005 and, as evidenced by the
    restatement of our financial statements as of and for the three
    months ended June 30, 2005, that these additional material
    weaknesses constituted a separate and independent cause of our
    ineffective disclosure controls and procedures at June 30,
    2005; and
|
| |  | the determination set forth in the Third Quarter 10-Q that
    our disclosure controls and procedures were effective at
    September 30, 2005 was incorrect because, as evidenced by
    the restatement of the financial statements as of and for the
    three months ended September 30, 2005, the material
    weaknesses identified herein were in existence at
    September 30, 2005 and our disclosure controls and
    procedures were not effective as of September 30, 2005.                                                                                                                                 

54



---



##### 








|         |                   
|-------- | ------------------
|Item 9B. | Other Information.








|         |                                                    
|-------- | ---------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant.



|                   |  |     |    |  |          |                                                                                                 
|------------------ |  | --- | -- |  | -------- | ------------------------------------------------------------------------------------------------
|Name               |  | Age |    |  | Position
|                   |  |     |    |  |         
|David Shaw         |  |     | 48 |  |          | Chief Executive Officer and Director                                                            
|Bradley Bertouille |  |     | 43 |  |          | Chief Financial Officer                                                                         
|Edward Richmond    |  |     | 50 |  |          | President, Enterprise Services and Senior Vice- President,
    Strategy and Business Development
|Paul Soubry, Jr    |  |     | 43 |  |          | President, Aviation MRO Services                                                                
|Peter J. Clare     |  |     | 41 |  |          | Director                                                                                        
|Allan Holt         |  |     | 54 |  |          | Director                                                                                        
|Adam Palmer        |  |     | 33 |  |          | Director                                                                                        
|Andrew Shinn.      |  |     | 32 |  |          | Director                                                                                        
|Thomas Corcoran    |  |     | 61 |  |          | Director                                                                                        
|Ralph Eberhart     |  |     | 59 |  |          | Director                                                                                        
|David Squier       |  |     | 60 |  |          | Director                                                                                        





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | David Shawjoined Standard Aero Limited in 1989 as
    Director of Engineering and Quality Assurance. After a series of
    promotions, he became the President of Standard Aero Limited in
    1994. In March 2001, Mr. Shaw was appointed Chief Operating
    Officer of Dunlop Standard, and in December 2001, Mr. Shaw
    became Chief Executive Officer. Before that, Mr. Shaw
    worked with Pratt & Whitney Canada and Garrett Canada,
    now part of Honeywell International Inc. Mr. Shaw is a
    professional engineer with a Bachelor of Science degree in
    Engineering and a Diploma in Management.                                                                                                                                                                                                                                                                                                                
|
| | Bradley Bertouille began with Standard Aero Limited in
    October 1985. Mr. Bertouille was promoted to Assistant
    Controller in 1988 and Corporate Controller in 1990, in 1995, he
    was appointed Executive Vice-President, Finance and
    Administration of Standard Aero Limited and became Senior
    Vice-President, Finance and Administration for Dunlop Standard
    in 2001, and in September 2004 became our Chief Financial
    Officer. Prior to joining us, Mr. Bertouille worked in
    retail accounting. He is a professional accountant with a
    Certified Management Accountant designation and a diploma in
    Business Administration.                                                                                                                                                                                                                                                                 
|
| | Edward S. Richmond commenced employment with Standard
    Aero Limited in January 1993 as Director of the PT-6 Business
    Unit. He was subsequently promoted to Executive Vice President
    of the PT-6 Business Unit in 1997 and was also assigned
    responsibility to lead the Standard Aero Alliance Business Unit.
    In March 2001, he was promoted to the role of Senior Vice
    President of Strategy and Business Development for Dunlop
    Standard and in 2005 he has also assumed responsibility of
    President of Enterprise Services. Prior to joining Standard,
    Mr. Richmond held management positions with UTL, European
    Helicopters and GE Aerospace. He is a graduate of the Royal
    Military College of Canada with a Bachelor of engineering
    degree. He is also a graduate of the General Electric Management
    Institute (Crotonville) and the Wharton Advanced Management
    Program.
|
| | Paul Soubry, Jr. joined Standard Aero Limited in
    1985 as manager of Publications. In 1989 Mr. Soubry was
    appointed Vice-President Sales and Marketing of Standard Aero
    Limited. Mr. Soubry became President, Standard Aero
    Canadian Operations in March 2001 and was appointed                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

55



---



##### 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | President, Standard Aero Commercial Aviation Services in January
    2004. Effective December 2004, he was appointed President of the
    Standard Aero Aviation MRO Services Division. He has a Bachelor
    of Commerce (Honors) degree from the University of Manitoba and
    has attended the Executive program at Harvard School of Business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | Peter J. Clare joined the board of directors in June,
    2004. He currently serves as a Managing Director of The Carlyle
    Group. From 1997 to 1999, Mr. Clare served as a Principal
    of The Carlyle Group, and from 1995 to 1997 as a Vice President
    of The Carlyle Group. Mr. Clare was previously with First
    City Capital, a private investment group, and also worked at
    Prudential-Bache. Mr. Clare is a director of Aviall, Inc.
    and several privately-held companies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | Allan Holt was elected as one of our directors in
    connection with the Acquisition. He currently serves as a
    Partner and Managing Director of The Carlyle Group, which he
    joined in 1991. Prior to joining Carlyle, Mr. Holt spent
    three and a half years with Avenir Group, Inc., a private
    investment and advisory group. From 1984 to 1987, Mr. Holt
    was Director of Planning and Budgets at MCI Communications
    Corporation. He also serves on the Boards of Directors of
    Aviall, Inc. and several privately-held companies.                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | Adam Palmer was elected as one of our directors in
    connection with the Acquisition. He is currently a Managing
    Director of Carlyle. Prior to joining Carlyle in 1996,
    Mr. Palmer was with Lehman Brothers focusing on mergers,
    acquisitions and financings for defense electronics and
    information services companies. Mr. Palmer also serves on
    the Boards of Directors of Vought Aircraft Industries, Landmark
    Aviation and US Investigations Services, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | Andrew Shinn was elected as one of our directors in
    connection with the Acquisition. He is currently a Principal
    with The Carlyle Group, focused on U.S. buyout investments
    in the aerospace, defense and financial services sectors.
    Mr. Shinn is a founding member of Carlyle Asia and was
    based in Hong Kong and Seoul for several years. Prior to joining
    Carlyle, Mr. Shinn was an Associate at Generation Partners
    and an Analyst at UBS Capital, the private equity investment
    unit of Union Bank of Switzerland.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | Thomas Corcoran was elected as one of our directors on
    May 10, 2005. Mr. Corcoran was President and CEO of
    Gemini Air Cargo, Inc., which is owned by Carlyle, from 2001 to
    2004. He is currently a director of Gemini Air Cargo. He is also
    President of Corcoran Enterprises, LLC, a management-consulting
    firm and in this capacity, has a relationship with Carlyle where
    he is a Senior Advisor. Previously, he was President and CEO of
    Allegheny Teledyne and prior to that he was President and COO of
    Lockheed Martins Electronics Sector from 1995 to 1999. He
    is a member of the Board of Trustees of Stevens Institute of
    Technology and has also been a trustee at Worcester Polytechnic
    Institute. Mr. Corcoran also is a member of the Boards of
    Directors of L-3 Communications Holdings, Inc. United Industrial
    Corporation, REMEC, Inc. and LaBarge, Inc. He was selected in
    1998, 1999 and 2000 for Irish America Magazines
    Business 100.
|
| | General Ralph E. Eberhart, USAF (Ret.) was elected as one
    of our directors on May 10, 2005. A graduate of the
    U.S. Air Force Academy, General Eberharts active-duty
    military career spans 36 years with his last assignment as
    Commander, U.S. Northern Command and Commander, North
    American Aerospace Defense Command, Peterson Air Force Base,
    Colorado. General Eberhart has been President of the Armed
    Forces Benefit Association (AFBA) since December
    2004. As President of the AFBA, General Eberhart also serves as
    Chairman of 5Star Bank, 5Star Life Insurance Company, AFBA 5Star
    Investment Management Company and AFBA 5Star Fund, Inc.                                                                                                                                                                                                                                                                                                                           
|
| | David Squier was elected as one of our directors on
    May 10, 2005. Mr. Squier has been a consultant and
    advisor to Carlyle since 2000. He retired from Howmet
    Corporation in October 2000 where he served as President and
    Chief Executive Officer since 1992. As Chief Executive Officer,
    he was responsible for the operations of an organization with
    more than $1.5 billion in annual sales and 29 manufacturing
    facilities in five nations. He is the Chairman of the Board of
    Directors of United Components, Inc. and Firth Rixson plc, and a
    Director of Avio SpA and Vought Aircraft Industries.                                                                                                                                                                                                                                                                                                                                                                               

56



---



##### 



| |                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------
| | Mr. Squier had been a member of the Board of Directors of
    Howmet Corporation since 1987, until his retirement.

Committees of our Board of Directors






Code of Ethics


8-K.







|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation



57



---



##### 





Summary Compensation Table


|                    |                                            |      |      |      |              |   |         |               |  |            |                 |         |              |   |   |     |  |  |   |        |  |   |         |       |    
|------------------- | ------------------------------------------ | ---- | ---- | ---- | ------------ | - | ------- | ------------- |  | ---------- | --------------- | ------- | ------------ | - | - | --- |  |  | - | ------ |  | - | ------- | ----- | ---
|                    |                                            |      |      |      |              |   |         |               |  | Securities |                 |         | All Other    |  
|Name and            |                                            |      |      |      |              |   |         | Other Annual  |  | Underlying |                 |         | Compensation |  
|Principal Position  |                                            | Year |      |      | Salary($)(1) |   |         | Bonuses($)(3) |  |            | Compensation($) |         | Options(#)   |   |   | ($) | 
|                    |                                            |      |      |      |              |   |         |               |  |            |                 |         |              |   |   |     | 
|David Shaw,         |                                            |      | 2005 |      |              | $ | 505,117 |               |  | $          | 101,023         |         |              | $ |  |     |  |  |  |        |  | $ | 102,008 | (4)  
|                    | Chief Executive Officer(2)                 |      |      | 2004 |              |   |         | 196,582       |  |            |                 | 231,066 |              |   |   |     |  |  |   | 46,837 |  |   |         | 7,876 | (4)
|Bradley Bertouille, |                                            |      | 2005 |      |              |   | 224,134 |               |  |            | 100,360         |         |              |   |  |     |  |  |  |        |  |   | 44,465  | (4)  
|                    | Chief Financial Officer(2)                 |      |      | 2004 |              |   |         | 62,413        |  |            |                 | 97,412  |              |   |   |     |  |  |   | 14,051 |  |   |         | 6,705 | (4)
|Edward Richmond,    |                                            |      | 2005 |      |              |   | 319,155 |               |  |            | 135,637         |         |              |   |  |     |  |  |  |        |  |   | 44,389  | (4)  
|                    | President Enterprise Services and          |      |      | 2004 |              |   |         | 102,116       |  |            |                 | 145,997 |              |   |   |     |  |  |   | 14,051 |  |   |         | 5,813 | (4)
|                    | Sr VP Strategy and Business Development(2) |      |      |      |              |   |         |               |  |            |                 |         |              |   |   |     |  |  |   |        |  |   |         |       |    
|Paul Soubry,        |                                            |      | 2005 |      |              |   | 286,912 |               |  |            | 127,104         |         |              |   |  |     |  |  |  |        |  |   | 44,316  | (4)  
|                    | President Aviation MRO                     |      |      | 2004 |              |   |         | 68,015        |  |            |                 | 106,154 |              |   |   |     |  |  |   | 14,051 |  |   |         | 6,266 | (4)
|                    | Services(2)                                |      |      |      |              |   |         |               |  |            |                 |         |              |   |   |     |  |  |   |        |  |   |         |       |    
|Rene van Doorn,     |                                            |      | 2005 |      |              |   | 189,661 |               |  |            |                |         |              |   |  |     |  |  |  |        |  |   | 747,335 | (6)  
|                    | President Energy Services(2)(5)            |      |      | 2004 |              |   |         | 65,498        |  |            |                 | 94,544  |              |   |   |    |  |  |   | 14,051 |  |   |         | 8,409 | (4)






|    |                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes base salary and vacation payments. Compensation for
    2004 represents salary and vacation payments for the period
    August 24 to December 31, 2004. For a more comprehensive
    discussion of the named executive officers salaries, see
     Employment Agreements.                                                                    
|   
|(2) | Messrs. Shaw, Bertouille, Richmond and Soubrys
    compensation is Canadian dollars converted to US dollars at
    period average exchange rates. Messr van Doorns
    compensation is in Euros converted to U.S. dollars at period
    average exchange rates.                                                                                         
|   
|(3) | Bonus for 2004 relates to amounts earned under the Dunlop
    Standard Aerospace Group Limited management incentive
    compensation plan.                                                                                                                                                                                                                
|   
|(4) | Comprised of matching contributions under our defined
    contribution pension plans, life insurance premiums, membership
    plans, tax return preparation, personal travel and company car
    leases. Includes Acquisition-related payments during 2005 of
    $50,710 to Mr. Shaw, and $11,603 to each of Messrs. Bertouille,
    Richmond and Soubry.
|   
|(5) | Mr. van Doorns employment with us ended January 1,
    2006.                                                                                                                                                                                                                                                                                             
|   
|(6) | Comprised of $33,995 of compensation of the kind described in
    footnote 4 above and $713,340 in severance payments under
    Mr. van Doorns employment agreement and accrued by us
    in 2005.                                                                                                                                                       

58



---



##### 



Stock Options


Option Grants in Last Fiscal Year




Aggregate Option Exercises in Last Fiscal Year and Fiscal
Year End Option Values






|                   |  |              |   |  |          |                        |   |                |                       |  |               |  |  |             |        |  |               |  |   |  |  |  |   | 
|------------------ |  | ------------ | - |  | -------- | ---------------------- | - | -------------- | --------------------- |  | ------------- |  |  | ----------- | ------ |  | ------------- |  | - |  |  |  | - | 
|                   |  |              |   |  |          | Number of Securities   |   |                | Value of Unexercised  | 
|                   |  |              |   |  |          | Underlying Unexercised |   |                | In the Money          | 
|                   |  |              |   |  |          | Options at Fiscal      |   |                | Options ($) at Fiscal | 
|                   |  | Shares       |   |  | Value    |                        |   | Year- End (#)  |                       |  | Year - End(2) | 
|                   |  | Acquired on  |   |  | Realized |                        |   |                |                       |  |               | 
|Name               |  | Exercise (#) |   |  | ($)      |                        |   | Exercisable(1) |                       |  | Unexercisable |  |  | Exercisable |        |  | Unexercisable | 
|                   |  |              |   |  |          |                        |   |                |                       |  |               |  |  |             |        |  |               | 
|David Shaw         |  |              |  |  |          |                        |  |                |                       |  | 9,745         |  |  |             | 37,092 |  |               |  |  |  |  |  |  | 
|Bradley Bertouille |  |              |  |  |          |                        |  |                |                       |  | 2,924         |  |  |             | 11,127 |  |               |  |  |  |  |  |  | 
|Edward Richmond    |  |              |  |  |          |                        |  |                |                       |  | 2,924         |  |  |             | 11,127 |  |               |  |  |  |  |  |  | 
|Paul Soubry        |  |              |  |  |          |                        |  |                |                       |  | 2,924         |  |  |             | 11,127 |  |               |  |  |  |  |  |  | 
|Rene van Doorn     |  |              |  |  |          |                        |  |                |                       |  | 1,224         |  |  |             | 12,827 |  |               |  |  |  |  |  |  | 






|    |                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Consists of options for shares which were exercisable as of,
    andor exercisable within 60 days of December 31, 2005.                                                                                                                                                            
|   
|(2) | The value of the options as at December 31, 2005 is not
    presented as it cannot be ascertained whether the subject
    options are in the money as the value of the
    underlying stock cannot accurately be determined because there
    is no trading market in such stock.

Pension Plan




Director Compensation


out-of


Stock Option Plan




59



---



##### 









| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Approximately 31% of the options are time vesting options that
    will vest on or prior to December 31, 2008.                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Approximately 47% of the options are performance vesting options
    that will vest on the day immediately preceding the seventh
    anniversary of the date of grant, provided the option holder
    remains continuously employed with the Company. However, all or
    a portion of such performance vesting options may vest over a
    five-year period, starting with 2004, if certain performance
    targets relating to earnings and cash flow are met.
|
| |  | Approximately 22% of the options are performance vesting options
    that will vest between December 31, 2006 and
    December 31, 2008 if certain performance targets relating
    to earnings and cash flow are met.                                                                                                                                                                                                                                          

Executive Bonus Plan




Management  Employment Agreements






60



---



##### 



















| |                                     
| | ------------------------------------
| | Committee Meetings and Deliberations









61



---



##### 









| |                                      
| | -------------------------------------
| | Review of CEO Compensation Components



change-in






| |                      
| | ---------------------
| | Peter Clare, Chairman
| | Andrew Shinn         
| | David Squier         








|         |                                                                                                    
|-------- | ---------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters.







| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | each person or group known to beneficially own more than 5% of
    the common stock;
|
| |  | each of the named executive officers in the Summary Compensation
    Table;         
|
| |  | each of our directors;                                                              
|
| |  | all of our directors and named executive officers as a group.                       



62



---



##### 







|                                                      |  |              |           |  |            |  |      |  
|----------------------------------------------------- |  | ------------ | --------- |  | ---------- |  | ---- | -
|                                                      |  | Shares Owned |          
|                                                      |  |              |          
|Name of Beneficial Owner                              |  | Number(3)    |           |  | Percentage | 
|                                                      |  |              |           |  |            | 
|TC Group III L.P.(1)                                  |  |              | 2,150,000 |  |            |  | 98.2 | %
|Peter J. Clare(2)                                     |  |              |          |  |            |  |     |  
|Allan Holt(2)                                         |  |              |          |  |            |  |     |  
|Adam Palmer(2)                                        |  |              |          |  |            |  |     |  
|Andrew Shinn(2)                                       |  |              |          |  |            |  |     |  
|Thomas Corcoran                                       |  |              | 1,063     |  |            |  | *    |  
|Ralph Eberhart                                        |  |              | 563       |  |            |  | *    |  
|David Squier                                          |  |              | 3,625     |  |            |  | *    |  
|David Shaw                                            |  |              | 19,645    |  |            |  | *    |  
|Bradley Bertouille                                    |  |              | 4,674     |  |            |  | *    |  
|Edward Richmond                                       |  |              | 6,174     |  |            |  | *    |  
|Paul Soubry Jr.                                       |  |              | 4,924     |  |            |  | *    |  
|Rene van Doorn                                        |  |              | 1,974     |  |            |  | *    |  
|All Directors and Named Executive Officers as a Group |  |              | 42,639    |  |            |  | 1.9  | %






| |   |                                          
| | - | -----------------------------------------
| | * | Denotes less than 1% beneficial ownership



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | TC Group III, L.P. is the sole general partner of Carlyle
    Partners III, L.P. and CP III Coinvestment, L.P. the
    record holders of 2,024,452 and 125,548 share of our common
    stock, respectively. TC Group III, L.L.C. is the sole
    general partner of TC Group III, L.P. TC Group, L.L.C. is
    the sole managing member of TC Group III, L.L.C. TCG
    Holdings, L.L.C. is the sole managing member of TC Group, L.L.C.
    Accordingly, (i) TC Group III, L.P. and TC
    Group III, L.L.C. each may be deemed to be a beneficial
    owner of shares of common stock owned of record by each of
    Carlyle Partners III, L.P. and CP III Coinvestment,
    L.P.; and (ii) TC Group, L.L.C. and TCG Holdings, L.L.C.
    each may be deemed to be a beneficial owner of shares of common
    stock owned of record by each of Carlyle Partners III,
    L.P., and CP III Coinvestment, L.P. William E.
    Conway, Jr., Daniel A. DAniello and David M.
    Rubenstein are managing members of TCG Holdings, L.L.C. and, in
    such capacity, may be deemed to share beneficial ownership of
    shares of common stock beneficially owned by TCG Holdings,
    L.L.C. Such individuals expressly disclaim any such beneficial
    ownership. The principal address and principal offices of TCG
    Holdings, L.L.C. and certain affiliates is c/o The Carlyle
    Group, 1001 Pennsylvania Avenue, N.W., Suite 220 South,
    Washington, D.C. 20004-2505.
|   
|(2) | Messrs. Clare, Holt, Palmer and Shinn as employees of The
    Carlyle Group, do not directly or indirectly have or share
    voting or investment power or have or share the ability to
    influence voting or investment power over the shares shown as
    beneficially owned by TC Group III L.P.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(3) | Includes options issued under the Stock Option Plan of Standard
    Aero Acquisitions Holdings, Inc. and exercisable within
    60 days after December 31, 2005 of 9,745 shares
    for Mr. Shaw; 2,924 shares each for
    Messrs. Richmond, Bertouille, and Soubry; 1,224 for
    Messr. van Doorn; 1,125 shares for
    Messr. Squier; 563 shares each for
    Messrs. Corcoran and Eberhart and 21,989 shares for
    all named executive officers and directors as a group.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

63



---



##### 



Equity Compensation Plan Information




|                                                           |  |                      |         |  |                      |                         |                       |                         |  |  |         | 
|---------------------------------------------------------- |  | -------------------- | ------- |  | -------------------- | ----------------------- | --------------------- | ----------------------- |  |  | ------- | 
|                                                           |  |                      |         |  |                      | Number of Securities    |                      
|                                                           |  |                      |         |  |                      | Remaining Available for |                      
|                                                           |  | Number of Securities |         |  |                      |                         | Future Issuance Under |                        
|                                                           |  | to be Issued Upon    |         |  | Weighted-Average     |                         |                       | Equity Compensation     | 
|                                                           |  | Exercise of          |         |  | Exercise Price of    |                         |                       | Plans (Excluding        | 
|                                                           |  | Outstanding Options, |         |  | Outstanding Options, |                         |                       | Securities Reflected in | 
|Plan Category                                              |  | Warrants and Rights  |         |  | Warrants and Rights  |                         |                       | Column (a))             | 
|                                                           |  |                      |         |  |                      |                         |                       |                         | 
|Equity compensation plans approved by security holders     |  |                      | 192,398 |  |                      | $                       | 100.00                |                         |  |  | 193,207 | 
|Equity compensation plans not approved by security holders |  |                      |        |  |                      |                         |                      |                         |  |  |        | 
|                                                           |  |                      |         |  |                      |                         |                       |                         | 
|Total                                                      |  |                      | 192,398 |  |                      | $                       | 100.00                |                         |  |  | 193,207 | 
|                                                           |  |                      |         |  |                      |                         |                       |                         | 






|         |                                                
|-------- | -----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions.

Carlyle Management Agreement


out-of


Supply Agreement with Aviall Inc.




Employment Agreements




Stockholders Agreements






| |   |                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------
| |  | impose restrictions on their transfer of Standard Aero
    Acquisitions Holdings, Inc. shares;                                       
|
| |  | require those stockholders to take certain actions upon the sale
    of Standard Aero Acquisitions Holdings, Inc.; and               
|
| |  | grant Carlyle the right to require other stockholders to
    participate pro rata in connection with a sale of shares by
    Carlyle.

64



---



##### 








|         |                                        
|-------- | ---------------------------------------
|Item 14. | Principal Accounting Fees and Services.

Audit Fees




Audit Related Fees




Tax Fees




All Other Fees




Audit Committee Pre-Approval Policies and Procedures




65



---



##### 








|         |                                         
|-------- | ----------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules.



|    |                                                                                                 
|--- | ------------------------------------------------------------------------------------------------
|(a) | The following Financial Statements and related information are
    filed as part of this report:



| |                                                                                 
| | --------------------------------------------------------------------------------
| | Index to Financial Statements, Page 67                                          
|
| | Reports of Independent Registered Public Accounting Firm,
    Page 68 through 70
|
| | Consolidated Financial Statements, Page 71 through 117                          



|    |         
|--- | --------
|(b) | Exhibits



| |                         
| | ------------------------
| | See Page 118 through 120



|    |                              
|--- | -----------------------------
|(c) | Financial Statement Schedules



| |             
| | ------------
| | See Page 121

66



---



##### 



Index to Financial Statements


|                                                                                                                                                                      |  |      |    | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                                                                      |  | Page |   
|                                                                                                                                                                      |  |      |   
|STANDARD AERO HOLDINGS, INC.                                                                                                                                          |  |      |    | 
|Reports of Independent Registered Public
    Accounting Firm                                                                                                          |  |      | 68 | 
|Consolidated Statements of Operations
    (Successor) for the year ended December 31, 2005 and the
    period from August 25, 2004 to December 31, 2004               |  |      | 71 | 
|Combined Statements of Operations
    (Predecessor) for the period from January 1, 2004 to
    August 24, 2004 and for the year ended December 31,
    2003           |  |      | 71 | 
|Consolidated Balance Sheets as of
    December 31, 2005 and December 31, 2004                                                                                         |  |      | 72 | 
|Consolidated Statements of
    Stockholders Equity (Successor) for the year ended
    December 31, 2005 and the period from August 25, 2005
    to December 31, 2004 |  |      | 73 | 
|Combined Statements of Divisional Equity (Predecessor) for the
    period from January 1, 2004 to August 24, 2004 and the
    year ended December 31, 2003            |  |      | 73 | 
|Consolidated Statements of Cash Flows
    (Successor) for the year ended December 31, 2005 and the
    period from August 25, 2004 to December 31, 2004               |  |      | 74 | 
|Combined Statements of Cash Flows
    (Predecessor) for the period from January 1, 2004 to
    August 24, 2004 and for the year ended December 31,
    2003           |  |      | 74 | 
|Notes to Financial Statements                                                                                                                                         |  |      | 75 | 

67



---



##### 






Report of Independent Registered Public Accounting Firm










McLean, Virginia


April 13, 2006


68



---



##### 



Report of Independent Registered Public Accounting Firm












Chartered Accountants


Winnipeg, Manitoba, Canada


March 31, 2005


Post-Effective S-4 333-124394) Post-Effective S-4


69



---



##### 



Report of Independent Registered Public Accounting Firm


To the Stockholder and Board of Directors of


Standard Aero Holdings, Inc.






Chartered Accountants


Winnipeg, Manitoba, Canada


March 31, 2005


S-4 333-124394)


70



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)





CONSOLIDATED STATEMENTS OF OPERATIONS (SUCCESSOR)/





COMBINED STATEMENTS OF OPERATIONS (PREDECESSOR)


|                                            |  |                |         |            |              |   |         |            |               |  |   |               |  |  |   |         | 
|------------------------------------------- |  | -------------- | ------- | ---------- | ------------ | - | ------- | ---------- | ------------- |  | - | ------------- |  |  | - | ------- | 
|                                            |  |                |         | August 25, |              |   |         | January 1, |               |  |  
|                                            |  | Year Ended     |         |            | 2004 to      |   |         |            | 2004 to       |  |   | Year Ended    | 
|                                            |  | December 31,   |         |            | December 31, |   |         |            | August 24,    |  |   | December 31,  | 
|                                            |  | 2005           |         |            | 2004         |   |         |            | 2004          |  |   | 2003          | 
|                                            |  |                |         |            |              |   |         |            |               |  |   |               | 
|                                            |  | (Successor)    |         |            | (Successor)  |   |         |            | (Predecessor) |  |   | (Predecessor) | 
|                                            |  |                |         | (restated) |              |   |         |            |               | 
|                                            |  | (In thousands) |        
|Revenues                                    |  | $              | 760,707 |            |              | $ | 284,116 |            |               |  | $ | 509,385       |  |  | $ | 545,029 | 
|                                            |  |                |         |            |              |   |         |            |               |  |   |               | 
|Operating expenses                          |  |                |         |            |              |   |         |            |               |  |   |               |  |  |   |         | 
|Cost of revenues                            |  |                | 662,239 |            |              |   | 249,710 |            |               |  |   | 423,368       |  |  |   | 456,058 | 
|Selling, general and administrative expense |  |                | 51,530  |            |              |   | 20,974  |            |               |  |   | 30,317        |  |  |   | 37,942  | 
|Amortization of intangible assets           |  |                | 9,385   |            |              |   | 3,262   |            |               |  |   | 1,835         |  |  |   | 2,752   | 
|Restructuring costs                         |  |                | 3,215   |            |              |   |        |            |               |  |   |              |  |  |   |        | 
|Goodwill impairment                         |  |                | 47,377  |            |              |   |        |            |               |  |   |              |  |  |   |        | 
|                                            |  |                |         |            |              |   |         |            |               |  |   |               | 
|Total operating expenses                    |  |                | 773,746 |            |              |   | 273,946 |            |               |  |   | 455,520       |  |  |   | 496,752 | 
|                                            |  |                |         |            |              |   |         |            |               |  |   |               | 
|Income (loss) from operations               |  |                | (13,039 | )          |              |   | 10,170  |            |               |  |   | 53,865        |  |  |   | 48,277  | 
|Interest expense                            |  |                | 36,440  |            |              |   | 14,005  |            |               |  |   | 4,835         |  |  |   | 8,118   | 
|                                            |  |                |         |            |              |   |         |            |               |  |   |               | 
|Income (loss) before income taxes           |  |                | (49,479 | )          |              |   | (3,835  | )          |               |  |   | 49,030        |  |  |   | 40,159  | 
|Income tax expense (benefit)                |  |                | (298    | )          |              |   | 66      |            |               |  |   | 15,822        |  |  |   | 15,163  | 
|                                            |  |                |         |            |              |   |         |            |               |  |   |               | 
|Net income (loss)                           |  | $              | (49,181 | )          |              | $ | (3,901  | )          |               |  | $ | 33,208        |  |  | $ | 24,996  | 
|                                            |  |                |         |            |              |   |         |            |               |  |   |               | 



71



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)





CONSOLIDATED BALANCE SHEETS


|                                                                                                                   |  |                |         |            |              |   |         |  
|------------------------------------------------------------------------------------------------------------------ |  | -------------- | ------- | ---------- | ------------ | - | ------- | -
|                                                                                                                   |  | December 31,   |         |            | December 31, |  
|                                                                                                                   |  | 2005           |         |            | 2004         |  
|                                                                                                                   |  |                |         |            |              |  
|                                                                                                                   |  |                |         | (restated) |             
|                                                                                                                   |  | (In thousands) |        
|ASSETS                                                                                                            
|Current assets                                                                                                     |  |                |         |            |              |   |         |  
|Cash and cash equivalents                                                                                          |  | $              | 24,056  |            |              | $ | 27,891  |  
|Accounts receivable (less allowance for doubtful accounts of
    $2,987 and $3,932 at 2005 and 2004, respectively) |  |                | 120,456 |            |              |   | 110,492 |  
|Inventories                                                                                                        |  |                | 134,011 |            |              |   | 146,403 |  
|Prepaid expenses and other current assets                                                                          |  |                | 7,668   |            |              |   | 10,994  |  
|Income taxes receivable                                                                                            |  |                | 3,811   |            |              |   | 4,563   |  
|Deferred income taxes                                                                                              |  |                | 2,407   |            |              |   | 4,118   |  
|                                                                                                                   |  |                |         |            |              |  
|Total current assets                                                                                               |  |                | 292,409 |            |              |   | 304,461 |  
|                                                                                                                   |  |                |         |            |              |  
|Deferred finance charges                                                                                           |  |                | 18,272  |            |              |   | 21,215  |  
|Deferred income taxes                                                                                              |  |                | 7,920   |            |              |   | 5,197   |  
|Property, plant and equipment, net                                                                                 |  |                | 136,968 |            |              |   | 136,439 |  
|Intangible assets, net                                                                                             |  |                | 195,168 |            |              |   | 237,280 |  
|Goodwill                                                                                                           |  |                | 192,301 |            |              |   | 242,570 |  
|                                                                                                                   |  |                |         |            |              |  
|Total assets                                                                                                       |  | $              | 843,038 |            |              | $ | 947,162 |  
|                                                                                                                   |  |                |         |            |              |  
|                                                                                                                  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                              
|Current liabilities                                                                                                |  |                |         |            |              |   |         |  
|Accounts payable                                                                                                   |  | $              | 75,301  |            |              | $ | 102,423 |  
|Other accrued liabilities                                                                                          |  |                | 29,197  |            |              |   | 28,498  |  
|Due to related party                                                                                               |  |                | 3,940   |            |              |   | 2,808   |  
|Unearned revenue                                                                                                   |  |                | 14,196  |            |              |   | 12,519  |  
|Accrued warranty provision                                                                                         |  |                | 3,986   |            |              |   | 6,907   |  
|Income taxes payable                                                                                               |  |                | 9,323   |            |              |   | 8,980   |  
|Current portion of long-term debt                                                                                  |  |                | 2,574   |            |              |   | 1,985   |  
|                                                                                                                   |  |                |         |            |              |  
|Total current liabilities                                                                                          |  |                | 138,517 |            |              |   | 164,120 |  
|                                                                                                                   |  |                |         |            |              |  
|Deferred income taxes                                                                                              |  |                | 72,542  |            |              |   | 84,630  |  
|Long-term debt                                                                                                     |  |                | 470,000 |            |              |   | 487,261 |  
|                                                                                                                   |  |                |         |            |              |  
|Total liabilities                                                                                                  |  |                | 681,059 |            |              |   | 736,011 |  
|                                                                                                                   |  |                |         |            |              |  
|Commitments and contingencies(note 8)                                                                              |  |                |         |            |              |   |         |  
|Stockholders equity                                                                                               |  |                |         |            |              |   |         |  
|Common stock(1,000 shares authorized, issued and
    outstanding, par value $0.01)                                 |  |                |        |            |              |   |        |  
|Additional paid in capital                                                                                         |  |                | 215,000 |            |              |   | 215,000 |  
|Accumulated deficit                                                                                                |  |                | (53,082 | )          |              |   | (3,901  | )
|Accumulated other comprehensive income                                                                             |  |                | 61      |            |              |   | 52      |  
|                                                                                                                   |  |                |         |            |              |  
|Total stockholders equity                                                                                         |  |                | 161,979 |            |              |   | 211,151 |  
|                                                                                                                   |  |                |         |            |              |  
|Total liabilities and stockholders equity                                                                         |  | $              | 843,038 |            |              | $ | 947,162 |  
|                                                                                                                   |  |                |         |            |              |  



72



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)





CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(SUCCESSOR)/


COMBINED STATEMENTS OF DIVISIONAL EQUITY (PREDECESSOR)


|                                           |  |                |         |  |            |   |         |               |  |   |            |   |  |   |         |  
|------------------------------------------ |  | -------------- | ------- |  | ---------- | - | ------- | ------------- |  | - | ---------- | - |  | - | ------- | -
|                                           |  | Divisional     |         |  | Divisional |   |         | Due to (from) |  |   | Total      |  
|                                           |  | Share          |         |  | Retained   |   |         | Related       |  |   | Divisional |  
|                                           |  | Capital        |         |  | Earnings   |   |         | Companies     |  |   | Equity     |  
|                                           |  |                |         |  |            |   |         |               |  |   |            |  
|                                           |  | (In thousands) |        
|Predecessor                                |  |                |         |  |            |   |         |               |  |   |            |   |  |   |         |  
|Balance as of December 31, 2002            |  |                | 163,952 |  |            |   | 60,213  |               |  |   | 32,915     |   |  |   | 257,080 |  
|Net income                                 |  |                |        |  |            |   | 24,996  |               |  |   |           |   |  |   | 24,996  |  
|Net intercompany/interdivisional transfers |  |                |        |  |            |   |        |               |  |   | (36,659    | ) |  |   | (36,659 | )
|                                           |  |                |         |  |            |   |         |               |  |   |            |  
|Balance as of December 31, 2003            |  | $              | 163,952 |  |            | $ | 85,209  |               |  | $ | (3,744     | ) |  | $ | 245,417 |  
|Net income                                 |  |                |        |  |            |   | 33,208  |               |  |   |           |   |  |   | 33,208  |  
|Net intercompany/interdivisional transfers |  |                |        |  |            |   |        |               |  |   | (10,729    | ) |  |   | (10,729 | )
|                                           |  |                |         |  |            |   |         |               |  |   |            |  
|Balance as of August 24, 2004              |  | $              | 163,952 |  |            | $ | 118,417 |               |  | $ | (14,473    | ) |  | $ | 267,896 |  
|                                           |  |                |         |  |            |   |         |               |  |   |            |  

|                                             |                            |                                                |   |         |   |   |             |             |   |               |         |         |               |   |    |   |    |   |         |         |    | 
|-------------------------------------------- | -------------------------- | ---------------------------------------------- | - | ------- | - | - | ----------- | ----------- | - | ------------- | ------- | ------- | ------------- | - | -- | - | -- | - | ------- | ------- | -- | 
|                                             |                            |                                                |   |         |   |   |             | Accumulated |   |               |        
|                                             |                            |                                                |   |         |   |   |             | Other       |   |               | Total   |        
|                                             |                            | Common                                         |   | Paid in |   |   | Accumulated |             |   | Comprehensive |         |         | Stockholders |  
|                                             |                            | Stock                                          |   | Capital |   |   | Deficit     |             |   | Income        |         |         | Equity        |  
|                                             |                            |                                                |   |         |   |   |             |             |   |               |         |         |               |  
|                                             |                            | (In thousands)                                 |  
|Successor                                    |                            |                                                |   |         |   |   |             |             |   |               |         |         |               |   |    |   |    |   |         |        
|Balance as of August 25, 2004                |                            | $                                              |  |         |   | $ |            |             |   | $             |        |         |               | $ |   |   |    | $ |        |        
|Issuance of 1,000 shares of common stock     |                            |                                                |  |         |   |   | 215,000     |             |   |               |        |         |               |   |   |   |    |   | 215,000 |        
|                                             |                            |                                                |   |         |   |   |             |             |   |               |         |         |               |   |   
|Comprehensive income (loss)                  |                            |                                                |   |         |   |   |             |             |   |               |         |         |               |   |    |   |    |   |         |        
|                                             | Net loss (restated)        |                                                |   |        |   |   |             |            |   |               |         | (3,901  | )             |   |    |  |    |   |         | (3,901  | ) 
|                                             | Other comprehensive income |                                                |   |         |   |   |             |             |   |               |         |         |               |   |    |   |    |   |         |         |   
|                                             |                            | Unrealized gain on cash flow hedge, net of tax |   |         |  |   |             |             |  |               |         |         |              |   |    |   | 52 |   |         |         | 52 | 
|                                             |                            |                                                |   |         |   |   |             |             |   |               |         |         |               |   |   
|Total comprehensive income (loss) (restated) |                            |                                                |  |         |   |   |            |             |   |               | (3,901  | )       |               |   | 52 |   |    |   | (3,849  | )      
|                                             |                            |                                                |   |         |   |   |             |             |   |               |         |         |               |   |   
|Balance as of December 31, 2004 (restated)   |                            | $                                              |  |         |   | $ | 215,000     |             |   | $             | (3,901  | )       |               | $ | 52 |   |    | $ | 211,151 |        
|                                             |                            |                                                |   |         |   |   |             |             |   |               |         |         |               |   |   
|Comprehensive income                         |                            |                                                |   |         |   |   |             |             |   |               |         |         |               |   |    |   |    |   |         |        
|                                             | Net loss                   |                                                |   |        |   |   |             |            |   |               |         | (49,181 | )             |   |    |  |    |   |         | (49,181 | ) 
|                                             | Other comprehensive income |                                                |   |         |   |   |             |             |   |               |         |         |               |   |    |   |    |   |         |         |   
|                                             |                            | Unrealized gain on cash flow hedge, net of tax |   |         |  |   |             |             |  |               |         |         |              |   |    |   | 9  |   |         |         | 9  | 
|                                             |                            |                                                |   |         |   |   |             |             |   |               |         |         |               |   |   
|Total comprehensive income (loss)            |                            |                                                |  |         |   |   |            |             |   |               | (49,181 | )       |               |   | 9  |   |    |   | (49,172 | )      
|                                             |                            |                                                |   |         |   |   |             |             |   |               |         |         |               |   |   
|Balance as of December 31, 2005              |                            | $                                              |  |         |   | $ | 215,000     |             |   | $             | (53,082 | )       |               | $ | 61 |   |    | $ | 161,979 |        
|                                             |                            |                                                |   |         |   |   |             |             |   |               |         |         |               |   |   



73



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)





CONSOLIDATED STATEMENTS OF CASH FLOWS (SUCCESSOR)/





COMBINED STATEMENTS OF CASH FLOWS (PREDECESSOR)


|                                                                                                      |                                                   |                |         |            |              |   |          |               |            |  |               |              |         |   |   |         |        |  
|----------------------------------------------------------------------------------------------------- | ------------------------------------------------- | -------------- | ------- | ---------- | ------------ | - | -------- | ------------- | ---------- |  | ------------- | ------------ | ------- | - | - | ------- | ------ | -
|                                                                                                      |                                                   |                |         | August 25, |              |   |          | January 1,    |            |  |              
|                                                                                                      |                                                   | Year Ended     |         |            | 2004 to      |   |          |               | 2004 to    |  |               | Year Ended   |        
|                                                                                                      |                                                   | December 31,   |         |            | December 31, |   |          |               | August 24, |  |               | December 31, |        
|                                                                                                      |                                                   | 2005           |         |            | 2004         |   |          |               | 2004       |  |               | 2003         |        
|                                                                                                      |                                                   |                |         |            |              |   |          |               |            |  |               |              |        
|                                                                                                      |                                                   | (Successor)    |         |            | (Successor)  |   |          |               |            |  | (Predecessor) |             
|                                                                                                      |                                                   |                |         | (restated) |              |   |          | (Predecessor) |            |  |              
|                                                                                                      |                                                   | (In thousands) |        
|Cash provided from                                                                                    |                                                   |                |         |            |              |   |          |               |            |  |               |              |         |   |   |         |       
|Operating activities                                                                                  |                                                   |                |         |            |              |   |          |               |            |  |               |              |         |   |   |         |       
|Net income (loss) for the period                                                                      |                                                   | $              | (49,181 | )          |              | $ | (3,901   | )             |            |  | $             | 33,208       |         |   | $ | 24,996  |       
|Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities |                                                   |                |         |            |              |   |          |               |            |  |               |              |         |   |   |         |       
|                                                                                                      | Depreciation and amortization                     |                |         | 25,300     |              |   |          | 8,825         |            |  |               |              | 14,229  |   |   |         | 19,685 |  
|                                                                                                      | Amortization of deferred finance charges          |                |         | 2,943      |              |   |          | 2,499         |            |  |               |              | 363     |   |   |         | 545    |  
|                                                                                                      | Intangible asset impairment                       |                |         | 29,700     |              |   |          |              |            |  |               |              |        |   |   |         |       |  
|                                                                                                      | Goodwill impairment                               |                |         | 47,377     |              |   |          |              |            |  |               |              |        |   |   |         |       |  
|                                                                                                      | Deferred income taxes                             |                |         | (13,100    | )            |   |          | (9,162        | )          |  |               |              | (5,281  | ) |   |         | 10,048 |  
|                                                                                                      | Loss on disposal of property, plant and equipment |                |         | 68         |              |   |          |              |            |  |               |              |        |   |   |         | 147    |  
|                                                                                                      | Foreign exchange loss/ (gain)                     |                |         | 722        |              |   |          | (59           | )          |  |               |              | 525     |   |   |         | 2,356  |  
|                                                                                                      | Other                                             |                |         |           |              |   |          |              |            |  |               |              |        |   |   |         | 74     |  
|Changes in assets and liabilities                                                                     |                                                   |                |         |            |              |   |          |               |            |  |               |              |         |   |   |         |       
|                                                                                                      | Accounts receivable                               |                |         | (9,964     | )            |   |          | (12,206       | )          |  |               |              | (32,439 | ) |   |         | (6,763 | )
|                                                                                                      | Inventories                                       |                |         | 12,392     |              |   |          | 40,315        |            |  |               |              | (30,414 | ) |   |         | (878   | )
|                                                                                                      | Prepaid expenses and other current assets         |                |         | (1,718     | )            |   |          | 349           |            |  |               |              | (1,670  | ) |   |         | 669    |  
|                                                                                                      | Accounts payable and other current liabilities    |                |         | (27,667    | )            |   |          | (4,820        | )          |  |               |              | 56,774  |   |   |         | 21,348 |  
|                                                                                                      | Income taxes payable and receivable               |                |         | 3,987      |              |   |          | (2,080        | )          |  |               |              | 1,671   |   |   |         | (5,572 | )
|                                                                                                      |                                                   |                |         |            |              |   |          |               |            |  |               |              |        
|Net cash provided by operating activities                                                             |                                                   |                | 20,859  |            |              |   | 19,760   |               |            |  |               | 36,966       |         |   |   | 66,655  |       
|                                                                                                      |                                                   |                |         |            |              |   |          |               |            |  |               |              |        
|Investing activities                                                                                  |                                                   |                |         |            |              |   |          |               |            |  |               |              |         |   |   |         |       
|Acquisition of property, plant and equipment                                                          |                                                   |                | (8,448  | )          |              |   | (4,529   | )             |            |  |               | (8,194       | )       |   |   | (8,528  | )     
|Proceeds from disposals of property, plant, and equipment                                             |                                                   |                | 57      |            |              |   |         |               |            |  |               | 112          |         |   |   | 97      |       
|Acquisition of rental assets                                                                          |                                                   |                | (16,028 | )          |              |   | (4,995   | )             |            |  |               | (9,786       | )       |   |   | (10,819 | )     
|Proceeds from disposals of rental assets                                                              |                                                   |                | 10,934  |            |              |   | 3,139    |               |            |  |               | 6,393        |         |   |   | 6,180   |       
|Acquisition of intangibles  licenses                                                                 |                                                   |                |        |            |              |   |         |               |            |  |               | (123         | )       |   |   | (3,250  | )     
|Acquisition of MRO Division of Dunlop Standard Aerospace Group
    Limited, net of cash acquired      |                                                   |                |        |            |              |   | (664,011 | )             |            |  |               |             |         |   |   |        |       
|                                                                                                      |                                                   |                |         |            |              |   |          |               |            |  |               |              |        
|Net cash used in investing activities                                                                 |                                                   |                | (13,485 | )          |              |   | (670,396 | )             |            |  |               | (11,598      | )       |   |   | (16,320 | )     
|                                                                                                      |                                                   |                |         |            |              |   |          |               |            |  |               |              |        
|Financing activities                                                                                  |                                                   |                |         |            |              |   |          |               |            |  |               |              |         |   |   |         |       
|Repayment of debt                                                                                     |                                                   |                | (16,672 | )          |              |   | (40,626  | )             |            |  |               | (1,112       | )       |   |   | (14,729 | )     
|Proceeds from issuance of debt                                                                        |                                                   |                |        |            |              |   | 525,000  |               |            |  |               |             |         |   |   | 6,300   |       
|Issuance of common stock                                                                              |                                                   |                |        |            |              |   | 215,000  |               |            |  |               |             |         |   |   |        |       
|Deferred financing charges                                                                            |                                                   |                |        |            |              |   | (23,714  | )             |            |  |               |             |         |   |   |        |       
|Change in due to and (from) related companies                                                         |                                                   |                | 6,185   |            |              |   | 2,808    |               |            |  |               | (10,729      | )       |   |   | (36,659 | )     
|                                                                                                      |                                                   |                |         |            |              |   |          |               |            |  |               |              |        
|Net cash provided by (used in) financing activities                                                   |                                                   |                | (10,487 | )          |              |   | 678,468  |               |            |  |               | (11,841      | )       |   |   | (45,088 | )     
|                                                                                                      |                                                   |                |         |            |              |   |          |               |            |  |               |              |        
|Effect of exchange rate changes on cash and cash
    equivalents                                      |                                                   |                | (722    | )          |              |   | 59       |               |            |  |               | (525         | )       |   |   | (2,356  | )     
|                                                                                                      |                                                   |                |         |            |              |   |          |               |            |  |               |              |        
|Net (decrease) increase in cash and cash equivalents                                                  |                                                   |                | (3,835  | )          |              |   | 27,891   |               |            |  |               | 13,002       |         |   |   | 2,891   |       
|Cash and cash equivalents  Beginning of period                                                       |                                                   |                | 27,891  |            |              |   |         |               |            |  |               | 22,698       |         |   |   | 19,807  |       
|                                                                                                      |                                                   |                |         |            |              |   |          |               |            |  |               |              |        
|Cash and cash equivalents  End of period                                                             |                                                   | $              | 24,056  |            |              | $ | 27,891   |               |            |  | $             | 35,700       |         |   | $ | 22,698  |       
|                                                                                                      |                                                   |                |         |            |              |   |          |               |            |  |               |              |        
|Supplemental cash flow information                                                                    |                                                   |                |         |            |              |   |          |               |            |  |               |              |         |   |   |         |       
|Cash paid during the period for:                                                                      |                                                   |                |         |            |              |   |          |               |            |  |               |              |         |   |   |         |       
|                                                                                                      | Interest                                          |                | $       | 33,623     |              |   | $        | 5,117         |            |  |               | $            | 4,000   |   |   | $       | 4,544  |  
|                                                                                                      | Income taxes                                      |                |         | 11,544     |              |   |          | 9,905         |            |  |               |              | 18,234  |   |   |         | 12,920 |  



74



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)





NOTES TO FINANCIAL STATEMENTS




|  |                     
|- | --------------------
|1 | Nature of operations



| |            
| | -----------
| | Restatement



Error in Recording Loss Contract. Business
Combinations






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes to the Companys opening consolidated balance sheet
    as of the date of the Acquisition to reflect (1) an increase of
    the recorded liability related to the Loss Contract of
    $3.3 million representing the present value of the Loss
    Contract as of the date of the Acquisition (the Loss
    Contract Liability) partially offset by an increase of
    $2.1 million in the carrying value of goodwill, net of
    $1.2 million of deferred taxes.                                                                                                                                  
|
| |  | a reclassification of the Loss Contract Liability from accounts
    payable to other accrued liabilities in the amount of
    $5.5 million as of December 31, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | changes to the Companys consolidated balance sheet at the
    end of each of the restated periods to reflect (1) the
    re-measured present value of the Loss Contract Liability over
    the life of the Loss Contract; (2) reductions in the
    carrying amount of the Loss Contract Liability as costs were
    incurred in excess of the net realizable value of inventory.
    Accordingly, the restated periods reflect an increase in the
    carrying amount of the Loss Contract Liability of
    $2.1 million as of December 31, 2004.                                                          
|
| |  | changes to the Companys cost of revenues for each of the
    restated periods reflecting the elimination of the actual losses
    recognized prior to the identification of the error and charges
    to non-cash interest expense reflecting the present value
    accretion associated with the Loss Contract Liability.
    Accordingly, the restated periods reflect: (1) reduction in cost
    of revenues in the amount of $2.6 million for the period
    ended December 31, 2004, and (2) increase in interest
    expense in the amount of $0.3 million for the period ended
    December 31, 2004.

75



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)


Accounts Receivable Error.






| |   |                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes to the Companys consolidated balance sheets to
    reflect the elimination of approximately $1.5 million in
    overstated accounts receivable at December 31, 2004;                                                   
|
| |  | a $1.5 million increase in the Companys cost of
    revenues for the period ended December 31, 2004 reflecting
    the elimination of the overstated accounts receivable at period
    end; and                                
|
| |  | a credit of $0.6 million to the Companys income tax
    expense for the period ended December 31, 2004 reflecting
    the income tax effect of the decrease in operating income caused
    by the increase in cost of revenues.

Other adjustments.




76



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




|                                            |  |                    |         |   |             |   |         |  
|------------------------------------------- |  | ------------------ | ------- | - | ----------- | - | ------- | -
|                                            |  | August 25, 2004 to |        
|                                            |  | December 31, 2004  |        
|                                            |  |                    |        
|                                            |  | As Previously      |         |   |            
|                                            |  | Reported           |         |   | As Restated |  
|                                            |  |                    |         |   |             |  
|Cost of revenues                            |  | $                  | 251,099 |   |             | $ | 249,710 |  
|Selling, general and administrative expense |  |                    | 20,964  |   |             |   | 20,974  |  
|Total operating expenses                    |  |                    | 275,325 |   |             |   | 273,946 |  
|Income from operations                      |  |                    | 8,791   |   |             |   | 10,170  |  
|Interest expense                            |  |                    | 13,706  |   |             |   | 14,005  |  
|Loss before income taxes                    |  |                    | (4,915  | ) |             |   | (3,835  | )
|Income tax expense (benefit)                |  |                    | (233    | ) |             |   | 66      |  
|Loss                                        |  | $                  | (4,682  | ) |             | $ | (3,901  | )

|                                           |  |                   |         |   |             |   |         |  
|------------------------------------------ |  | ----------------- | ------- | - | ----------- | - | ------- | -
|                                           |  | December 31, 2004 |        
|                                           |  |                   |        
|                                           |  | As Previously     |         |   |            
|                                           |  | Reported          |         |   | As Restated |  
|                                           |  |                   |         |   |             |  
|ASSETS                                     |  |                   |         |   |             |   |         |  
|Accounts receivable, net                   |  | $                 | 111,992 |   |             | $ | 110,492 |  
|Inventories                                |  |                   | 146,875 |   |             |   | 146,403 |  
|Total current assets                       |  |                   | 306,433 |   |             |   | 304,461 |  
|Deferred income taxes  long-term          |  |                   | 3,856   |   |             |   | 5,197   |  
|Property, plant and equipment, net         |  |                   | 136,140 |   |             |   | 136,439 |  
|Goodwill                                   |  |                   | 240,490 |   |             |   | 242,570 |  
|Total assets                               |  | $                 | 945,414 |   |             | $ | 947,162 |  
|LIABILITIES AND STOCKHOLDERS EQUITY       |  |                   |         |   |             |   |         |  
|Accounts payable                           |  | $                 | 106,419 |   |             | $ | 102,423 |  
|Other accrued liabilities                  |  |                   | 24,015  |   |             |   | 28,498  |  
|Income taxes payable                       |  |                   | 8,608   |   |             |   | 8,980   |  
|Total current liabilities                  |  |                   | 163,261 |   |             |   | 164,120 |  
|Deferred income taxes  long-term          |  |                   | 84,522  |   |             |   | 84,630  |  
|Total liabilities                          |  |                   | 735,044 |   |             |   | 736,011 |  
|Accumulated deficit                        |  |                   | (4,682  | ) |             |   | (3,901  | )
|Total stockholders equity                 |  |                   | 210,370 |   |             |   | 211,151 |  
|Total liabilities and stockholders equity |  | $                 | 945,414 |   |             | $ | 947,162 |  



77



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




| |            
| | -----------
| | The Company



|                                        |  |               |             | 
|--------------------------------------- |  | ------------- | ----------- | 
|                                        |  | Country of    |            
|Name                                    |  | Incorporation |            
|                                        |  |               |            
|Standard Aero, Inc.                     |  |               | USA         | 
|Standard Aero (US) Inc.                 |  |               | USA         | 
|Standard Aero (San Antonio) Inc.        |  |               | USA         | 
|Standard Aero (Alliance) Inc.           |  |               | USA         | 
|Standard Aero (US) Legal Inc.           |  |               | USA         | 
|Standard Aero Materials Inc.            |  |               | USA         | 
|Standard Aero Canada Inc.               |  |               | USA         | 
|Standard Aero de Mexico                 |  |               | Mexico      | 
|Standard Aero Limited                   |  |               | Canada      | 
|Not FM Canada Inc.                      |  |               | Canada      | 
|3091781 Nova Scotia Company             |  |               | Canada      | 
|3091782 Nova Scotia Company             |  |               | Canada      | 
|3091783 Nova Scotia Company             |  |               | Canada      | 
|Standard Aero (Australia) Pty Limited   |  |               | Australia   | 
|Standard Aero International Pty Limited |  |               | Australia   | 
|Standard Aero (Asia) Pte Limited        |  |               | Singapore   | 
|Standard Aero BV                        |  |               | Netherlands | 
|Standard Aero (Netherlands) BV          |  |               | Netherlands | 





| |                
| | ---------------
| | The Acquisition





78



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)










| |            
| | -----------
| | Predecessor



|                                                                                       |  |               |             | 
|-------------------------------------------------------------------------------------- |  | ------------- | ----------- | 
|                                                                                       |  | Country of    |            
|Name                                                                                   |  | Incorporation |            
|                                                                                       |  |               |            
|Standard Aero, Inc.                                                                    |  |               | USA         | 
|Standard Aero (San Antonio) Inc.                                                       |  |               | USA         | 
|Standard Aero (Alliance) Inc.                                                          |  |               | USA         | 
|Standard Aero Limited                                                                  |  |               | Canada      | 
|Standard Aero de Mexico                                                                |  |               | Mexico      | 
|Standard Aero (Australia) Pty Limited                                                  |  |               | Australia   | 
|Standard Aero International Pty Limited                                                |  |               | Australia   | 
|Standard Aero BV                                                                       |  |               | Netherlands | 
|Standard Aero (Asia) Pte Limited                                                       |  |               | Singapore   | 
|Standard Aero (Netherlands) BV (formerly Dunlop Standard
    Aerospace (Nederland) BV) |  |               | Netherlands | 
|Standard Aero (US) Legal Inc. (formerly Dunlop Standard
    Aerospace (US) Legal Inc.) |  |               | USA         | 
|Standard Aero Materials Inc. (formerly Dunlop Aerospace Parts
    Inc.)                |  |               | USA         | 
|Not FM Canada Inc.                                                                     |  |               | Canada      | 
|Standard Aerospace BV                                                                  |  |               | Netherlands | 
|Standard Aero vof                                                                      |  |               | Netherlands | 

79



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)








|  |                                           
|- | ------------------------------------------
|2 | Summary of significant accounting policies





| |                               
| | ------------------------------
| | a) Principles of consolidation





| |                                     
| | ------------------------------------
| | b) Translation of foreign currencies





| |                               
| | ------------------------------
| | c) Use of accounting estimates



80



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




| |                       
| | ----------------------
| | d) Revenue recognition











| |                             
| | ----------------------------
| | e) Cash and cash equivalents





| |                       
| | ----------------------
| | f) Accounts receivable





| |               
| | --------------
| | g) Inventories

first-in,




| |                                 
| | --------------------------------
| | h) Property, plant and equipment



81



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)






| |   |                                                                                                
| | - | -----------------------------------------------------------------------------------------------
| |  | Buildings  20 to 40 years;                                                                    
|
| |  | Computer hardware and software  3 to 5 years;                                                 
|
| |  | Machinery and equipment  4 to 13 years;                                                       
|
| |  | Leasehold improvements  shorter of economic life or
    term of the lease  3 to 10 years; and
|
| |  | Rental engines  based on hours flown                                                          





| |                                   
| | ----------------------------------
| | i) Impairment of long-lived assets





| |                                  
| | ---------------------------------
| | j) Goodwill and intangible assets





|                                |  |               |  |               
|------------------------------- |  | ------------- |  | --------------
|                                |  | Successor     |  | Predecessor   
|                                |  |               |  |               
|Customer relationships          |  | 1 to 20 years |  | 13 to 40 years
|OEM authorizations and licenses |  | 4 to 17 years |  | 3 to 10 years 
|Technology and other            |  | 5 years       |  |              



| |                
| | ---------------
| | k) Income taxes



82



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)






| |                                      
| | -------------------------------------
| | l) Provision for unfavorable contract

Business Combinations




| |          
| | ---------
| | m) Leases





| |                                                             
| | ------------------------------------------------------------
| | n) Pension, post-retirement and post-employment
    benefits







| |                  
| | -----------------
| | o) Warranty costs





| |                            
| | ---------------------------
| | p) Share-based compensation



83



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




| |                                    
| | -----------------------------------
| | q) Derivative financial instruments



marked-to




| |                            
| | ---------------------------
| | r) Deferred finance charges





| |                            
| | ---------------------------
| | s) New accounting standards







84



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




|  |            
|- | -----------
|3 | Inventories

|                |  |                |         |            |      |   |         | 
|--------------- |  | -------------- | ------- | ---------- | ---- | - | ------- | 
|                |  | December 31,   |        
|                |  |                |        
|                |  | 2005           |         |            | 2004 |  
|                |  |                |         |            |      |  
|                |  |                |         | (restated) |     
|                |  | (In thousands) |        
|Raw materials   |  | $              | 66,241  |            |      | $ | 74,897  | 
|Work in process |  |                | 67,770  |            |      |   | 71,506  | 
|                |  |                |         |            |      |  
|                |  | $              | 134,011 |            |      | $ | 146,403 | 
|                |  |                |         |            |      |  



|  |                              
|- | -----------------------------
|4 | Property, plant and equipment

|                                    |  |                |         |            |      |   |         |  
|----------------------------------- |  | -------------- | ------- | ---------- | ---- | - | ------- | -
|                                    |  | December 31,   |        
|                                    |  |                |        
|                                    |  | 2005           |         |            | 2004 |  
|                                    |  |                |         |            |      |  
|                                    |  |                |         | (restated) |     
|                                    |  | (In thousands) |        
|Land                                |  | $              | 3,745   |            |      | $ | 3,745   |  
|Buildings                           |  |                | 36,989  |            |      |   | 35,341  |  
|Leasehold improvements              |  |                | 3,179   |            |      |   | 2,727   |  
|Machinery and equipment             |  |                | 74,001  |            |      |   | 58,336  |  
|Rental engines                      |  |                | 35,693  |            |      |   | 30,606  |  
|Construction in progress            |  |                | 712     |            |      |   | 10,239  |  
|                                    |  |                |         |            |      |  
|                                    |  |                | 154,319 |            |      |   | 140,994 |  
|Less: Accumulated depreciation      |  |                | (17,351 | )          |      |   | (4,555  | )
|                                    |  |                |         |            |      |  
|Property, plant and equipment  net |  | $              | 136,968 |            |      | $ | 136,439 |  
|                                    |  |                |         |            |      |  







85



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




|  |                               
|- | ------------------------------
|5 | Goodwill and intangible assets



|                                    |                                 |                |         |        |              |   |        |            |  |     |         |         |   |   |         |        | 
|----------------------------------- | ------------------------------- | -------------- | ------- | ------ | ------------ | - | ------ | ---------- |  | --- | ------- | ------- | - | - | ------- | ------ | 
|                                    |                                 | Gross Carrying |         |        | Accumulated  |   |        |            |  | Net |        
|At December 31, 2005                |                                 | Amount         |         |        | Amortization |   |        | Impairment |  |     | Balance |        
|                                    |                                 |                |         |        |              |   |        |            |  |     |         |        
|                                    |                                 | (In thousands) |        
|Definite lived intangible assets:   |                                 |                |         |        |              |   |        |            |  |     |         |         |   |   |         |       
|                                    | Customer relationships          |                | $       | 98,000 |              |   | $      | 10,540     |  |     | $       |        |   |   | $       | 87,460 | 
|                                    | OEM authorizations and licenses |                |         | 38,350 |              |   |        | 4,035      |  |     |         |        |   |   |         | 34,315 | 
|                                    | Technology and other            |                |         | 7,900  |              |   |        | 2,107      |  |     |         |        |   |   |         | 5,793  | 
|                                    |                                 |                |         |        |              |   |        |            |  |     |         |        
|                                    |                                 |                | 144,250 |        |              |   | 16,682 |            |  |     |         |         |   |   | 127,568 |       
|Indefinite lived intangible assets: |                                 |                |         |        |              |   |        |            |  |     |         |         |   |   |         |       
|                                    | Trademarks                      |                |         | 97,300 |              |   |        |           |  |     |         | (29,700 | ) |   |         | 67,600 | 
|                                    |                                 |                |         |        |              |   |        |            |  |     |         |        
|Total intangible assets             |                                 | $              | 241,550 |        |              | $ | 16,682 |            |  | $   | (29,700 | )       |   | $ | 195,168 |       
|                                    |                                 |                |         |        |              |   |        |            |  |     |         |        

|                                    |                                 |                |         |        |              |   |       |            |  |         |   |   |  |   |         |        | 
|----------------------------------- | ------------------------------- | -------------- | ------- | ------ | ------------ | - | ----- | ---------- |  | ------- | - | - |  | - | ------- | ------ | 
|                                    |                                 | Gross Carrying |         |        | Accumulated  |   |       |            |  | Net     |  
|At December 31, 2004                |                                 | Amount         |         |        | Amortization |   |       | Impairment |  | Balance |  
|                                    |                                 |                |         |        |              |   |       |            |  |         |  
|Definite lived intangible assets:   |                                 |                |         |        |              |   |       |            |  |         |   |   |  |   |         |       
|                                    | Customer relationships          |                | $       | 98,000 |              |   | $     | 2,735      |  |         | $ |  |  |   | $       | 95,265 | 
|                                    | OEM authorizations and licenses |                |         | 38,350 |              |   |       | 1,008      |  |         |   |  |  |   |         | 37,342 | 
|                                    | Technology and other            |                |         | 7,900  |              |   |       | 527        |  |         |   |  |  |   |         | 7,373  | 
|                                    |                                 |                |         |        |              |   |       |            |  |         |   |  
|                                    |                                 |                | 144,250 |        |              |   | 4,270 |            |  |         |  |   |  |   | 139,980 |       
|Indefinite lived intangible assets: |                                 |                |         |        |              |   |       |            |  |         |   |   |  |   |         |       
|                                    | Trademarks                      |                |         | 97,300 |              |   |       |           |  |         |   |  |  |   |         | 97,300 | 
|                                    |                                 |                |         |        |              |   |       |            |  |         |   |  
|Total intangible assets             |                                 | $              | 241,550 |        |              | $ | 4,270 |            |  | $       |  |   |  | $ | 237,280 |       
|                                    |                                 |                |         |        |              |   |       |            |  |         |   |  







|               |  |   |        | 
|-------------- |  | - | ------ | 
|(in thousands) |  |  
|2006           |  | $ | 11,611 | 
|2007           |  | $ | 11,611 | 
|2008           |  | $ | 11,610 | 
|2009           |  | $ | 10,179 | 
|2010           |  | $ | 7,105  | 

86



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




|                                                        |  |                    |         |   |            |   |       |  |  |   |         |  
|------------------------------------------------------- |  | ------------------ | ------- | - | ---------- | - | ----- |  |  | - | ------- | -
|                                                        |  | Aviation           |         |   |            |   |      
|                                                        |  | Maintenance Repair |         |   | Enterprise |   |      
|                                                        |  | and Overhaul       |         |   | Services   |   | Total | 
|                                                        |  |                    |         |   |            |   |       | 
|                                                        |  | (In thousands)     |        
|Balance as of August 25, 2004 (restated)                |  | $                  | 242,570 |   |            | $ |      |  |  | $ | 242,570 |  
|                                                        |  |                    |         |   |            |   |       |  | 
|Balance as of December 31, 2004 (restated)              |  | $                  | 242,570 |   |            | $ |      |  |  | $ | 242,570 |  
|Impairment losses                                       |  |                    | (47,377 | ) |            |   |      |  |  |   | (47,377 | )
|Reallocated from pre-acquisition contingent liabilities |  |                    | (2,892  | ) |            |   |      |  |  |   | (2,892  | )
|                                                        |  |                    |         |   |            |   |       |  | 
|Balance as of December 31, 2005                         |  | $                  | 192,301 |   |            | $ |      |  |  | $ | 192,301 |  
|                                                        |  |                    |         |   |            |   |       |  | 



two-step




|  |               
|- | --------------
|6 | Long-term debt



|                                 |  |                |         |  |      |   |         | 
|-------------------------------- |  | -------------- | ------- |  | ---- | - | ------- | 
|                                 |  | December 31,   |        
|                                 |  |                |        
|                                 |  | 2005           |         |  | 2004 |  
|                                 |  |                |         |  |      |  
|                                 |  | (In thousands) |        
|Term loans                       |  | $              | 270,000 |  |      | $ | 285,000 | 
|Senior subordinated notes        |  |                | 200,000 |  |      |   | 200,000 | 
|Obligations under capital leases |  |                | 2,574   |  |      |   | 4,246   | 
|                                 |  |                |         |  |      |  
|                                 |  |                | 472,574 |  |      |   | 489,246 | 
|Less: Current portion            |  |                | 2,574   |  |      |   | 1,985   | 
|                                 |  |                |         |  |      |  
|Long-term debt                   |  | $              | 470,000 |  |      | $ | 487,261 | 
|                                 |  |                |         |  |      |  



87



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)










|                     |  |                |       |  |      |   |         |       |  |   |         | 
|-------------------- |  | -------------- | ----- |  | ---- | - | ------- | ----- |  | - | ------- | 
|                     |  | Capital Leases |       |  | Debt |   |         | Total | 
|                     |  |                |       |  |      |   |         |       | 
|                     |  | (In thousands) |      
|2006                 |  | $              | 2,574 |  |      | $ |        |       |  | $ | 2,574   | 
|2007                 |  |                |      |  |      |   |        |       |  |   |        | 
|2008                 |  |                |      |  |      |   |        |       |  |   |        | 
|2009                 |  |                |      |  |      |   |        |       |  |   |        | 
|2010                 |  |                |      |  |      |   |        |       |  |   |        | 
|Thereafter           |  |                |      |  |      |   | 470,000 |       |  |   | 470,000 | 
|                     |  |                |       |  |      |   |         |       | 
|Total long-term debt |  | $              | 2,574 |  |      | $ | 470,000 |       |  | $ | 472,574 | 
|                     |  |                |       |  |      |   |         |       | 







88



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




|  |              
|- | -------------
|7 | Restructuring





|  |                              
|- | -----------------------------
|8 | Commitments and contingencies



| |            
| | -----------
| | Commitments





|                              |  |                |        | 
|----------------------------- |  | -------------- | ------ | 
|                              |  | (In thousands) |       
|2006                          |  | $              | 7,810  | 
|2007                          |  |                | 1,642  | 
|2008                          |  |                | 586    | 
|2009                          |  |                | 291    | 
|2010                          |  |                | 284    | 
|Thereafter                    |  |                | 1,101  | 
|                              |  |                |       
|Total future minimum payments |  | $              | 11,714 | 
|                              |  |                |       





| |                       
| | ----------------------
| | Contingent liabilities





89



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




| |                                 
| | --------------------------------
| | Kelly Air Force Base Subcontract













|  |             
|- | ------------
|9 | Income taxes



|                             |               |                |         |            |              |   |        |            |               |  |   |               |        |   |   |        |        |  
|---------------------------- | ------------- | -------------- | ------- | ---------- | ------------ | - | ------ | ---------- | ------------- |  | - | ------------- | ------ | - | - | ------ | ------ | -
|                             |               |                |         | August 25, |              |   |        | January 1, |               |  |  
|                             |               | Year Ended     |         |            | 2004 to      |   |        |            | 2004 to       |  |   | Year Ended    |       
|                             |               | December 31,   |         |            | December 31, |   |        |            | August 24,    |  |   | December 31,  |       
|                             |               | 2005           |         |            | 2004         |   |        |            | 2004          |  |   | 2003          |       
|                             |               |                |         |            |              |   |        |            |               |  |   |               |       
|                             |               | (Successor)    |         |            | (Successor)  |   |        |            | (Predecessor) |  |   | (Predecessor) |       
|                             |               |                |         | (restated) |              |   |        |            |               | 
|                             |               | (In thousands) |        
|Current                      |               |                |         |            |              |   |        |            |               |  |   |               |        |   |   |        |       
|                             | United States |                | $       | 12,217     |              |   | $      | 5,412      |               |  |   | $             | 21,034 |   |   | $      | 9,600  |  
|                             | Canada        |                |         | 370        |              |   |        | 4,468      |               |  |   |               | 692    |   |   |        | (4,217 | )
|                             | Other         |                |         | 215        |              |   |        | (652       | )             |  |   |               | (623   | ) |   |        | (268   | )
|                             |               |                |         |            |              |   |        |            |               |  |   |               |       
|Total current                |               |                | 12,802  |            |              |   | 9,228  |            |               |  |   | 21,103        |        |   |   | 5,115  |       
|                             |               |                |         |            |              |   |        |            |               |  |   |               |       
|Deferred                     |               |                |         |            |              |   |        |            |               |  |   |               |        |   |   |        |       
|                             | United States |                |         | (8,147     | )            |   |        | (3,492     | )             |  |   |               | (2,097 | ) |   |        | 4,452  |  
|                             | Canada        |                |         | (3,243     | )            |   |        | (4,841     | )             |  |   |               | (2,246 | ) |   |        | 4,989  |  
|                             | Other         |                |         | (1,710     | )            |   |        | (829       | )             |  |   |               | (938   | ) |   |        | 607    |  
|                             |               |                |         |            |              |   |        |            |               |  |   |               |       
|Total deferred               |               |                | (13,100 | )          |              |   | (9,162 | )          |               |  |   | (5,281        | )      |   |   | 10,048 |       
|                             |               |                |         |            |              |   |        |            |               |  |   |               |       
|Income tax expense (benefit) |               | $              | (298    | )          |              | $ | 66     |            |               |  | $ | 15,822        |        |   | $ | 15,163 |       
|                             |               |                |         |            |              |   |        |            |               |  |   |               |       

90



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)






|                                  |  |                |         |            |              |   |        |            |               |  |   |               |   |  |   |        | 
|--------------------------------- |  | -------------- | ------- | ---------- | ------------ | - | ------ | ---------- | ------------- |  | - | ------------- | - |  | - | ------ | 
|                                  |  |                |         | August 25, |              |   |        | January 1, |               |  |  
|                                  |  | Year Ended     |         |            | 2004 to      |   |        |            | 2004 to       |  |   | Year Ended    |  
|                                  |  | December 31,   |         |            | December 31, |   |        |            | August 24,    |  |   | December 31,  |  
|                                  |  | 2005           |         |            | 2004         |   |        |            | 2004          |  |   | 2003          |  
|                                  |  |                |         |            |              |   |        |            |               |  |   |               |  
|                                  |  | (Successor)    |         |            | (Successor)  |   |        |            | (Predecessor) |  |   | (Predecessor) |  
|                                  |  |                |         | (restated) |              |   |        |            |               | 
|                                  |  | (In thousands) |        
|United States                     |  | $              | (37,408 | )          |              | $ | 8,573  |            |               |  | $ | 51,024        |   |  | $ | 39,706 | 
|Canada                            |  |                | (10,616 | )          |              |   | (6,336 | )          |               |  |   | 2,772         |   |  |   | 66     | 
|Other                             |  |                | (1,455  | )          |              |   | (6,072 | )          |               |  |   | (4,766        | ) |  |   | 387    | 
|                                  |  |                |         |            |              |   |        |            |               |  |   |               |  
|Income (loss) before income taxes |  | $              | (49,479 | )          |              | $ | (3,835 | )          |               |  | $ | 49,030        |   |  | $ | 40,159 | 
|                                  |  |                |         |            |              |   |        |            |               |  |   |               |  



|                                                   |                              |                |         |            |              |   |        |    |                 |  |   |               |        |  |   |        |        | 
|-------------------------------------------------- | ---------------------------- | -------------- | ------- | ---------- | ------------ | - | ------ | -- | --------------- |  | - | ------------- | ------ |  | - | ------ | ------ | 
|                                                   |                              |                |         | August 25, |              |   |        |    |                 | 
|                                                   |                              | Year Ended     |         |            | 2004 to      |   |        |    | January 1,      |  |   | Year Ended    |       
|                                                   |                              | December 31,   |         |            | December 31, |   |        |    | 2004 to         |  |   | December 31,  |       
|                                                   |                              | 2005           |         |            | 2004         |   |        |    | August 24, 2004 |  |   | 2003          |       
|                                                   |                              |                |         |            |              |   |        |    |                 |  |   |               |       
|                                                   |                              | (Successor)    |         |            | (Successor)  |   |        |    | (Predecessor)   |  |   | (Predecessor) |       
|                                                   |                              |                |         | (restated) |              |   |        |    |                 | 
|                                                   |                              | (In thousands) |        
|Income tax expense at the US statutory rate of 35% |                              | $              | (17,318 | )          |              | $ | (1,342 | )  |                 |  | $ | 17,161        |        |  | $ | 14,056 |       
|State taxes, net                                   |                              |                | 936     |            |              |   | 522    |    |                 |  |   | 1,621         |        |  |   | 1,195  |       
|Effect of foreign income tax rates                 |                              |                | 2,564   |            |              |   | 847    |    |                 |  |   | (2,499        | )      |  |   | (963   | )     
|Change in income tax rates                         |                              |                | (816    | )          |              |   |       |    |                 |  |   |              |        |  |   |       |       
|Non-taxable income                                 |                              |                | (1,211  | )          |              |   | (1,677 | )  |                 |  |   |              |        |  |   |        |       
|Foreign exchange                                   |                              |                | (1,216  | )          |              |   | 1,375  |    |                 |  |   | (172          | )      |  |   |        |       
|Non-deductible expenses                            |                              |                | 142     |            |              |   | 208    |    |                 |  |   | 123           |        |  |   | 532    |       
|Goodwill impairment                                |                              |                | 16,582  |            |              |   |       |    |                 |  |   |              |        |  |   |       |       
|Valuation allowance                                |                              |                | 299     |            |              |   | 94     |    |                 |  |   | 155           |        |  |   | 217    |       
|Tax credits                                        |                              |                | (1,518  | )          |              |   |       |    |                 |  |   |              |        |  |   |       |       
|Change in tax reserves                             |                              |                | 1,745   |            |              |   |       |    |                 |  |   |              |        |  |   |       |       
|Other, net                                         |                              |                | (487    | )          |              |   | 39     |    |                 |  |   | (567          | )      |  |   | 126    |       
|                                                   |                              |                |         |            |              |   |        |    |                 |  |   |               |       
|                                                   | Income tax expense (benefit) |                | $       | (298       | )            |   | $      | 66 |                 |  |   | $             | 15,822 |  |   | $      | 15,163 | 
|                                                   |                              |                |         |            |              |   |        |    |                 |  |   |               |       

91



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




| |                                  
| | ---------------------------------
| | Composition of deferred tax items

|                                                   |                                  |                |         |            |      |   |         |         |  
|-------------------------------------------------- | -------------------------------- | -------------- | ------- | ---------- | ---- | - | ------- | ------- | -
|                                                   |                                  | December 31,   |        
|                                                   |                                  |                |        
|                                                   |                                  | 2005           |         |            | 2004 |  
|                                                   |                                  |                |         |            |      |  
|                                                   |                                  |                |         | (restated) |     
|                                                   |                                  | (In thousands) |        
|Deferred tax assets consist of the following:      |                                  |                |         |            |      |   |         |        
|                                                   | Accounts receivable              |                | $       | 35         |      |   | $       | 72      |  
|                                                   | Inventories                      |                |         | 41         |      |   |         | 104     |  
|                                                   | Property, plant and equipment    |                |         | 2,972      |      |   |         | 3,478   |  
|                                                   | Accrued interest                 |                |         | 17         |      |   |         | 68      |  
|                                                   | Other provisions                 |                |         | 2,415      |      |   |         | 3,707   |  
|                                                   | Onerous contract                 |                |         | 448        |      |   |         | 1,341   |  
|                                                   | Income included for tax purposes |                |         |           |      |   |         | 168     |  
|                                                   | Deferred financing costs         |                |         |           |      |   |         | 377     |  
|                                                   | Tax credits                      |                |         | 871        |      |   |         | 509     |  
|                                                   | Foreign exchange loss            |                |         | 220        |      |   |         |        |  
|                                                   | Tax losses carryforward          |                |         | 5,235      |      |   |         | 1,078   |  
|                                                   |                                  |                |         |            |      |  
|                                                   |                                  |                | 12,254  |            |      |   | 10,902  |        
|                                                   | Valuation allowance              |                |         | (1,927     | )    |   |         | (1,587  | )
|                                                   |                                  |                |         |            |      |  
|Deferred tax assets                                |                                  |                | 10,327  |            |      |   | 9,315   |        
|                                                   |                                  |                |         |            |      |  
|Deferred tax liabilities consist of the following: |                                  |                |         |            |      |   |         |        
|                                                   | Property, plant and equipment    |                |         | (15,182    | )    |   |         | (15,422 | )
|                                                   | Intangibles                      |                |         | (55,928    | )    |   |         | (68,426 | )
|                                                   | Deferred financing costs         |                |         | (276       | )    |   |         |        |  
|                                                   | Other                            |                |         | (1,156     | )    |   |         | (782    | )
|                                                   |                                  |                |         |            |      |  
|Deferred tax liabilities                           |                                  |                | (72,542 | )          |      |   | (84,630 | )      
|                                                   |                                  |                |         |            |      |  
|Net deferred tax liability                         |                                  | $              | (62,215 | )          |      | $ | (75,315 | )      
|                                                   |                                  |                |         |            |      |  



92



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




|               |  |   |     | 
|-------------- |  | - | --- | 
|(in thousands) |  |   |     | 
|2007           |  | $ | 131 | 
|2008           |  |   | 419 | 
|2009           |  |   | 179 | 
|2013           |  |   | 72  | 
|2014           |  |   | 40  | 
|2015           |  |   | 129 | 
|               |  |   |    
|Total          |  | $ | 970 | 
|               |  |   |    





|   |                           
|-- | --------------------------
|10 | Related party transactions



| |                       
| | ----------------------
| | Successor transactions







| |                         
| | ------------------------
| | Predecessor transactions





|                            |  |                |       |   |              |   |       |  
|--------------------------- |  | -------------- | ----- | - | ------------ | - | ----- | -
|                            |  | January 1,     |       |   |             
|                            |  | 2004 to        |       |   | Year Ended   |  
|                            |  | August 24,     |       |   | December 31, |  
|                            |  | 2004           |       |   | 2003         |  
|                            |  |                |       |   |              |  
|                            |  | (In thousands) |      
|Management cost allocations |  | $              | 2,602 |   |              | $ | 3,412 |  
|Interest expense            |  |                | 181   |   |              |   | 550   |  
|Interest revenue            |  |                | (398  | ) |              |   | (337  | )



93



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)






|                                                       |  |                |         |   |                |   |         |  
|------------------------------------------------------ |  | -------------- | ------- | - | -------------- | - | ------- | -
|                                                       |  | August 24,     |         |   | December 31,   |  
|                                                       |  | 2004           |         |   | 2003           |  
|                                                       |  |                |         |   |                |  
|                                                       |  | (In thousands) |         |   | (In thousands) |  
|Amounts due from affiliates                            |  | $              | (25,628 | ) |                | $ | (15,308 | )
|Amounts due to affiliates                              |  |                | 6,266   |   |                |   | 6,736   |  
|Amounts due to Dunlop Standard Aerospace Group Limited |  |                | 4,889   |   |                |   | 4,828   |  





|   |                       
|-- | ----------------------
|11 | Employee benefit plans









|                                             |  |                |      |            |              |   |     |            |               |  |   |               |   |  |   |     |  
|-------------------------------------------- |  | -------------- | ---- | ---------- | ------------ | - | --- | ---------- | ------------- |  | - | ------------- | - |  | - | --- | -
|                                             |  |                |      | August 25, |              |   |     | January 1, |               |  |  
|                                             |  | Year Ended     |      |            | 2004 to      |   |     |            | 2004 to       |  |   | Year Ended    |  
|                                             |  | December 31,   |      |            | December 31, |   |     |            | August 24,    |  |   | December 31,  |  
|                                             |  | 2005           |      |            | 2004         |   |     |            | 2004          |  |   | 2003          |  
|                                             |  |                |      |            |              |   |     |            |               |  |   |               |  
|                                             |  | (Successor)    |      |            | (Successor)  |   |     |            | (Predecessor) |  |   | (Predecessor) |  
|                                             |  | (In thousands) |     
|Service cost  net of employee contributions |  | $              | 280  |            |              | $ | 85  |            |               |  | $ | 170           |   |  | $ | 243 |  
|Interest costs                               |  |                | 147  |            |              |   | 42  |            |               |  |   | 84            |   |  |   | 97  |  
|Expected return on plan assets               |  |                | (141 | )          |              |   | (38 | )          |               |  |   | (75           | ) |  |   | (93 | )
|Amortization of unrecognized net losses      |  |                |     |            |              |   |    |            |               |  |   |              |   |  |   | 25  |  
|                                             |  |                |      |            |              |   |     |            |               |  |   |               |  
|Net pension expense                          |  | $              | 286  |            |              | $ | 89  |            |               |  | $ | 179           |   |  | $ | 272 |  
|                                             |  |                |      |            |              |   |     |            |               |  |   |               |  

94



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




| |            
| | -----------
| | Assumptions



|                              |  |              |      |      |  |  |      |  
|----------------------------- |  | ------------ | ---- | ---- |  |  | ---- | -
|                              |  | December 31,
|                              |  |             
|                              |  | 2005         |      | 2004
|                              |  |              |      |     
|Discount rate                 |  |              | 5.00 | %    |  |  | 6.00 | %
|Rate of compensation increase |  |              | 3.50 | %    |  |  | 3.50 | %



|                                                 |  |              |      |              |  |  |               |   |               |  |  |      |   |  |  |      |  
|------------------------------------------------ |  | ------------ | ---- | ------------ |  |  | ------------- | - | ------------- |  |  | ---- | - |  |  | ---- | -
|                                                 |  |              |      | August 25,   |  |  | January 1,    |   |              
|                                                 |  | Year Ended   |      | 2004 to      |  |  | 2004 to       |   | Year Ended   
|                                                 |  | December 31, |      | December 31, |  |  | August 24,    |   | December 31, 
|                                                 |  | 2005         |      | 2004         |  |  | 2004          |   | 2003         
|                                                 |  |              |      |              |  |  |               |   |              
|                                                 |  | (Successor)  |      | (Successor)  |  |  | (Predecessor) |   | (Predecessor)
|Discount rate                                    |  |              | 6.00 | %            |  |  | 6.25          | % |               |  |  | 6.25 | % |  |  | 6.25 | %
|Expected long-term rate of return on plan assets |  |              | 6.25 | %            |  |  | 6.25          | % |               |  |  | 6.25 | % |  |  | 6.25 | %
|Rate of compensation increase                    |  |              | 3.50 | %            |  |  | 4.00          | % |               |  |  | 4.00 | % |  |  | 4.00 | %





95



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




|                                              |  |                |       |   |      |   |       |  
|--------------------------------------------- |  | -------------- | ----- | - | ---- | - | ----- | -
|                                              |  | December 31,   |      
|                                              |  |                |      
|Defined benefit plans                         |  | 2005           |       |   | 2004 |  
|                                              |  |                |       |   |      |  
|                                              |  | (In thousands) |      
|Change in benefit obligation                  |  |                |       |   |      |   |       |  
|Benefit obligation  beginning of year        |  | $              | 2,285 |   |      | $ | 2,132 |  
|Service costs                                 |  |                | 280   |   |      |   | 85    |  
|Interest cost                                 |  |                | 147   |   |      |   | 42    |  
|Actuarial loss                                |  |                | 603   |   |      |   | 12    |  
|Benefits paid                                 |  |                | (192  | ) |      |   | (43   | )
|Foreign currency adjustment                   |  |                | 112   |   |      |   | 57    |  
|                                              |  |                |       |   |      |  
|Benefit obligation  end of year              |  |                | 3,235 |   |      |   | 2,285 |  
|                                              |  |                |       |   |      |  
|Change in plan assets                         |  |                |       |   |      |   |       |  
|Fair value of plan assets  beginning of year |  |                | 2,204 |   |      |   | 2,033 |  
|Actual return on plan assets                  |  |                | 237   |   |      |   | 45    |  
|Employer contributions                        |  |                | 338   |   |      |   | 106   |  
|Benefits paid                                 |  |                | (192  | ) |      |   | (43   | )
|Foreign currency adjustment                   |  |                | 90    |   |      |   | 63    |  
|                                              |  |                |       |   |      |  
|Fair value of plan assets  end of year       |  |                | 2,677 |   |      |   | 2,204 |  
|                                              |  |                |       |   |      |  
|Funded status of the plans                    |  |                | (558  | ) |      |   | (81   | )
|Unrecognized net actuarial losses             |  |                | 518   |   |      |   | (11   | )
|                                              |  |                |       |   |      |  
|Accrued pension liability                     |  | $              | (40   | ) |      | $ | (92   | )
|                                              |  |                |       |   |      |  





|               |                   |              |     |    |        |  |     |            |   |  |     |    |  
|-------------- | ----------------- | ------------ | --- | -- | ------ |  | --- | ---------- | - |  | --- | -- | -
|               |                   | December 31, |     |    |       
|               |                   |              |     |    | Target | 
|               |                   | 2005         |     |    | 2004   |  |     | Allocation |  
|               |                   |              |     |    |        |  |     |            |  
|Asset category |                   |              |     |    |        |  |     |            |   |  |     |   
|               | Equity securities |              |     | 60 | %      |  |     | 57         | % |  |     | 58 | %
|               | Debt securities   |              |     | 35 | %      |  |     | 37         | % |  |     | 37 | %
|               | Other             |              |     | 5  | %      |  |     | 6          | % |  |     | 5  | %
|               |                   |              |     |    |        |  |     |            |  
|               |                   |              | 100 | %  |        |  | 100 | %          |   |  | 100 | % 
|               |                   |              |     |    |        |  |     |            |  





96



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




|            |  |                |       | 
|----------- |  | -------------- | ----- | 
|            |  | Pension Plan   |      
|            |  |                |      
|            |  | (In thousands) |      
|2006        |  | $              | 44    | 
|2007        |  |                | 67    | 
|2008        |  |                | 88    | 
|2009        |  |                | 111   | 
|2010        |  |                | 138   | 
|2011  2015 |  |                | 1,293 | 









|   |              
|-- | -------------
|12 | Stock options



97



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




|                                                  |  |              |           |            |              |  |           | 
|------------------------------------------------- |  | ------------ | --------- | ---------- | ------------ |  | --------- | 
|                                                  |  |              |           | August 25, |             
|                                                  |  | Year Ended   |           |            | 2004 to      | 
|                                                  |  | December 31, |           |            | December 31, | 
|                                                  |  | 2005         |           |            | 2004         | 
|                                                  |  |              |           |            |              | 
|Opening balance                                   |  |              | 206,071   |            |              |  |          | 
|Granted                                           |  |              | 4,311     |            |              |  | 206,071   | 
|Exercised                                         |  |              |          |            |              |  |          | 
|Cancelled                                         |  |              | 17,984    |            |              |  |          | 
|                                                  |  |              |           |            |              | 
|Outstanding as of December 31                     |  |              | 192,398   |            |              |  | 206,071   | 
|                                                  |  |              |           |            |              | 
|Weighted average remaining life as of December 31 |  |              | 5.0 years |            |              |  | 5.9 years | 
|Options exercisable as of December 31             |  |              | 37,710    |            |              |  | 17,952    | 







|                                                                                        |  |                |         |  
|--------------------------------------------------------------------------------------- |  | -------------- | ------- | -
|                                                                                        |  | Year Ended     |        
|                                                                                        |  | December 31,   |        
|                                                                                        |  | 2005           |        
|                                                                                        |  |                |        
|                                                                                        |  | (In thousands) |        
|Net income (loss), as reported                                                          |  | $              | (49,181 | )
|Deduct: Stock-based compensation expense calculated in
    accordance with SFAS No. 123 |  |                | (473    | )
|                                                                                        |  |                |        
|Pro forma net income (loss)                                                             |  | $              | (49,654 | )
|                                                                                        |  |                |        



| |            
| | -----------
| | Predecessor



98



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




|   |                                          
|-- | -----------------------------------------
|13 | Financial instruments and risk management



| |                
| | ---------------
| | Risk management













| |                   
| | ------------------
| | Interest rate risk



99



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




|              |  |                                       |                                     |         |                  |  |         |                  |  |  |       | 
|------------- |  | ------------------------------------- | ----------------------------------- | ------- | ---------------- |  | ------- | ---------------- |  |  | ----- | 
|              |  |                                       |                                     | Maximum |                  |  | Minimum |                 
|Notional      |  | Period Hedged by Interest Rate Collar |                                     |         | Interest Rate(1) |  |         | Interest Rate(1) | 
|              |  |                                       |                                     |         |                  |  |         |                  | 
|$75.0 million |  |                                       | September 27, 2005  March 26, 2006 |         |                  |  | 4.25%   |                  |  |  | 2.00% | 
|$75.0 million |  |                                       | March 27, 2006  December 27, 2006  |         |                  |  | 5.25%   |                  |  |  | 2.40% | 






|    |                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------
|(1) | Maximum and minimum interest rates exclude the effect of the
    Companys credit spread on the variable rate debt.







| |                      
| | ---------------------
| | Foreign currency risk







| |           
| | ----------
| | Fair value





100



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)






| |            
| | -----------
| | Credit risk







|   |           
|-- | ----------
|14 | Guarantees





| |                   
| | ------------------
| | Warranty guarantee





|                             |  |                |        |  
|---------------------------- |  | -------------- | ------ | -
|                             |  | (In thousands) |       
|Balance at August 25, 2004   |  | $              | (6,740 | )
|Warranty costs incurred      |  |                | 925    |  
|Warranty accrued             |  |                | (1,092 | )
|                             |  |                |       
|Balance at December 31, 2004 |  |                | (6,907 | )
|Warranty costs incurred      |  |                | 1,986  |  
|Warranty accrued             |  |                | 935    |  
|                             |  |                |       
|Balance at December 31, 2005 |  | $              | (3,986 | )
|                             |  |                |       



|   |                 
|-- | ----------------
|15 | Subsequent event



101



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




|   |                                        
|-- | ---------------------------------------
|16 | Segment information and major customers











As of and for the year ended December 31, 2005
(Successor)


|                                    |  |                |         |            |          |   |        |             |  |   |         |   |  |   |         |  
|----------------------------------- |  | -------------- | ------- | ---------- | -------- | - | ------ | ----------- |  | - | ------- | - |  | - | ------- | -
|                                    |  |                |         | Enterprise |          |   |        |             | 
|                                    |  | Aviation MRO   |         |            | Services |   |        | Unallocated |  |   | Total   |  
|                                    |  |                |         |            |          |   |        |             |  |   |         |  
|                                    |  | (In thousands) |        
|Revenues                            |  | $              | 751,526 |            |          | $ | 9,181  |             |  | $ |        |   |  | $ | 760,707 |  
|Income (loss) before income taxes   |  |                | 6,725   |            |          |   | (3,896 | )           |  |   | (52,308 | ) |  |   | (49,479 | )
|Depreciation and amortization       |  |                | 25,254  |            |          |   | 46     |             |  |   |        |   |  |   | 25,300  |  
|Total assets                        |  |                | 778,382 |            |          |   | 11,712 |             |  |   | 52,944  |   |  |   | 843,038 |  
|Goodwill                            |  |                | 192,301 |            |          |   |       |             |  |   |        |   |  |   | 192,301 |  
|Capital and intangible expenditures |  |                | 24,340  |            |          |   | 106    |             |  |   | 30      |   |  |   | 24,476  |  

102



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)


As of December 31, 2004 and for the period
August 25, 2004 to December 31, 2004 (Successor)


|                                    |  |                |         |            |          |   |            |             |  |            |         |   |  |   |         |  
|----------------------------------- |  | -------------- | ------- | ---------- | -------- | - | ---------- | ----------- |  | ---------- | ------- | - |  | - | ------- | -
|                                    |  |                |         | Enterprise |          |   |            |             | 
|                                    |  | Aviation MRO   |         |            | Services |   |            | Unallocated |  |            | Total   |  
|                                    |  |                |         |            |          |   |            |             |  |            |         |  
|                                    |  | (restated)     |         |            |          |   | (restated) |             |  | (restated) |        
|                                    |  | (In thousands) |        
|Revenues                            |  | $              | 282,376 |            |          | $ | 1,740      |             |  | $          |        |   |  | $ | 284,116 |  
|Income (loss) before income taxes   |  |                | 39,170  |            |          |   | (1,746     | )           |  |            | (41,259 | ) |  |   | (3,835  | )
|Depreciation and amortization       |  |                | 8,812   |            |          |   | 13         |             |  |            |        |   |  |   | 8,825   |  
|Total assets                        |  |                | 881,980 |            |          |   | 6,291      |             |  |            | 58,891  |   |  |   | 947,162 |  
|Goodwill                            |  |                | 242,570 |            |          |   |           |             |  |            |        |   |  |   | 242,570 |  
|Capital and intangible expenditures |  |                | 9,403   |            |          |   | 40         |             |  |            | 81      |   |  |   | 9,524   |  

As of August 24, 2004 and for the period January 1,
2004 to August 24, 2004 (Predecessor)


|                                    |  |                |         |            |          |   |        |             |  |   |         |   |  |   |         | 
|----------------------------------- |  | -------------- | ------- | ---------- | -------- | - | ------ | ----------- |  | - | ------- | - |  | - | ------- | 
|                                    |  |                |         | Enterprise |          |   |        |             | 
|                                    |  | Aviation MRO   |         |            | Services |   |        | Unallocated |  |   | Total   |  
|                                    |  |                |         |            |          |   |        |             |  |   |         |  
|                                    |  | (In thousands) |        
|Revenues                            |  | $              | 504,079 |            |          | $ | 5,306  |             |  | $ |        |   |  | $ | 509,385 | 
|Income (loss) before income taxes   |  |                | 62,255  |            |          |   | (3,110 | )           |  |   | (10,115 | ) |  |   | 49,030  | 
|Depreciation and amortization       |  |                | 14,182  |            |          |   | 47     |             |  |   |        |   |  |   | 14,229  | 
|Capital and intangible expenditures |  |                | 17,973  |            |          |   | 101    |             |  |   | 29      |   |  |   | 18,103  | 

For the year ended December 31, 2003 (Predecessor)


|                                    |  |                |         |            |          |   |       |             |  |   |         |   |  |   |         | 
|----------------------------------- |  | -------------- | ------- | ---------- | -------- | - | ----- | ----------- |  | - | ------- | - |  | - | ------- | 
|                                    |  |                |         | Enterprise |          |   |       |             | 
|                                    |  | Aviation MRO   |         |            | Services |   |       | Unallocated |  |   | Total   |  
|                                    |  |                |         |            |          |   |       |             |  |   |         |  
|                                    |  | (In thousands) |        
|Revenues                            |  | $              | 542,341 |            |          | $ | 2,688 |             |  | $ |        |   |  | $ | 545,029 | 
|Income (loss) before income taxes   |  |                | 52,162  |            |          |   | (407  | )           |  |   | (11,596 | ) |  |   | 40,159  | 
|Depreciation and amortization       |  |                | 19,685  |            |          |   |      |             |  |   |        |   |  |   | 19,685  | 
|Capital and intangible expenditures |  |                | 22,597  |            |          |   |      |             |  |   |        |   |  |   | 22,597  | 



|                              |  |                |         |            |      |   |         | 
|----------------------------- |  | -------------- | ------- | ---------- | ---- | - | ------- | 
|                              |  | December 31,   |        
|                              |  |                |        
|                              |  | 2005           |         |            | 2004 |  
|                              |  |                |         |            |      |  
|                              |  |                |         | (restated) |     
|                              |  | (In thousands) |        
|Property, plant and equipment |  |                |         |            |      |   |         | 
|United States                 |  | $              | 16,188  |            |      | $ | 16,151  | 
|Canada                        |  |                | 99,696  |            |      |   | 100,778 | 
|Rest of the world             |  |                | 21,084  |            |      |   | 19,510  | 
|                              |  |                |         |            |      |  
|                              |  | $              | 136,968 |            |      | $ | 136,439 | 
|                              |  |                |         |            |      |  

103



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




|                  |  |                |         |            |              |   |         |            |               |  |   |               |  |  |   |         | 
|----------------- |  | -------------- | ------- | ---------- | ------------ | - | ------- | ---------- | ------------- |  | - | ------------- |  |  | - | ------- | 
|                  |  |                |         | August 25, |              |   |         | January 1, |               |  |  
|                  |  | Year ended     |         |            | 2004 to      |   |         |            | 2004 to       |  |   | Year ended    | 
|                  |  | December 31,   |         |            | December 31, |   |         |            | August 24,    |  |   | December 31,  | 
|                  |  | 2005           |         |            | 2004         |   |         |            | 2004          |  |   | 2003          | 
|                  |  |                |         |            |              |   |         |            |               |  |   |               | 
|                  |  | (Successor)    |         |            | (Successor)  |   |         |            | (Predecessor) |  |   | (Predecessor) | 
|                  |  | (In thousands) |        
|United States     |  | $              | 561,104 |            |              | $ | 207,212 |            |               |  | $ | 398,503       |  |  | $ | 380,940 | 
|Canada            |  |                | 90,226  |            |              |   | 40,976  |            |               |  |   | 46,735        |  |  |   | 67,700  | 
|Rest of the world |  |                | 109,377 |            |              |   | 35,928  |            |               |  |   | 64,147        |  |  |   | 96,389  | 
|                  |  |                |         |            |              |   |         |            |               |  |   |               | 
|                  |  | $              | 760,707 |            |              | $ | 284,116 |            |               |  | $ | 509,385       |  |  | $ | 545,029 | 
|                  |  |                |         |            |              |   |         |            |               |  |   |               | 



| |                      
| | ---------------------
| | Significant customers



|                            |  |              |      |              |  |  |               |   |               |  |  |      |   |  |  |      |  
|--------------------------- |  | ------------ | ---- | ------------ |  |  | ------------- | - | ------------- |  |  | ---- | - |  |  | ---- | -
|                            |  |              |      | August 25,   |  |  | January 1,    |   |              
|                            |  | Year Ended   |      | 2004 to      |  |  | 2004 to       |   | Year Ended   
|                            |  | December 31, |      | December 31, |  |  | August 24,    |   | December 31, 
|                            |  | 2005         |      | 2004         |  |  | 2004          |   | 2003         
|                            |  |              |      |              |  |  |               |   |              
|                            |  | (Successor)  |      | (Successor)  |  |  | (Predecessor) |   | (Predecessor)
|Rolls-Royce Corporation     |  |              | 15.1 | %            |  |  | 14.7          | % |               |  |  | 21.4 | % |  |  | 22.7 | %
|Kelly Aviation Center, L.P. |  |              | 31.2 | %            |  |  | 34.2          | % |               |  |  | 36.6 | % |  |  | 23.1 | %





| |                        
| | -----------------------
| | Significant receivables



|             |      |              |  |  |      |  
|------------ | ---- | ------------ |  |  | ---- | -
|             |      | August 25,  
|Year Ended   |      | 2004 to     
|December 31, |      | December 31,
|2005         |      | 2004        
|             |      |             
|             | 39.9 | %            |  |  | 30.9 | %





| |                      
| | ---------------------
| | Significant suppliers





|   |                      
|-- | ---------------------
|17 | Guarantor information



104



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)








105



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)


Condensed Combining Statements of Operations (Successor)


For the year ended December 31, 2005


|                                                     |  |                |         |            |            |   |            |                |  |           |             |   |  |       |        |   |  |   |         |  
|---------------------------------------------------- |  | -------------- | ------- | ---------- | ---------- | - | ---------- | -------------- |  | --------- | ----------- | - |  | ----- | ------ | - |  | - | ------- | -
|                                                     |  |                |         | Subsidiary |            |   | Subsidiary |                |  | Combining |             |   | 
|                                                     |  | Parent         |         |            | Guarantors |   |            | Non-Guarantors |  |           | Adjustments |   |  | Total |       
|                                                     |  |                |         |            |            |   |            |                |  |           |             |   |  |       |       
|                                                     |  | (In thousands) |        
|Revenues                                             |  | $              |        |            |            | $ | 667,648    |                |  | $         | 99,834      |   |  | $     | (6,775 | ) |  | $ | 760,707 |  
|                                                     |  |                |         |            |            |   |            |                |  |           |             |   |  |       |       
|Operating expenses                                   |  |                |         |            |            |   |            |                |  |           |             |   |  |       |        |   |  |   |         |  
|Cost of revenues                                     |  |                |        |            |            |   | 576,881    |                |  |           | 92,133      |   |  |       | (6,775 | ) |  |   | 662,239 |  
|Selling, general and administrative expense          |  |                | 6,508   |            |            |   | 38,573     |                |  |           | 6,449       |   |  |       |       |   |  |   | 51,530  |  
|Amortization of intangible assets                    |  |                |        |            |            |   | 9,385      |                |  |           |            |   |  |       |       |   |  |   | 9,385   |  
|Restructuring costs                                  |  |                |        |            |            |   | 2,014      |                |  |           | 1,201       |   |  |       |       |   |  |   | 3,215   |  
|Goodwill impairment                                  |  |                |        |            |            |   | 47,377     |                |  |           |            |   |  |       |       |   |  |   | 47,377  |  
|                                                     |  |                |         |            |            |   |            |                |  |           |             |   |  |       |       
|Total operating expenses                             |  |                | 6,508   |            |            |   | 674,230    |                |  |           | 99,783      |   |  |       | (6,775 | ) |  |   | 773,746 |  
|                                                     |  |                |         |            |            |   |            |                |  |           |             |   |  |       |       
|Income (loss) from operations                        |  |                | (6,508  | )          |            |   | (6,582     | )              |  |           | 51          |   |  |       |       |   |  |   | (13,039 | )
|Interest expense                                     |  |                | 32,021  |            |            |   | 2,913      |                |  |           | 1,506       |   |  |       |       |   |  |   | 36,440  |  
|                                                     |  |                |         |            |            |   |            |                |  |           |             |   |  |       |       
|Income (loss) before income taxes                    |  |                | (38,529 | )          |            |   | (9,495     | )              |  |           | (1,455      | ) |  |       |       |   |  |   | (49,479 | )
|Income tax expense (benefit)                         |  |                | (8,959  | )          |            |   | 10,156     |                |  |           | (1,495      | ) |  |       |       |   |  |   | (298    | )
|                                                     |  |                |         |            |            |   |            |                |  |           |             |   |  |       |       
|Income (loss) before equity earnings in subsidiaries |  |                | (29,570 | )          |            |   | (19,651    | )              |  |           | 40          |   |  |       |       |   |  |   | (49,181 | )
|Equity in earnings (loss) of subsidiaries            |  |                | (19,611 | )          |            |   | (351       | )              |  |           |            |   |  |       | 19,962 |   |  |   |        |  
|                                                     |  |                |         |            |            |   |            |                |  |           |             |   |  |       |       
|Net income (loss)                                    |  | $              | (49,181 | )          |            | $ | (20,002    | )              |  | $         | 40          |   |  | $     | 19,962 |   |  | $ | (49,181 | )
|                                                     |  |                |         |            |            |   |            |                |  |           |             |   |  |       |       

106



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)


Condensed Combining Statements of Operations (Successor)


For the period August 25 to December 31, 2004


|                                                     |  |                |         |            |            |            |            |                |  |           |             |   |  |       |        |   |  |   |         |  
|---------------------------------------------------- |  | -------------- | ------- | ---------- | ---------- | ---------- | ---------- | -------------- |  | --------- | ----------- | - |  | ----- | ------ | - |  | - | ------- | -
|                                                     |  |                |         | Subsidiary |            |            | Subsidiary |                |  | Combining |             |   | 
|                                                     |  | Parent         |         |            | Guarantors |            |            | Non-Guarantors |  |           | Adjustments |   |  | Total |       
|                                                     |  |                |         |            |            |            |            |                |  |           |             |   |  |       |       
|                                                     |  |                |         |            |            | (restated) |            |                |  |           |            
|                                                     |  | (In thousands) |        
|Revenues                                             |  | $              |        |            |            | $          | 254,826    |                |  | $         | 33,897      |   |  | $     | (4,607 | ) |  | $ | 284,116 |  
|                                                     |  |                |         |            |            |            |            |                |  |           |             |   |  |       |       
|Operating expenses                                   |  |                |         |            |            |            |            |                |  |           |             |   |  |       |        |   |  |   |         |  
|Cost of revenues                                     |  |                |        |            |            |            | 221,124    |                |  |           | 33,193      |   |  |       | (4,607 | ) |  |   | 249,710 |  
|Selling, general and administrative expense          |  |                | 1,085   |            |            |            | 12,950     |                |  |           | 6,939       |   |  |       |       |   |  |   | 20,974  |  
|Amortization of intangible assets                    |  |                |        |            |            |            | 3,262      |                |  |           |            |   |  |       |       |   |  |   | 3,262   |  
|                                                     |  |                |         |            |            |            |            |                |  |           |             |   |  |       |       
|Total operating expenses                             |  |                | 1,085   |            |            |            | 237,336    |                |  |           | 40,132      |   |  |       | (4,607 | ) |  |   | 273,946 |  
|                                                     |  |                |         |            |            |            |            |                |  |           |             |   |  |       |       
|Income (loss) from operations                        |  |                | (1,085  | )          |            |            | 17,490     |                |  |           | (6,235      | ) |  |       |       |   |  |   | 10,170  |  
|Interest expense                                     |  |                | 12,273  |            |            |            | 1,442      |                |  |           | 290         |   |  |       |       |   |  |   | 14,005  |  
|                                                     |  |                |         |            |            |            |            |                |  |           |             |   |  |       |       
|Income (loss) before income taxes                    |  |                | (13,358 | )          |            |            | 16,048     |                |  |           | (6,525      | ) |  |       |       |   |  |   | (3,835  | )
|Income tax expense (benefit)                         |  |                | (4,603  | )          |            |            | 6,603      |                |  |           | (1,934      | ) |  |       |       |   |  |   | 66      |  
|                                                     |  |                |         |            |            |            |            |                |  |           |             |   |  |       |       
|Income (loss) before equity earnings in subsidiaries |  |                | (8,755  | )          |            |            | 9,445      |                |  |           | (4,591      | ) |  |       |       |   |  |   | (3,901  | )
|Equity in earnings of subsidiaries                   |  |                | 4,854   |            |            |            | (4,603     | )              |  |           |            |   |  |       | (251   | ) |  |   |        |  
|                                                     |  |                |         |            |            |            |            |                |  |           |             |   |  |       |       
|Net income (loss)                                    |  | $              | (3,901  | )          |            | $          | 4,842      |                |  | $         | (4,591      | ) |  | $     | (251   | ) |  | $ | (3,901  | )
|                                                     |  |                |         |            |            |            |            |                |  |           |             |   |  |       |       

Condensed Combining Statement of Operations (Predecessor)


For the period January 1, 2004 to August 24,
2004


|                                    |  |                |         |  |                |   |        |             |  |   |        |   |  |   |         | 
|----------------------------------- |  | -------------- | ------- |  | -------------- | - | ------ | ----------- |  | - | ------ | - |  | - | ------- | 
|                                    |  | Subsidiary     |         |  | Subsidiary     |   |        | Combining   |  |   |       
|                                    |  | Guarantors     |         |  | Non-Guarantors |   |        | Adjustments |  |   | Total  |  
|                                    |  |                |         |  |                |   |        |             |  |   |        |  
|                                    |  | (In thousands) |        
|Revenues                            |  | $              | 470,367 |  |                | $ | 43,345 |             |  | $ | (4,327 | ) |  | $ | 509,385 | 
|                                    |  |                |         |  |                |   |        |             |  |   |        |  
|Operating expenses                  |  |                |         |  |                |   |        |             |  |   |        |   |  |   |         | 
|Cost of revenues                    |  |                | 387,964 |  |                |   | 39,731 |             |  |   | (4,327 | ) |  |   | 423,368 | 
|Selling, general and administrative |  |                | 22,665  |  |                |   | 7,652  |             |  |   |       |   |  |   | 30,317  | 
|Amortization of intangible assets   |  |                | 1,575   |  |                |   | 260    |             |  |   |       |   |  |   | 1,835   | 
|                                    |  |                |         |  |                |   |        |             |  |   |        |  
|Total operating expenses            |  |                | 412,204 |  |                |   | 47,643 |             |  |   | (4,327 | ) |  |   | 455,520 | 
|                                    |  |                |         |  |                |   |        |             |  |   |        |  
|Income (loss) from operations       |  |                | 58,163  |  |                |   | (4,298 | )           |  |   |       |   |  |   | 53,865  | 
|Interest expense                    |  |                | 4,367   |  |                |   | 468    |             |  |   |       |   |  |   | 4,835   | 
|                                    |  |                |         |  |                |   |        |             |  |   |        |  
|Income (loss) before income taxes   |  |                | 53,796  |  |                |   | (4,766 | )           |  |   |       |   |  |   | 49,030  | 
|Income tax expense (benefit)        |  |                | 17,395  |  |                |   | (1,573 | )           |  |   |       |   |  |   | 15,822  | 
|                                    |  |                |         |  |                |   |        |             |  |   |        |  
|Net income (loss)                   |  | $              | 36,401  |  |                | $ | (3,193 | )           |  | $ |       |   |  | $ | 33,208  | 
|                                    |  |                |         |  |                |   |        |             |  |   |        |  

107



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)


Condensed Combining Statement of Operations (Predecessor)


For the year ended December 31, 2003


|                                    |  |                |         |  |                |   |        |             |  |   |        |   |  |   |         | 
|----------------------------------- |  | -------------- | ------- |  | -------------- | - | ------ | ----------- |  | - | ------ | - |  | - | ------- | 
|                                    |  | Subsidiary     |         |  | Subsidiary     |   |        | Combining   |  |   |       
|                                    |  | Guarantors     |         |  | Non-Guarantors |   |        | Adjustments |  |   | Total  |  
|                                    |  |                |         |  |                |   |        |             |  |   |        |  
|                                    |  | (In thousands) |        
|Revenues                            |  | $              | 471,773 |  |                | $ | 75,137 |             |  | $ | (1,881 | ) |  | $ | 545,029 | 
|                                    |  |                |         |  |                |   |        |             |  |   |        |  
|Operating expenses                  |  |                |         |  |                |   |        |             |  |   |        |   |  |   |         | 
|Cost of revenues                    |  |                | 391,000 |  |                |   | 66,939 |             |  |   | (1,881 | ) |  |   | 456,058 | 
|Selling, general and administrative |  |                | 30,730  |  |                |   | 7,212  |             |  |   |       |   |  |   | 37,942  | 
|Amortization of intangible assets   |  |                | 2,298   |  |                |   | 454    |             |  |   |       |   |  |   | 2,752   | 
|                                    |  |                |         |  |                |   |        |             |  |   |        |  
|Total operating expenses            |  |                | 424,028 |  |                |   | 74,605 |             |  |   | (1,881 | ) |  |   | 496,752 | 
|                                    |  |                |         |  |                |   |        |             |  |   |        |  
|Income from operations              |  |                | 47,745  |  |                |   | 532    |             |  |   |       |   |  |   | 48,277  | 
|Interest expense                    |  |                | 7,973   |  |                |   | 145    |             |  |   |       |   |  |   | 8,118   | 
|                                    |  |                |         |  |                |   |        |             |  |   |        |  
|Income before income taxes          |  |                | 39,772  |  |                |   | 387    |             |  |   |       |   |  |   | 40,159  | 
|Income tax expense                  |  |                | 14,887  |  |                |   | 276    |             |  |   |       |   |  |   | 15,163  | 
|                                    |  |                |         |  |                |   |        |             |  |   |        |  
|Net income                          |  | $              | 24,885  |  |                | $ | 111    |             |  | $ |       |   |  | $ | 24,996  | 
|                                    |  |                |         |  |                |   |        |             |  |   |        |  

108



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)


Condensed Consolidating Balance Sheet


December 31, 2005


|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |          |   |  |   |         |  
|------------------------------------------ |  | -------------- | ------- | ---------- | ---------- | - | ---------- | -------------- |  | --------- | ----------- | - |  | ----- | -------- | - |  | - | ------- | -
|                                           |  |                |         | Subsidiary |            |   | Subsidiary |                |  | Combining |             |   | 
|                                           |  | Parent         |         |            | Guarantors |   |            | Non-Guarantors |  |           | Adjustments |   |  | Total |         
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|                                           |  | (In thousands) |        
|ASSETS                                    
|Current assets                             |  |                |         |            |            |   |            |                |  |           |             |   |  |       |          |   |  |   |         |  
|Cash and cash equivalents                  |  | $              | 557     |            |            | $ | 20,519     |                |  | $         | 2,980       |   |  | $     |         |   |  | $ | 24,056  |  
|Accounts Receivable                        |  |                |        |            |            |   | 101,271    |                |  |           | 19,185      |   |  |       |         |   |  |   | 120,456 |  
|Due from related party                     |  |                | 34,635  |            |            |   | 114,679    |                |  |           | 3,451       |   |  |       | (152,765 | ) |  |   |        |  
|Inventories                                |  |                |        |            |            |   | 103,986    |                |  |           | 30,025      |   |  |       |         |   |  |   | 134,011 |  
|Prepaid expenses and other current assets  |  |                | 100     |            |            |   | 6,453      |                |  |           | 1,115       |   |  |       |         |   |  |   | 7,668   |  
|Income taxes receivable                    |  |                |        |            |            |   | 1,389      |                |  |           | 2,422       |   |  |       |         |   |  |   | 3,811   |  
|Deferred income taxes                      |  |                |        |            |            |   | 1,661      |                |  |           | 746         |   |  |       |         |   |  |   | 2,407   |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|Total current assets                       |  |                | 35,292  |            |            |   | 349,958    |                |  |           | 59,924      |   |  |       | (152,765 | ) |  |   | 292,409 |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|Deferred finance charges                   |  |                | 8,968   |            |            |   | 9,304      |                |  |           |            |   |  |       |         |   |  |   | 18,272  |  
|Deferred income taxes                      |  |                |        |            |            |   | 6,068      |                |  |           | 1,852       |   |  |       |         |   |  |   | 7,920   |  
|Property, plant and equipment, net         |  |                |        |            |            |   | 115,884    |                |  |           | 21,084      |   |  |       |         |   |  |   | 136,968 |  
|Intangible assets, net                     |  |                |        |            |            |   | 190,894    |                |  |           | 4,274       |   |  |       |         |   |  |   | 195,168 |  
|Due from related party                     |  |                |        |            |            |   | 5,467      |                |  |           |            |   |  |       | (5,467   | ) |  |   |        |  
|Goodwill                                   |  |                |        |            |            |   | 192,301    |                |  |           |            |   |  |       |         |   |  |   | 192,301 |  
|Investments in subsidiaries                |  |                | 698,940 |            |            |   | 38,617     |                |  |           |            |   |  |       | (737,557 | ) |  |   |        |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|Total assets                               |  | $              | 743,200 |            |            | $ | 908,493    |                |  | $         | 87,134      |   |  | $     | (895,789 | ) |  | $ | 843,038 |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|                                          
|LIABILITIES AND STOCKHOLDERS EQUITY      
|Current liabilities                        |  |                |         |            |            |   |            |                |  |           |             |   |  |       |          |   |  |   |         |  
|Accounts payable                           |  | $              | 135     |            |            | $ | 64,654     |                |  | $         | 10,512      |   |  | $     |         |   |  | $ | 75,301  |  
|Other accrued liabilities                  |  |                | 9,980   |            |            |   | 16,018     |                |  |           | 3,199       |   |  |       |         |   |  |   | 29,197  |  
|Unearned revenue                           |  |                |        |            |            |   | 7,791      |                |  |           | 6,405       |   |  |       |         |   |  |   | 14,196  |  
|Accrued warranty provision                 |  |                |        |            |            |   | 2,782      |                |  |           | 1,204       |   |  |       |         |   |  |   | 3,986   |  
|Income taxes payable                       |  |                |        |            |            |   | 9,151      |                |  |           | 172         |   |  |       |         |   |  |   | 9,323   |  
|Due to related party                       |  |                | 101,041 |            |            |   | 43,708     |                |  |           | 11,956      |   |  |       | (152,765 | ) |  |   | 3,940   |  
|Current portion of long-term debt          |  |                |        |            |            |   | 2,261      |                |  |           | 313         |   |  |       |         |   |  |   | 2,574   |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|Total current liabilities                  |  |                | 111,156 |            |            |   | 146,365    |                |  |           | 33,761      |   |  |       | (152,765 | ) |  |   | 138,517 |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|Deferred income taxes                      |  |                | 65      |            |            |   | 67,632     |                |  |           | 4,845       |   |  |       |         |   |  |   | 72,542  |  
|Due to related party                       |  |                |        |            |            |   |           |                |  |           | 5,467       |   |  |       | (5,467   | ) |  |   |        |  
|Long-term debt                             |  |                | 470,000 |            |            |   |           |                |  |           |            |   |  |       |         |   |  |   | 470,000 |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|Total liabilities                          |  |                | 581,221 |            |            |   | 213,997    |                |  |           | 44,073      |   |  |       | (158,232 | ) |  |   | 681,059 |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|Stockholders equity                       |  |                |         |            |            |   |            |                |  |           |             |   |  |       |          |   |  |   |         |  
|Common stock                               |  |                |        |            |            |   |           |                |  |           |            |   |  |       |         |   |  |   |        |  
|Additional paid in capital                 |  |                | 215,000 |            |            |   | 709,656    |                |  |           | 47,612      |   |  |       | (757,268 | ) |  |   | 215,000 |  
|Accumulated deficit                        |  |                | (53,082 | )          |            |   | (15,160    | )              |  |           | (4,551      | ) |  |       | 19,711   |   |  |   | (53,082 | )
|Accumulated other comprehensive income     |  |                | 61      |            |            |   |           |                |  |           |            |   |  |       |         |   |  |   | 61      |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|Total stockholders equity                 |  |                | 161,979 |            |            |   | 694,496    |                |  |           | 43,061      |   |  |       | (737,557 | ) |  |   | 161,979 |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|Total liabilities and stockholders equity |  | $              | 743,200 |            |            | $ | 908,493    |                |  | $         | 87,134      |   |  | $     | (895,789 | ) |  | $ | 843,038 |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         

109



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)


Condensed Consolidating Balance Sheet


December 31, 2004


(Restated)


|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |          |   |  |   |         |  
|------------------------------------------ |  | -------------- | ------- | ---------- | ---------- | - | ---------- | -------------- |  | --------- | ----------- | - |  | ----- | -------- | - |  | - | ------- | -
|                                           |  |                |         | Subsidiary |            |   | Subsidiary |                |  | Combining |             |   | 
|                                           |  | Parent         |         |            | Guarantors |   |            | Non-Guarantors |  |           | Adjustments |   |  | Total |         
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|                                           |  | (In thousands) |        
|ASSETS                                    
|Current assets                             |  |                |         |            |            |   |            |                |  |           |             |   |  |       |          |   |  |   |         |  
|Cash and cash equivalents                  |  | $              | 4,116   |            |            | $ | 18,521     |                |  | $         | 5,254       |   |  | $     |         |   |  | $ | 27,891  |  
|Accounts receivable                        |  |                | 4,678   |            |            |   | 93,680     |                |  |           | 12,134      |   |  |       |         |   |  |   | 110,492 |  
|Due from related party                     |  |                | 13,352  |            |            |   | 52,090     |                |  |           | 3,910       |   |  |       | (69,352  | ) |  |   |        |  
|Inventories                                |  |                |        |            |            |   | 115,918    |                |  |           | 30,485      |   |  |       |         |   |  |   | 146,403 |  
|Prepaid expenses and other current assets  |  |                | 469     |            |            |   | 9,485      |                |  |           | 1,040       |   |  |       |         |   |  |   | 10,994  |  
|Income taxes receivable                    |  |                | 4,729   |            |            |   |           |                |  |           | 4,563       |   |  |       | (4,729   | ) |  |   | 4,563   |  
|Deferred income taxes                      |  |                |        |            |            |   | 2,670      |                |  |           | 1,448       |   |  |       |         |   |  |   | 4,118   |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|Total current assets                       |  |                | 27,344  |            |            |   | 292,364    |                |  |           | 58,834      |   |  |       | (74,081  | ) |  |   | 304,461 |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|Deferred finance charges                   |  |                | 11,304  |            |            |   | 9,911      |                |  |           |            |   |  |       |         |   |  |   | 21,215  |  
|Deferred income taxes                      |  |                |        |            |            |   | 5,197      |                |  |           |            |   |  |       |         |   |  |   | 5,197   |  
|Property, plant and equipment, net         |  |                |        |            |            |   | 116,929    |                |  |           | 19,510      |   |  |       |         |   |  |   | 136,439 |  
|Intangible assets, net                     |  |                |        |            |            |   | 232,461    |                |  |           | 4,819       |   |  |       |         |   |  |   | 237,280 |  
|Due from related party                     |  |                |        |            |            |   | 5,117      |                |  |           |            |   |  |       | (5,117   | ) |  |   |        |  
|Goodwill                                   |  |                |        |            |            |   | 242,570    |                |  |           |            |   |  |       |         |   |  |   | 242,570 |  
|Investments in subsidiaries                |  |                | 719,927 |            |            |   | 37,592     |                |  |           |            |   |  |       | (757,519 | ) |  |   |        |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|Total assets                               |  | $              | 758,575 |            |            | $ | 942,141    |                |  | $         | 83,163      |   |  | $     | (836,717 | ) |  | $ | 947,162 |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|LIABILITIES AND STOCKHOLDERS EQUITY      
|                                          
|Current liabilities                        |  |                |         |            |            |   |            |                |  |           |             |   |  |       |          |   |  |   |         |  
|Accounts payable                           |  | $              | 5,058   |            |            | $ | 88,693     |                |  | $         | 8,672       |   |  | $     |         |   |  | $ | 102,423 |  
|Other accrued liabilities                  |  |                | 7,349   |            |            |   | 17,461     |                |  |           | 3,688       |   |  |       |         |   |  |   | 28,498  |  
|Due to related party                       |  |                | 50,017  |            |            |   | 12,291     |                |  |           | 9,852       |   |  |       | (69,352  | ) |  |   | 2,808   |  
|Unearned revenue                           |  |                |        |            |            |   | 9,126      |                |  |           | 3,393       |   |  |       |         |   |  |   | 12,519  |  
|Accrued warranty provision                 |  |                |        |            |            |   | 3,784      |                |  |           | 3,123       |   |  |       |         |   |  |   | 6,907   |  
|Income taxes payable                       |  |                |        |            |            |   | 13,498     |                |  |           | 211         |   |  |       | (4,729   | ) |  |   | 8,980   |  
|Current portion of long-term debt          |  |                |        |            |            |   | 1,304      |                |  |           | 681         |   |  |       |         |   |  |   | 1,985   |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|Total current liabilities                  |  |                | 62,424  |            |            |   | 146,157    |                |  |           | 29,620      |   |  |       | (74,081  | ) |  |   | 164,120 |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|Deferred income taxes                      |  |                |        |            |            |   | 79,225     |                |  |           | 5,405       |   |  |       |         |   |  |   | 84,630  |  
|Due to related party                       |  |                |        |            |            |   |           |                |  |           | 5,117       |   |  |       | (5,117   | ) |  |   |        |  
|Long-term debt                             |  |                | 485,000 |            |            |   | 2,261      |                |  |           |            |   |  |       |         |   |  |   | 487,261 |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|Total liabilities                          |  |                | 547,424 |            |            |   | 227,643    |                |  |           | 40,142      |   |  |       | (79,198  | ) |  |   | 736,011 |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|Stockholders equity                       |  |                |         |            |            |   |            |                |  |           |             |   |  |       |          |   |  |   |         |  
|Common stock                               |  |                |        |            |            |   |           |                |  |           |            |   |  |       |         |   |  |   |        |  
|Additional paid in capital                 |  |                | 215,000 |            |            |   | 709,656    |                |  |           | 47,612      |   |  |       | (757,268 | ) |  |   | 215,000 |  
|Accumulated deficit                        |  |                | (3,901  | )          |            |   | 4,842      |                |  |           | (4,591      | ) |  |       | (251     | ) |  |   | (3,901  | )
|Accumulated other comprehensive income     |  |                | 52      |            |            |   |           |                |  |           |            |   |  |       |         |   |  |   | 52      |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|Total stockholders equity                 |  |                | 211,151 |            |            |   | 714,498    |                |  |           | 43,021      |   |  |       | (757,519 | ) |  |   | 211,151 |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         
|Total liabilities and stockholders equity |  | $              | 758,575 |            |            | $ | 942,141    |                |  | $         | 83,163      |   |  | $     | (836,717 | ) |  | $ | 947,162 |  
|                                           |  |                |         |            |            |   |            |                |  |           |             |   |  |       |         

110



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)


Condensed Consolidating Statement of Cash Flows
(Successor)


For the year ended December 31, 2005


|                                                                                                      |                                                   |                |         |            |            |   |            |                |   |           |             |        |   |       |        |         |   |   |         |         |  
|----------------------------------------------------------------------------------------------------- | ------------------------------------------------- | -------------- | ------- | ---------- | ---------- | - | ---------- | -------------- | - | --------- | ----------- | ------ | - | ----- | ------ | ------- | - | - | ------- | ------- | -
|                                                                                                      |                                                   |                |         | Subsidiary |            |   | Subsidiary |                |   | Combining |             |        |  
|                                                                                                      |                                                   | Parent         |         |            | Guarantors |   |            | Non-Guarantors |   |           | Adjustments |        |   | Total |       
|                                                                                                      |                                                   |                |         |            |            |   |            |                |   |           |             |        |   |       |       
|                                                                                                      |                                                   | (In thousands) |        
|Cash provided by (used in)                                                                            |                                                   |                |         |            |            |   |            |                |   |           |             |        |   |       |        |         |   |   |         |        
|Operating activities                                                                                  |                                                   |                |         |            |            |   |            |                |   |           |             |        |   |       |        |         |   |   |         |        
|Net income (loss) for the period                                                                      |                                                   | $              | (49,181 | )          |            | $ | (20,002    | )              |   | $         | 40          |        |   | $     | 19,962 |         |   | $ | (49,181 | )      
|Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities |                                                   |                |         |            |            |   |            |                |   |           |             |        |   |       |        |         |   |   |         |        
|                                                                                                      | Depreciation and amortization                     |                |         |           |            |   |            | 22,515         |   |           |             | 2,785  |   |       |        |        |   |   |         | 25,300  |  
|                                                                                                      | Amortization of deferred finance charges          |                |         | 2,336      |            |   |            | 607            |   |           |             |       |   |       |        |        |   |   |         | 2,943   |  
|                                                                                                      | Intangible asset impairment                       |                |         |           |            |   |            | 29,700         |   |           |             |       |   |       |        |        |   |   |         | 29,700  |  
|                                                                                                      | Goodwill impairment                               |                |         |           |            |   |            | 47,377         |   |           |             |       |   |       |        |        |   |   |         | 47,377  |  
|                                                                                                      | Deferred income taxes                             |                |         | 65         |            |   |            | (11,455        | ) |           |             | (1,710 | ) |       |        |        |   |   |         | (13,100 | )
|                                                                                                      | Loss on disposal of property, plant and equipment |                |         |           |            |   |            | 68             |   |           |             |       |   |       |        |        |   |   |         | 68      |  
|                                                                                                      | Foreign exchange loss                             |                |         |           |            |   |            | 623            |   |           |             | 99     |   |       |        |        |   |   |         | 722     |  
|                                                                                                      | Equity in earnings of subsidiaries                |                |         | 19,611     |            |   |            | 351            |   |           |             |       |   |       |        | (19,962 | ) |   |         |        |  
|Changes in assets and liabilities                                                                     |                                                   |                |         |            |            |   |            |                |   |           |             |        |   |       |        |         |   |   |         |        
|                                                                                                      | Accounts receivable                               |                |         |           |            |   |            | (2,913         | ) |           |             | (7,051 | ) |       |        |        |   |   |         | (9,964  | )
|                                                                                                      | Inventories                                       |                |         |           |            |   |            | 11,932         |   |           |             | 460    |   |       |        |        |   |   |         | 12,392  |  
|                                                                                                      | Prepaid expenses and other current assets         |                |         | 3          |            |   |            | (1,646         | ) |           |             | (75    | ) |       |        |        |   |   |         | (1,718  | )
|                                                                                                      | Accounts payable and other accrued liabilities    |                |         | (2,292     | )          |   |            | (27,819        | ) |           |             | 2,444  |   |       |        |        |   |   |         | (27,667 | )
|                                                                                                      | Income taxes payable and receivable               |                |         | 4,729      |            |   |            | (2,844         | ) |           |             | 2,102  |   |       |        |        |   |   |         | 3,987   |  
|                                                                                                      |                                                   |                |         |            |            |   |            |                |   |           |             |        |   |       |       
|Net cash provided by (used in) operating activities                                                   |                                                   |                | (24,729 | )          |            |   | 46,494     |                |   |           | (906        | )      |   |       |       |         |   |   | 20,859  |        
|                                                                                                      |                                                   |                |         |            |            |   |            |                |   |           |             |        |   |       |       
|Investing activities                                                                                  |                                                   |                |         |            |            |   |            |                |   |           |             |        |   |       |        |         |   |   |         |        
|Acquisitions of property, plant and equipment                                                         |                                                   |                |        |            |            |   | (7,668     | )              |   |           | (780        | )      |   |       |       |         |   |   | (8,448  | )      
|Proceeds on disposal of property, plant and equipment                                                 |                                                   |                |        |            |            |   | 57         |                |   |           |            |        |   |       |       |         |   |   | 57      |        
|Acquisition of rental assets                                                                          |                                                   |                |        |            |            |   | (11,464    | )              |   |           | (4,564      | )      |   |       |       |         |   |   | (16,028 | )      
|Proceeds on disposal of rental assets                                                                 |                                                   |                |        |            |            |   | 9,434      |                |   |           | 1,500       |        |   |       |       |         |   |   | 10,934  |        
|                                                                                                      |                                                   |                |         |            |            |   |            |                |   |           |             |        |   |       |       
|Net cash used in investing activities                                                                 |                                                   |                |        |            |            |   | (9,641     | )              |   |           | (3,844      | )      |   |       |       |         |   |   | (13,485 | )      
|                                                                                                      |                                                   |                |         |            |            |   |            |                |   |           |             |        |   |       |       
|Financing activities                                                                                  |                                                   |                |         |            |            |   |            |                |   |           |             |        |   |       |        |         |   |   |         |        
|Repayment of debt                                                                                     |                                                   |                | (15,000 | )          |            |   | (1,304     | )              |   |           | (368        | )      |   |       |       |         |   |   | (16,672 | )      
|Change in due to and (from) related companies                                                         |                                                   |                | 36,170  |            |            |   | (32,928    | )              |   |           | 2,943       |        |   |       |        |         |   |   | 6,185   |        
|                                                                                                      |                                                   |                |         |            |            |   |            |                |   |           |             |        |   |       |       
|Net cash (used in) provided by financing activities                                                   |                                                   |                | 21,170  |            |            |   | (34,232    | )              |   |           | 2,575       |        |   |       |       |         |   |   | (10,487 | )      
|                                                                                                      |                                                   |                |         |            |            |   |            |                |   |           |             |        |   |       |       
|Effect of exchange rate changes on cash and cash
    equivalents                                      |                                                   |                |        |            |            |   | (623       | )              |   |           | (99         | )      |   |       |       |         |   |   | (722    | )      
|                                                                                                      |                                                   |                |         |            |            |   |            |                |   |           |             |        |   |       |       
|Net (decrease) increase in cash and cash equivalents                                                  |                                                   |                | (3,559  | )          |            |   | 1,998      |                |   |           | (2,274      | )      |   |       |       |         |   |   | (3,835  | )      
|Cash and cash equivalents  Beginning of period                                                       |                                                   |                | 4,116   |            |            |   | 18,521     |                |   |           | 5,254       |        |   |       |       |         |   |   | 27,891  |        
|                                                                                                      |                                                   |                |         |            |            |   |            |                |   |           |             |        |   |       |       
|Cash and cash equivalents  End of period                                                             |                                                   | $              | 557     |            |            | $ | 20,519     |                |   | $         | 2,980       |        |   | $     |       |         |   | $ | 24,056  |        
|                                                                                                      |                                                   |                |         |            |            |   |            |                |   |           |             |        |   |       |       

111



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)


Consolidated Statement of Cash Flows (Successor)


For the period from August 25, 2004 to December 31,
2004


(Restated)


|                                                                                                      |                                                |                |          |            |            |   |            |                |   |           |             |        |   |       |      |     |  |   |          |         |  
|----------------------------------------------------------------------------------------------------- | ---------------------------------------------- | -------------- | -------- | ---------- | ---------- | - | ---------- | -------------- | - | --------- | ----------- | ------ | - | ----- | ---- | --- |  | - | -------- | ------- | -
|                                                                                                      |                                                |                |          | Subsidiary |            |   | Subsidiary |                |   | Combining |             |        |  
|                                                                                                      |                                                | Parent         |          |            | Guarantors |   |            | Non-Guarantors |   |           | Adjustments |        |   | Total |     
|                                                                                                      |                                                |                |          |            |            |   |            |                |   |           |             |        |   |       |     
|                                                                                                      |                                                | (In thousands) |         
|Cash provided by (used in)                                                                            |                                                |                |          |            |            |   |            |                |   |           |             |        |   |       |      |     |  |   |          |        
|Operating activities                                                                                  |                                                |                |          |            |            |   |            |                |   |           |             |        |   |       |      |     |  |   |          |        
|Net income (loss) for the period                                                                      |                                                | $              | (3,901   | )          |            | $ | 4,842      |                |   | $         | (4,591      | )      |   | $     | (251 | )   |  | $ | (3,901   | )      
|Adjustments to reconcile net income (loss) to net cash (used in)
    provided by operating activities |                                                |                |          |            |            |   |            |                |   |           |             |        |   |       |      |     |  |   |          |        
|                                                                                                      | Depreciation and amortization                  |                |          |           |            |   |            | 7,807          |   |           |             | 1,018  |   |       |      |    |  |   |          | 8,825   |  
|                                                                                                      | Amortization of deferred finance charges       |                |          | 1,048      |            |   |            | 1,451          |   |           |             |       |   |       |      |    |  |   |          | 2,499   |  
|                                                                                                      | Deferred income taxes                          |                |          |           |            |   |            | (7,541         | ) |           |             | (1,621 | ) |       |      |    |  |   |          | (9,162  | )
|                                                                                                      | Equity in earnings of subsidiaries             |                |          | (4,854     | )          |   |            | 4,603          |   |           |             |       |   |       |      | 251 |  |   |          |        |  
|                                                                                                      | Foreign exchange loss/ (gain)                  |                |          | 16         |            |   |            | 42             |   |           |             | (117   | ) |       |      |     |  |   |          | (59     | )
|Changes in assets and liabilities                                                                     |                                                |                |          |            |            |   |            |                |   |           |             |        |   |       |      |     |  |   |          |        
|                                                                                                      | Accounts receivable                            |                |          | (4,678     | )          |   |            | (6,954         | ) |           |             | (574   | ) |       |      |    |  |   |          | (12,206 | )
|                                                                                                      | Inventories                                    |                |          |           |            |   |            | 34,310         |   |           |             | 6,005  |   |       |      |    |  |   |          | 40,315  |  
|                                                                                                      | Prepaid expenses and other current assets      |                |          | (417       | )          |   |            | 588            |   |           |             | 178    |   |       |      |    |  |   |          | 349     |  
|                                                                                                      | Accounts payable and other accrued liabilities |                |          | 12,407     |            |   |            | (11,894        | ) |           |             | (5,333 | ) |       |      |    |  |   |          | (4,820  | )
|                                                                                                      | Income taxes payable and receivable            |                |          | (4,729     | )          |   |            | 3,111          |   |           |             | (462   | ) |       |      |    |  |   |          | (2,080  | )
|                                                                                                      |                                                |                |          |            |            |   |            |                |   |           |             |        |   |       |     
|Net cash provided by (used in) operating activities                                                   |                                                |                | (5,108   | )          |            |   | 30,365     |                |   |           | (5,497      | )      |   |       |     |     |  |   | 19,760   |        
|                                                                                                      |                                                |                |          |            |            |   |            |                |   |           |             |        |   |       |     
|Investing activities                                                                                  |                                                |                |          |            |            |   |            |                |   |           |             |        |   |       |      |     |  |   |          |        
|Acquisitions of property, plant and equipment                                                         |                                                |                |         |            |            |   | (4,316     | )              |   |           | (213        | )      |   |       |     |     |  |   | (4,529   | )      
|Acquisitions of rental assets                                                                         |                                                |                |         |            |            |   | (4,454     | )              |   |           | (541        | )      |   |       |     |     |  |   | (4,995   | )      
|Proceeds on disposal of rental assets                                                                 |                                                |                |         |            |            |   | 2,872      |                |   |           | 267         |        |   |       |     |     |  |   | 3,139    |        
|Acquisition of MRO Division of Dunlop Standard Aerospace Group
    Limited, net of cash acquired      |                                                |                | (699,711 | )          |            |   | 26,899     |                |   |           | 8,801       |        |   |       |     |     |  |   | (664,011 | )      
|                                                                                                      |                                                |                |          |            |            |   |            |                |   |           |             |        |   |       |     
|Net cash provided by (used in) investing activities                                                   |                                                |                | (699,711 | )          |            |   | 21,001     |                |   |           | 8,314       |        |   |       |     |     |  |   | (670,396 | )      
|                                                                                                      |                                                |                |          |            |            |   |            |                |   |           |             |        |   |       |     
|Financing activities                                                                                  |                                                |                |          |            |            |   |            |                |   |           |             |        |   |       |      |     |  |   |          |        
|Repayment of debt                                                                                     |                                                |                | (40,000  | )          |            |   | (413       | )              |   |           | (213        | )      |   |       |     |     |  |   | (40,626  | )      
|Proceeds from issuance of debt                                                                        |                                                |                | 525,000  |            |            |   |           |                |   |           |            |        |   |       |     |     |  |   | 525,000  |        
|Issuance of common stock                                                                              |                                                |                | 215,000  |            |            |   |           |                |   |           |            |        |   |       |     |     |  |   | 215,000  |        
|Deferred financing charges                                                                            |                                                |                | (23,714  | )          |            |   |           |                |   |           |            |        |   |       |     |     |  |   | (23,714  | )      
|Change in due to and (from) related companies                                                         |                                                |                | 32,665   |            |            |   | (32,390    | )              |   |           | 2,533       |        |   |       |     |     |  |   | 2,808    |        
|                                                                                                      |                                                |                |          |            |            |   |            |                |   |           |             |        |   |       |     
|Net cash (used in) provided by financing activities                                                   |                                                |                | 708,951  |            |            |   | (32,803    | )              |   |           | 2,320       |        |   |       |     |     |  |   | 678,468  |        
|                                                                                                      |                                                |                |          |            |            |   |            |                |   |           |             |        |   |       |     
|Effect of exchange rate changes on cash and cash
    equivalents                                      |                                                |                | (16      | )          |            |   | (42        | )              |   |           | 117         |        |   |       |     |     |  |   | 59       |        
|                                                                                                      |                                                |                |          |            |            |   |            |                |   |           |             |        |   |       |     
|Net (decrease) increase in cash and cash equivalents                                                  |                                                |                | 4,116    |            |            |   | 18,521     |                |   |           | 5,254       |        |   |       |     |     |  |   | 27,891   |        
|Cash and cash equivalents  Beginning of period                                                       |                                                |                |         |            |            |   |           |                |   |           |            |        |   |       |     |     |  |   |         |        
|                                                                                                      |                                                |                |          |            |            |   |            |                |   |           |             |        |   |       |     
|Cash and cash equivalents  End of period                                                             |                                                | $              | 4,116    |            |            | $ | 18,521     |                |   | $         | 5,254       |        |   | $     |     |     |  | $ | 27,891   |        
|                                                                                                      |                                                |                |          |            |            |   |            |                |   |           |             |        |   |       |     

112



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)


Condensed Combining Statement of Cash Flows (Predecessor)


For the period from January 1, 2004 to August 24,
2004


|                                                                                                               |                                                |                |         |         |                |   |        |             |   |       |   |   |  |   |         |         |  
|-------------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | -------------- | ------- | ------- | -------------- | - | ------ | ----------- | - | ----- | - | - |  | - | ------- | ------- | -
|                                                                                                               |                                                | Subsidiary     |         |         | Subsidiary     |   |        | Combining   |   |      
|                                                                                                               |                                                | Guarantors     |         |         | Non-Guarantors |   |        | Adjustments |   | Total |  
|                                                                                                               |                                                |                |         |         |                |   |        |             |   |       |  
|                                                                                                               |                                                | (In thousands) |        
|Cash provided by (used in)                                                                                     |                                                |                |         |         |                |   |        |             |   |       |   |   |  |   |         |        
|Operating activities                                                                                           |                                                |                |         |         |                |   |        |             |   |       |   |   |  |   |         |        
|Net income (loss) for the period                                                                               |                                                | $              | 36,401  |         |                | $ | (3,193 | )           |   | $     |  |   |  | $ | 33,208  |        
|Adjustments to reconcile net income (loss) provided to net cash
    provided by (used in) operating activities |                                                |                |         |         |                |   |        |             |   |       |   |   |  |   |         |        
|                                                                                                               | Depreciation and amortization                  |                |         | 11,750  |                |   |        | 2,479       |   |       |   |  |  |   |         | 14,229  |  
|                                                                                                               | Amortization of deferred finance charges       |                |         | 363     |                |   |        |            |   |       |   |  |  |   |         | 363     |  
|                                                                                                               | Deferred income taxes                          |                |         | (5,889  | )              |   |        | 608         |   |       |   |  |  |   |         | (5,281  | )
|                                                                                                               | Foreign exchange loss                          |                |         | 222     |                |   |        | 303         |   |       |   |  |  |   |         | 525     |  
|Changes in assets and liabilities                                                                              |                                                |                |         |         |                |   |        |             |   |       |   |   |  |   |         |        
|                                                                                                               | Accounts receivable                            |                |         | (34,422 | )              |   |        | 1,983       |   |       |   |  |  |   |         | (32,439 | )
|                                                                                                               | Inventories                                    |                |         | (21,545 | )              |   |        | (8,869      | ) |       |   |  |  |   |         | (30,414 | )
|                                                                                                               | Prepaid expenses and other current assets      |                |         | (1,031  | )              |   |        | (639        | ) |       |   |  |  |   |         | (1,670  | )
|                                                                                                               | Accounts payable and other accrued liabilities |                |         | 47,796  |                |   |        | 8,978       |   |       |   |  |  |   |         | 56,774  |  
|                                                                                                               | Income taxes payable and receivable            |                |         | 4,680   |                |   |        | (3,009      | ) |       |   |  |  |   |         | 1,671   |  
|                                                                                                               |                                                |                |         |         |                |   |        |             |   |       |   |  
|Net cash provided by (used in) operating activities                                                            |                                                |                | 38,325  |         |                |   | (1,359 | )           |   |       |  |   |  |   | 36,966  |        
|                                                                                                               |                                                |                |         |         |                |   |        |             |   |       |   |  
|Investing activities                                                                                           |                                                |                |         |         |                |   |        |             |   |       |   |   |  |   |         |        
|Acquisition of property, plant and equipment                                                                   |                                                |                | (8,025  | )       |                |   | (169   | )           |   |       |  |   |  |   | (8,194  | )      
|Proceeds on disposals of property, plant and equipment                                                         |                                                |                | 112     |         |                |   |       |             |   |       |  |   |  |   | 112     |        
|Acquisition of rental assets                                                                                   |                                                |                | (8,889  | )       |                |   | (897   | )           |   |       |  |   |  |   | (9,786  | )      
|Proceeds on disposal of rental assets                                                                          |                                                |                | 5,822   |         |                |   | 571    |             |   |       |  |   |  |   | 6,393   |        
|Acquisitions of intangibles  licenses                                                                         |                                                |                |        |         |                |   | (123   | )           |   |       |  |   |  |   | (123    | )      
|                                                                                                               |                                                |                |         |         |                |   |        |             |   |       |   |  
|Net cash used in investing activities                                                                          |                                                |                | (10,980 | )       |                |   | (618   | )           |   |       |  |   |  |   | (11,598 | )      
|                                                                                                               |                                                |                |         |         |                |   |        |             |   |       |   |  
|Financing activities                                                                                           |                                                |                |         |         |                |   |        |             |   |       |   |   |  |   |         |        
|Repayment of debt                                                                                              |                                                |                | (793    | )       |                |   | (319   | )           |   |       |  |   |  |   | (1,112  | )      
|Change in due to and (from) related companies                                                                  |                                                |                | (14,619 | )       |                |   | 3,890  |             |   |       |  |   |  |   | (10,729 | )      
|                                                                                                               |                                                |                |         |         |                |   |        |             |   |       |   |  
|Net cash (used in) provided by financing activities                                                            |                                                |                | (15,412 | )       |                |   | 3,571  |             |   |       |  |   |  |   | (11,841 | )      
|                                                                                                               |                                                |                |         |         |                |   |        |             |   |       |   |  
|Effect of exchange rate changes on cash and cash
    equivalents                                               |                                                |                | (222    | )       |                |   | (303   | )           |   |       |  |   |  |   | (525    | )      
|                                                                                                               |                                                |                |         |         |                |   |        |             |   |       |   |  
|Net increase in cash and cash equivalents                                                                      |                                                |                | 11,711  |         |                |   | 1,291  |             |   |       |  |   |  |   | 13,002  |        
|Cash and cash equivalents  Beginning of period                                                                |                                                |                | 15,188  |         |                |   | 7,510  |             |   |       |  |   |  |   | 22,698  |        
|                                                                                                               |                                                |                |         |         |                |   |        |             |   |       |   |  
|Cash and cash equivalents  End of period                                                                      |                                                | $              | 26,899  |         |                | $ | 8,801  |             |   | $     |  |   |  | $ | 35,700  |        
|                                                                                                               |                                                |                |         |         |                |   |        |             |   |       |   |  

113



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)


Condensed Combining Statement of Cash Flows (Predecessor)


For the year ended December 31, 2003


|                                                                 |                                                   |                |         |         |                |   |        |             |   |   |        |   |  |   |         |        |  
|---------------------------------------------------------------- | ------------------------------------------------- | -------------- | ------- | ------- | -------------- | - | ------ | ----------- | - | - | ------ | - |  | - | ------- | ------ | -
|                                                                 |                                                   | Subsidiary     |         |         | Subsidiary     |   |        | Combining   |   |   |       
|                                                                 |                                                   | Guarantors     |         |         | Non-Guarantors |   |        | Adjustments |   |   | Total  |  
|                                                                 |                                                   |                |         |         |                |   |        |             |   |   |        |  
|                                                                 |                                                   | (In thousands) |        
|Cash provided by (used in)                                       |                                                   |                |         |         |                |   |        |             |   |   |        |   |  |   |         |       
|Operating activities                                             |                                                   |                |         |         |                |   |        |             |   |   |        |   |  |   |         |       
|Net income for the period                                        |                                                   | $              | 24,885  |         |                | $ | 111    |             |   | $ |       |   |  | $ | 24,996  |       
|Adjustments to reconcile net income provided to net              |                                                   |                |         |         |                |   |        |             |   |   |        |   |  |   |         |       
|                                                                 | Cash provided by operating activities             |                |         |         |                |   |        |             |   |   |        |   |  |   |         |        |  
|                                                                 | Depreciation and amortization                     |                |         | 16,418  |                |   |        | 3,267       |   |   |        |  |  |   |         | 19,685 |  
|                                                                 | Amortization of deferred finance charges          |                |         | 545     |                |   |        |            |   |   |        |  |  |   |         | 545    |  
|                                                                 | Deferred income taxes                             |                |         | 9,495   |                |   |        | 553         |   |   |        |  |  |   |         | 10,048 |  
|                                                                 | Loss on disposal of property, plant and equipment |                |         | 112     |                |   |        | 35          |   |   |        |  |  |   |         | 147    |  
|                                                                 | Foreign exchange loss                             |                |         | 2,041   |                |   |        | 315         |   |   |        |   |  |   |         | 2,356  |  
|                                                                 | Other                                             |                |         | 74      |                |   |        |            |   |   |        |  |  |   |         | 74     |  
|Changes in assets and liabilities                                |                                                   |                |         |         |                |   |        |             |   |   |        |   |  |   |         |       
|                                                                 | Accounts receivable                               |                |         | (14,452 | )              |   |        | 7,689       |   |   |        |  |  |   |         | (6,763 | )
|                                                                 | Inventories                                       |                |         | (4,206  | )              |   |        | 3,328       |   |   |        |  |  |   |         | (878   | )
|                                                                 | Prepaid expenses and other current assets         |                |         | 1,136   |                |   |        | (467        | ) |   |        |  |  |   |         | 669    |  
|                                                                 | Accounts payable and other accrued liabilities    |                |         | 27,049  |                |   |        | (5,701      | ) |   |        |  |  |   |         | 21,348 |  
|                                                                 | Income taxes payable and receivable               |                |         | (3,627  | )              |   |        | (1,945      | ) |   |        |  |  |   |         | (5,572 | )
|                                                                 |                                                   |                |         |         |                |   |        |             |   |   |        |  
|Net cash provided by operating activities                        |                                                   |                | 59,470  |         |                |   | 7,185  |             |   |   |       |   |  |   | 66,655  |       
|                                                                 |                                                   |                |         |         |                |   |        |             |   |   |        |  
|Investing activities                                             |                                                   |                |         |         |                |   |        |             |   |   |        |   |  |   |         |       
|Acquisition of property, plant and equipment                     |                                                   |                | (9,203  | )       |                |   | (346   | )           |   |   | 1,021  |   |  |   | (8,528  | )     
|Proceeds on disposals of property, plant and equipment           |                                                   |                | 97      |         |                |   | 1,021  |             |   |   | (1,021 | ) |  |   | 97      |       
|Acquisition of rental assets                                     |                                                   |                | (9,119  | )       |                |   | (1,700 | )           |   |   |       |   |  |   | (10,819 | )     
|Proceeds on disposal of rental assets                            |                                                   |                | 5,909   |         |                |   | 271    |             |   |   |       |   |  |   | 6,180   |       
|Acquisitions of intangibles  licenses                           |                                                   |                | (3,250  | )       |                |   |       |             |   |   |       |   |  |   | (3,250  | )     
|                                                                 |                                                   |                |         |         |                |   |        |             |   |   |        |  
|Net cash used in investing activities                            |                                                   |                | (15,566 | )       |                |   | (754   | )           |   |   |       |   |  |   | (16,320 | )     
|                                                                 |                                                   |                |         |         |                |   |        |             |   |   |        |  
|Financing activities                                             |                                                   |                |         |         |                |   |        |             |   |   |        |   |  |   |         |       
|Repayment of debt                                                |                                                   |                | (14,542 | )       |                |   | (187   | )           |   |   |       |   |  |   | (14,729 | )     
|Proceeds from issuance of long-term debt                         |                                                   |                | 4,900   |         |                |   | 1,400  |             |   |   |        |   |  |   | 6,300   |       
|Change in due to and (from) related companies                    |                                                   |                | (28,170 | )       |                |   | (8,489 | )           |   |   |       |   |  |   | (36,659 | )     
|                                                                 |                                                   |                |         |         |                |   |        |             |   |   |        |  
|Net cash used in provided by financing activities                |                                                   |                | (37,812 | )       |                |   | (7,276 | )           |   |   |       |   |  |   | (45,088 | )     
|                                                                 |                                                   |                |         |         |                |   |        |             |   |   |        |  
|Effect of exchange rate changes on cash and cash
    equivalents |                                                   |                | (2,041  | )       |                |   | (315   | )           |   |   |       |   |  |   | (2,356  | )     
|                                                                 |                                                   |                |         |         |                |   |        |             |   |   |        |  
|Net increase in cash and cash equivalents                        |                                                   |                | 4,051   |         |                |   | (1,160 | )           |   |   |       |   |  |   | 2,891   |       
|Cash and cash equivalents  Beginning of period                  |                                                   |                | 11,137  |         |                |   | 8,670  |             |   |   |       |   |  |   | 19,807  |       
|                                                                 |                                                   |                |         |         |                |   |        |             |   |   |        |  
|Cash and cash equivalents  End of period                        |                                                   | $              | 15,188  |         |                | $ | 7,510  |             |   | $ |       |   |  | $ | 22,698  |       
|                                                                 |                                                   |                |         |         |                |   |        |             |   |   |        |  

114



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




|   |                                       
|-- | --------------------------------------
|18 | Selected quarterly results (unaudited)



|                                  |  |             |         |  |             |   |         |             |  |   |             |  |             |           |         |   |  |   |         |  
|--------------------------------- |  | ----------- | ------- |  | ----------- | - | ------- | ----------- |  | - | ----------- |  | ----------- | --------- | ------- | - |  | - | ------- | -
|                                  |  | 2005        |        
|                                  |  |             |        
|                                  |  | First       |         |  | Second      |   |         | Third       |  |   | Fourth      |  |             |          
|                                  |  | Quarter     |         |  | Quarter     |   |         | Quarter     |  |   | Quarter(2)  |  |             | Full Year |        
|                                  |  |             |         |  |             |   |         |             |  |   |             |  |             |           |        
|                                  |  | (Successor) |         |  | (Successor) |   |         | (Successor) |  |   |             |  | (Successor) |          
|                                  |  | (restated)  |         |  | (restated)  |   |         | (restated)  |  |   | (Successor) |  |             |          
|Revenue                           |  | $           | 187,414 |  |             | $ | 171,781 |             |  | $ | 198,267     |  |             | $         | 203,245 |   |  | $ | 760,707 |  
|Gross Profit                      |  |             | 33,511  |  |             |   | 27,190  |             |  |   | 34,599      |  |             |           | 3,168   |   |  |   | 98,468  |  
|Income (loss) before income taxes |  |             | 9,426   |  |             |   | 3,185   |             |  |   | 7,880       |  |             |           | (69,970 | ) |  |   | (49,479 | )
|Net Income (loss)                 |  |             | 6,558   |  |             |   | 3,146   |             |  |   | 4,195       |  |             |           | (63,080 | ) |  |   | (49,181 | )

|                                  |  |               |         |  |               |            |         |            |             |   |            |            |  |            |         |   |  |   |         | 
|--------------------------------- |  | ------------- | ------- |  | ------------- | ---------- | ------- | ---------- | ----------- | - | ---------- | ---------- |  | ---------- | ------- | - |  | - | ------- | 
|                                  |  | 2004          |        
|                                  |  |               |        
|                                  |  | First         |         |  | Second        |            |         | Third      |             |   | Fourth     |            |  |           
|                                  |  | Quarter       |         |  | Quarter       |            |         | Quarter(1) |             |   | Quarter    |            |  | Full Year  |        
|                                  |  |               |         |  |               |            |         |            |             |   |            |            |  |            |        
|                                  |  |               |         |  |               | (Combined) |         |            | (Successor) |   |            | (Combined) | 
|                                  |  | (Predecessor) |         |  | (Predecessor) |            |         | (restated) |             |   | (restated) |            |  | (restated) |        
|Revenue                           |  | $             | 177,951 |  |               | $          | 189,917 |            |             | $ | 216,995    |            |  | $          | 208,638 |   |  | $ | 793,501 | 
|Gross Profit                      |  |               | 30,721  |  |               |            | 35,169  |            |             |   | 31,735     |            |  |            | 22,798  |   |  |   | 120,423 | 
|Income (loss) before income taxes |  |               | 17,185  |  |               |            | 21,054  |            |             |   | 9,693      |            |  |            | (2,737  | ) |  |   | 45,195  | 
|Net Income (loss)                 |  |               | 10,691  |  |               |            | 13,130  |            |             |   | 7,811      |            |  |            | (2,325  | ) |  |   | 29,307  | 






|    |                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Standard Aero Holdings, Inc. commenced operations on
    August 25, 2004. The third quarter results for 2004 combine
    the results of the Successor and Predecessor.
|   
|(2) | Results of operations includes impairments related to trademarks
    and goodwill of $29.7 million and $47.4 million,
    respectively.                               







| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a reclassification of the Loss Contract Liability from accounts
    payable to other accrued liabilities in the amounts of
    $6.0 million as of August 24, 2004, $5.0 million
    as of March 31, 2005, $3.8 million as of June 30,
    2005, and $2.2 million as of September 30, 2005.                                                                                                                                                                                                                                                                                                                                            
|
| |  | changes to the Companys consolidated balance sheet at the
    end of each of the restated periods to reflect (1) the
    re-measured present value of the Loss Contract Liability over
    the life of the Loss Contract; (2) reductions in the
    carrying amount of the Loss Contract Liability as costs were
    incurred in excess of the net realizable value of inventory.
    Accordingly, the restated periods reflect an increase in the
    carrying amounts of the Loss Contract Liability of
    $0.4 million as of March 31, 2005, $0.7 million
    as of June 30, 2005, and $2.1 million as of
    September 30, 2005.
|
| |  | (1) changes to the Companys cost of revenues for each of
    the restated periods reflecting the elimination of the actual
    losses recognized prior to the identification of the error and
    (2) charges to non-cash interest expense reflecting the present
    value accretion associated with the Loss Contract Liability.
    Accordingly, the restated periods reflect: (1) reductions in
    cost of revenues in the amounts of $0.5 million for the
    period from August 25, 2004 to September 30, 2004,
    $2.1 million                                                                                              

115



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | for the quarter ended December 31, 2004, $0.8 million
    for the quarter ended March 31, 2005, $0.5 million for
    the quarter ended June 30, 2005, and $2.4 million for
    the quarter ended September 30, 2005 and (2) increases in
    interest expense in the amounts of $0.1 million for the
    period from August 25, 2005 to September 30, 2004,
    $0.2 million for the quarter ended December 31, 2004,
    $0.2 million for the quarter ended March 31, 2005,
    $0.2 million for the quarter ended March 31, 2005,
    $0.2 million for the quarter ended June 30, 2005, and
    $0.1 million for the quarter ended September 30, 2004.
|
| |  | a charge or credit to the Companys cost of revenues in
    each of the restated periods to reverse charges recorded in
    those periods. Accordingly, the restated periods reflect
    increases (decreases) in cost of revenues in the amounts of
    $0.4 million for the quarter ended March 31, 2005,
    ($0.2 million) for the quarter ended June 30, 2005,
    and $0.3 million for the quarter ended September 30,
    2005.                                                                                                                                                                                                                  





| |   |                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes to the Companys consolidated balance sheets to
    reflect the elimination of approximately $1.5 million in
    overstated accounts receivable at the end of each of the first
    three quarters of 2005.





|                                            |  |                                   |         |  |                |   |         |               |  |   |          |    |  |            |         |  |          |   |         |  |  |   |         | 
|------------------------------------------- |  | --------------------------------- | ------- |  | -------------- | - | ------- | ------------- |  | - | -------- | -- |  | ---------- | ------- |  | -------- | - | ------- |  |  | - | ------- | 
|                                            |  | 2005                              |        
|                                            |  |                                   |        
|                                            |  | First Quarter                     |         |  | Second Quarter |   |         | Third Quarter | 
|                                            |  |                                   |         |  |                |   |         |               | 
|                                            |  | As                                |         |  |                |   | As      |               |  |   |          | As |  |            |        
|                                            |  | Previously                        |         |  | As             |   |         | Previously    |  |   | As       |    |  | Previously |         |  | As       |  
|                                            |  | Reported                          |         |  | Restated       |   |         | Reported      |  |   | Restated |    |  | Reported   |         |  | Restated |  
|                                            |  |                                   |         |  |                |   |         |               |  |   |          |    |  |            |         |  |          |  
|                                            |  | (Quarterly amounts are unaudited) |        
|Cost of revenues                            |  | $                                 | 154,305 |  |                | $ | 153,903 |               |  | $ | 145,264  |    |  | $          | 144,591 |  |          | $ | 165,735 |  |  | $ | 163,668 | 
|Selling, general and administrative expense |  |                                   | 12,544  |  |                |   | 12,538  |               |  |   | 12,851   |    |  |            | 12,838  |  |          |   | 12,032  |  |  |   | 12,086  | 
|Total operating expenses                    |  |                                   | 169,295 |  |                |   | 168,887 |               |  |   | 160,561  |    |  |            | 159,875 |  |          |   | 183,328 |  |  |   | 181,315 | 
|Income from operations                      |  |                                   | 18,119  |  |                |   | 18,527  |               |  |   | 11,220   |    |  |            | 11,906  |  |          |   | 14,939  |  |  |   | 16,952  | 
|Interest expense                            |  |                                   | 8,928   |  |                |   | 9,101   |               |  |   | 8,547    |    |  |            | 8,721   |  |          |   | 8,938   |  |  |   | 9,072   | 
|Income before income taxes                  |  |                                   | 9,191   |  |                |   | 9,426   |               |  |   | 2,673    |    |  |            | 3,185   |  |          |   | 6,001   |  |  |   | 7,880   | 
|Income tax expense (benefit)                |  |                                   | 2,713   |  |                |   | 2,868   |               |  |   | (126     | )  |  |            | 39      |  |          |   | 3,059   |  |  |   | 3,685   | 
|Net income                                  |  | $                                 | 6,478   |  |                | $ | 6,558   |               |  | $ | 2,799    |    |  | $          | 3,146   |  |          | $ | 2,942   |  |  | $ | 4,195   | 

116



---



##### 



STANDARD AERO HOLDINGS, INC.


(A WHOLLY OWNED SUBSIDIARY OF STANDARD AERO ACQUISITION
HOLDINGS, INC.)


NOTES TO FINANCIAL STATEMENTS  (Continued)


|                                         |  |                                   |         |  |                |   |         |               |  |   |          |    |  |            |         |  |          |   |         |  |  |   |         | 
|---------------------------------------- |  | --------------------------------- | ------- |  | -------------- | - | ------- | ------------- |  | - | -------- | -- |  | ---------- | ------- |  | -------- | - | ------- |  |  | - | ------- | 
|                                         |  | 2005                              |        
|                                         |  |                                   |        
|                                         |  | First Quarter                     |         |  | Second Quarter |   |         | Third Quarter | 
|                                         |  |                                   |         |  |                |   |         |               | 
|                                         |  | As                                |         |  |                |   | As      |               |  |   |          | As |  |            |        
|                                         |  | Previously                        |         |  | As             |   |         | Previously    |  |   | As       |    |  | Previously |         |  | As       |  
|                                         |  | Reported                          |         |  | Restated       |   |         | Reported      |  |   | Restated |    |  | Reported   |         |  | Restated |  
|                                         |  |                                   |         |  |                |   |         |               |  |   |          |    |  |            |         |  |          |  
|                                         |  | (Quarterly amounts are unaudited) |        
|ASSETS                                   |  |                                   |         |  |                |   |         |               |  |   |          |    |  |            |         |  |          |   |         |  |  |   |         | 
|Accounts receivable                      |  | $                                 | 109,125 |  |                | $ | 105,619 |               |  | $ | 102,022  |    |  | $          | 100,522 |  |          | $ | 118,605 |  |  | $ | 117,105 | 
|Inventories                              |  |                                   | 153,784 |  |                |   | 152,815 |               |  |   | 150,026  |    |  |            | 149,013 |  |          |   | 146,035 |  |  |   | 145,524 | 
|Prepaid expense and other current assets |  |                                   | 3,766   |  |                |   | 5,772   |               |  |   | 7,705    |    |  |            | 7,705   |  |          |   | 4,921   |  |  |   | 4,921   | 
|Income taxes receivable                  |  |                                   | 6,038   |  |                |   | 5,062   |               |  |   | 7,225    |    |  |            | 6,262   |  |          |   | 7,587   |  |  |   | 6,570   | 
|Total current assets                     |  |                                   | 290,829 |  |                |   | 287,384 |               |  |   | 270,645  |    |  |            | 267,169 |  |          |   | 286,917 |  |  |   | 283,889 | 
|Deferred income taxes  long-term        |  |                                   | 3,751   |  |                |   | 5,043   |               |  |   | 3,545    |    |  |            | 4,642   |  |          |   | 3,162   |  |  |   | 3,618   | 
|Property, plant and equipment, net       |  |                                   | 135,665 |  |                |   | 135,964 |               |  |   | 139,740  |    |  |            | 140,039 |  |          |   | 139,852 |  |  |   | 140,151 | 
|Goodwill                                 |  |                                   | 240,490 |  |                |   | 242,570 |               |  |   | 240,490  |    |  |            | 242,570 |  |          |   | 240,490 |  |  |   | 242,570 | 
|Total assets                             |  | $                                 | 924,845 |  |                | $ | 925,071 |               |  | $ | 904,740  |    |  | $          | 904,740 |  |          | $ | 917,051 |  |  | $ | 916,858 | 

|                                           |  |                                   |         |  |                |   |         |               |  |   |          |    |  |            |         |  |          |   |         |  |  |   |         | 
|------------------------------------------ |  | --------------------------------- | ------- |  | -------------- | - | ------- | ------------- |  | - | -------- | -- |  | ---------- | ------- |  | -------- | - | ------- |  |  | - | ------- | 
|                                           |  | 2005                              |        
|                                           |  |                                   |        
|                                           |  | First Quarter                     |         |  | Second Quarter |   |         | Third Quarter | 
|                                           |  |                                   |         |  |                |   |         |               | 
|                                           |  | As                                |         |  |                |   | As      |               |  |   |          | As |  |            |        
|                                           |  | Previously                        |         |  | As             |   |         | Previously    |  |   | As       |    |  | Previously |         |  | As       |  
|                                           |  | Reported                          |         |  | Restated       |   |         | Reported      |  |   | Restated |    |  | Reported   |         |  | Restated |  
|                                           |  |                                   |         |  |                |   |         |               |  |   |          |    |  |            |         |  |          |  
|                                           |  | (Quarterly amounts are unaudited) |        
|LIABILITIES AND STOCKHOLDERS EQUITY       |  |                                   |         |  |                |   |         |               |  |   |          |    |  |            |         | 
|Accounts payable                           |  | $                                 | 104,624 |  |                | $ | 90,266  |               |  | $ | 77,614   |    |  | $          | 74,028  |  |          | $ | 86,166  |  |  | $ | 82,213  | 
|Other accrued liabilities                  |  |                                   | 13,864  |  |                |   | 27,982  |               |  |   | 23,481   |    |  |            | 26,285  |  |          |   | 19,220  |  |  |   | 20,960  | 
|Income taxes payable                       |  |                                   | 11,027  |  |                |   | 10,523  |               |  |   | 6,640    |    |  |            | 6,106   |  |          |   | 7,277   |  |  |   | 6,728   | 
|Total current liabilities                  |  |                                   | 152,760 |  |                |   | 152,017 |               |  |   | 131,344  |    |  |            | 130,028 |  |          |   | 140,084 |  |  |   | 137,322 | 
|Deferred income taxes  long-term          |  |                                   | 83,239  |  |                |   | 83,347  |               |  |   | 82,193   |    |  |            | 82,301  |  |          |   | 83,144  |  |  |   | 83,252  | 
|Total liabilities                          |  |                                   | 707,918 |  |                |   | 707,283 |               |  |   | 685,107  |    |  |            | 683,899 |  |          |   | 694,442 |  |  |   | 691,788 | 
|Accumulated deficit                        |  |                                   | 1,796   |  |                |   | 2,657   |               |  |   | 4,595    |    |  |            | 5,803   |  |          |   | 7,537   |  |  |   | 9,998   | 
|Total stockholders equity                 |  |                                   | 216,927 |  |                |   | 217,788 |               |  |   | 219,633  |    |  |            | 220,841 |  |          |   | 222,609 |  |  |   | 225,070 | 
|Total liabilities and stockholders equity |  | $                                 | 924,845 |  |                | $ | 925,071 |               |  | $ | 904,740  |    |  | $          | 904,740 |  |          | $ | 917,051 |  |  | $ | 916,858 | 

117



---



##### 



Exhibit Index


|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | -- | ---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|No.     |    | Description of Exhibit
|        |    |                       
|        | 3  | .1                     |  | Certificate of Incorporation of Standard Aero Holdings, Inc.
    (incorporated by reference to Exhibit 3.1 of Standard Aero
    Holdings, Inc.s Registration Statement on Form S-4
    filed on April 28, 2005).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       
|        | 3  | .2                     |  | Bylaws of Standard Aero Holdings, Inc. (incorporated by
    reference to Exhibit 3.17 of Standard Aero Holdings,
    Inc.s Registration Statement on Form S-4 filed on
    April 28, 2005).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       
|        | 4  | .1                     |  | Senior Subordinated Note Indenture with respect to the
    81/4% Senior Subordinated Notes due 2014, between Standard
    Aero Holdings, Inc., Wells Fargo Bank Minnesota, National
    Association, as trustee, and the Guarantors listed on the
    signature pages thereto, dated as of August 20, 2004
    (incorporated by reference to Exhibit 4.1 of Standard Aero
    Holdings, Inc.s Registration Statement on Form S-4
    filed on April 28, 2005).                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|        | 4  | .2                     |  | Supplemental Indenture, dated as of August 24, 2004, among
    Dunlop Standard Aerospace (Nederland) BV and Standard Aero BV,
    Standard Aero Holdings, Inc. and Wells Fargo Bank, National
    Association, as trustee (incorporated by reference to
    Exhibit 4.2 of Standard Aero Holdings, Inc.s
    Registration Statement on Form S-4 filed on April 28,
    2005).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       
|        | 4  | .3                     |  | Supplemental Indenture, dated as of August 24, 2004, among
    Dunlop Standard Aerospace (US) Inc., Dunlop Standard
    Aerospace (US) Legal Inc., Standard Aero, Inc., Dunlop
    Aerospace Parts, Inc., Standard Aero (San Antonio) Inc.,
    Standard Aero (Alliance) Inc., Standard Aero Canada, Inc.,
    3091781 Nova Scotia Company, 3091782 Nova Scotia Company,
    3091783 Nova Scotia Company, Standard Aero Limited, Not FM
    Canada Inc., Standard Aero Holdings, Inc. and Wells Fargo Bank,
    National Association, as trustee (incorporated by reference to
    Exhibit 4.3 of Standard Aero Holdings, Inc.s
    Registration Statement on Form S-4 filed on April 28,
    2005).                                                                                                                                                                                                                                 
|       
|        | 4  | .4                     |  | Supplemental Indenture, dated as of March 3, 2005, among
    Standard Aero (US), Inc. (f/k/a Dunlop Standard Aerospace (U.S.)
    Inc.); Standard Aero (US) Legal, Inc. (f/k/a Dunlop
    Standard Aerospace (US) Legal, Inc.); Standard Aero Inc.;
    Standard Aero Materials, Inc. (f/k/a Dunlop Aerospace Parts
    Inc.); Standard Aero (San Antonio) Inc.; Standard Aero
    (Alliance) Inc.; Standard Aero Canada, Inc.; 3091781 Nova Scotia
    Company; 3091782 Nova Scotia Company; 3091783 Nova Scotia
    Company; Standard Aero Limited; Not FM Canada Inc.; Standard
    Aero (Netherlands) B.V. (f/k/a Dunlop Standard Aerospace
    (Nederland) BV) and Standard Aero BV, Standard Aero Holdings,
    Inc. and Wells Fargo Bank, National Association, as trustee
    (incorporated by reference to Exhibit 4.4 of Standard Aero
    Holdings, Inc.s Registration Statement on Form S-4
    filed on April 28, 2005).
|       
|        | 4  | .5                     |  | Supplemental Indenture, dated as of March 31, 2005, among
    Standard Aero (US), Inc. (f/k/a Dunlop Standard Aerospace (U.S.)
    Inc.); Standard Aero (US) Legal, Inc. (f/k/a Dunlop
    Standard Aerospace (US) Legal, Inc.); Standard Aero Inc.;
    Standard Aero Materials, Inc. (f/k/a Dunlop Aerospace Parts
    Inc.); Standard Aero (San Antonio) Inc.; Standard Aero
    (Alliance) Inc.; Standard Aero Canada, Inc.; 3091781 Nova Scotia
    Company; 3091782 Nova Scotia Company; 3091783 Nova Scotia
    Company; Standard Aero Limited; Not FM Canada Inc. and Standard
    Aero Redesign Services Inc., Standard Aero Holdings, Inc. and
    Wells Fargo Bank, National Association, as trustee (incorporated
    by reference to Exhibit 4.5 of Standard Aero Holdings,
    Inc.s Registration Statement on Form S-4 filed on
    April 28, 2005).                                                                  
|       
|        | 10 | .1                     |  | Credit Agreement, dated as of August 24, 2004, by and among
    Standard Aero Holdings, Inc., the lenders party thereto,
    J.P. Morgan Securities Inc. and Lehman Brothers Inc., as
    joint lead arrangers, JPMorgan Chase Bank, as administrative
    agent, and Lehman Commercial Paper Inc. and Credit Suisse First
    Boston, as co-syndication agent (incorporated by reference to
    Exhibit 10.1 of Standard Aero Holdings, Inc.s
    Registration Statement on Form S-4 filed on April 28,
    2005).                                                                                                                                                                                                                                                                                                                                                                                                                  
|       
|        | 10 | .2                     |  | Guarantee and Collateral Agreement, dated as of August 24,
    2004, made by Standard Aero Acquisition Holdings, Inc., Standard
    Aero Holdings, Inc. and certain of its subsidiaries in favor of
    JPMorgan Chase Bank, as administrative agent (incorporated by
    reference to Exhibit 10.2 of Standard Aero Holdings,
    Inc.s Registration Statement on Form S-4 filed on
    April 28, 2005).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       
|        | 10 | .3                     |  | CDN Guarantee and Collateral Agreement, dated as of
    August 24, 2004, made by Standard Aero Limited, Not FM
    Canada, 3091781 Nova Scotia Company, 3091782 Nova Scotia
    Company, 3091783 Nova Scotia Company and 6269044 Canada Inc. in
    favor of JPMorgan Chase Bank, as administrative agent
    (incorporated by reference to Exhibit 10.3 of Standard Aero
    Holdings, Inc.s Registration Statement on Form S-4
    filed on April 28, 2005).                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|        | 10 | .4                     |  | Management Agreement among Standard Aero Holdings, Inc. and TC
    Group, L.L.C. dated August 24, 2004 (incorporated by
    reference to Exhibit 10.4 of Standard Aero Holdings,
    Inc.s Registration Statement on Form S-4/A filed on
    May 9, 2005).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

118



---



##### 



|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|No.     |    | Description of Exhibit
|        |    |                       
|       
|        | 10 | .5                     |  | Service Agreement between Standard Aero Limited and David W.
    Shaw, dated as of October 1, 1998 (incorporated by
    reference to Exhibit 10.5 of Standard Aero Holdings,
    Inc.s Registration Statement on Form S-4 filed on
    April 28, 2005).                                                                                          
|       
|        | 10 | .6                     |  | Amendment to Service Agreement between Standard Aero Limited and
    David W. Shaw, dated as of March 10, 2004 (incorporated by
    reference to Exhibit 10.6 of Standard Aero Holdings,
    Inc.s Registration Statement on Form S-4 filed on
    April 28, 2005).                                                                              
|       
|        | 10 | .7                     |  | Employment Agreement between Standard Aero Limited and Paul
    Soubry, dated as of June 7, 2002 (incorporated by reference
    to Exhibit 10.7 of Standard Aero Holdings, Inc.s
    Registration Statement on Form S-4 filed on April 28,
    2005).                                                                                            
|       
|        | 10 | .8                     |  | Amendment to Employment Agreement between Standard Aero Limited
    and Paul Soubry, dated as of March 10, 2004 (incorporated
    by reference to Exhibit 10.8 of Standard Aero Holdings,
    Inc.s Registration Statement on Form S-4 filed on
    April 28, 2005).                                                                             
|       
|        | 10 | .9                     |  | Employment Agreement between Standard Aero vof and Rene van
    Doorn, dated as of June 10, 2002 (incorporated by reference
    to Exhibit 10.9 of Standard Aero Holdings, Inc.s
    Registration Statement on Form S-4 filed on April 28,
    2005).                                                                                            
|       
|        | 10 | .10                    |  | Amendment to Employment Agreement between Standard Aero vof and
    Rene van Doorn, dated as of March 10, 2004 (incorporated by
    reference to Exhibit 10.10 of Standard Aero Holdings,
    Inc.s Registration Statement on Form S-4 filed on
    April 28, 2005).                                                                             
|       
|        | 10 | .11                    |  | Employment Agreement between Standard Aero Limited and Bradley
    Bertouille, dated as of June 17, 2002 (incorporated by
    reference to Exhibit 10.11 of Standard Aero Holdings,
    Inc.s Registration Statement on Form S-4 filed on
    April 28, 2005).                                                                                   
|       
|        | 10 | .12                    |  | Amendment to Employment Agreement between Standard Aero Limited
    and Bradley Bertouille, dated as of March 10, 2004
    (incorporated by reference to Exhibit 10.12 of Standard
    Aero Holdings, Inc.s Registration Statement on
    Form S-4 filed on April 28, 2005).                                                                     
|       
|        | 10 | .13                    |  | Employment Agreement between Standard Aero Limited and Edward
    Richmond, dated as of June 17, 2002 (incorporated by
    reference to Exhibit 10.13 of Standard Aero Holdings,
    Inc.s Registration Statement on Form S-4 filed on
    April 28, 2005).                                                                                      
|       
|        | 10 | .14                    |  | Amendment to Employment Agreement between Standard Aero Limited
    and Edward Richmond, dated as of March 10, 2004
    (incorporated by reference to Exhibit 10.14 of Standard
    Aero Holdings, Inc.s Registration Statement on
    Form S-4 filed on April 28, 2005).                                                                        
|       
|        | 10 | .15                    |  | Stock Option and Purchase Plan of Standard Aero Acquisition
    Holdings, Inc (incorporated by reference to Exhibit 10.15
    of Standard Aero Holdings, Inc.s Registration Statement on
    Form S-4 filed on April 28, 2005).                                                                                                                  
|       
|        | 10 | .16                    |  | Stockholders Agreement, dated as of December 22, 2004, by
    and between Standard Aero Acquisition Holdings, Inc., Carlyle
    Partners III, L.P. and David Shaw (incorporated by
    reference to Exhibit 10.16 of Standard Aero Holdings,
    Inc.s Registration Statement on Form S-4 filed on
    April 28, 2005).                          
|       
|        | 10 | .17                    |  | Stockholders Agreement, dated as of December 22, 2004, by
    and between Standard Aero Acquisition Holdings, Inc., Carlyle
    Partners III, L.P. and Paul Soubry (incorporated by
    reference to Exhibit 10.17 of Standard Aero Holdings,
    Inc.s Registration Statement on Form S-4 filed on
    April 28, 2005).                         
|       
|        | 10 | .18                    |  | Stockholders Agreement, dated as of December 22, 2004, by
    and between Standard Aero Acquisition Holdings, Inc., Carlyle
    Partners III, L.P. and Rene van Doorn (incorporated by
    reference to Exhibit 10.18 of Standard Aero Holdings,
    Inc.s Registration Statement on Form S-4 filed on
    April 28, 2005).                      
|       
|        | 10 | .19                    |  | Stockholders Agreement, dated as of December 22, 2004, by
    and between Standard Aero Acquisition Holdings, Inc., Carlyle
    Partners III, L.P. and Bradley Bertouille (incorporated by
    reference to Exhibit 10.19 of Standard Aero Holdings,
    Inc.s Registration Statement on Form S-4 filed on
    April 28, 2005).                  
|       
|        | 10 | .20                    |  | Stockholders Agreement, dated as of December 22, 2004, by
    and between Standard Aero Acquisition Holdings, Inc., Carlyle
    Partners III, L.P. and Edward Richmond (incorporated by
    reference to Exhibit 10.20 of Standard Aero Holdings,
    Inc.s Registration Statement on Form S-4 filed on
    April 28, 2005).                     
|       
|        | 10 | .21                    |  | T56 Engine and Accessories Support Subcontract
    No. LMKAC-98-0001 between Standard Aero (San Antonio) Inc.
    and Lockheed Martin Kelly Aircraft Center, dated
    September 23, 1998 (incorporated by reference to
    Exhibit 10.21 of Standard Aero Holdings, Inc.s
    Registration Statement on Form S-4/A filed on July 14,
    2005).*

119



---



##### 



|        |    |                        |  |                                                                                                                                                                                                                                                                                
|------- | -- | ---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|No.     |    | Description of Exhibit
|        |    |                       
|       
|        | 10 | .22                    |  | Amendment No. 24 to Subcontract No. LMKAC-98-0001
    between Standard Aero and Lockheed, dated as of May 2, 2002
    (incorporated by reference to Exhibit 10.22 of Standard
    Aero Holdings, Inc.s Registration Statement on Form S-4/A
    filed on May 9, 2005).*       
|       
|        | 10 | .23                    |  | Amendment No. 36 to Subcontract No. LMKAC-98-0001
    between Standard Aero and Lockheed dated as of November 24,
    2003 (incorporated by reference to Exhibit 10.23 of
    Standard Aero Holdings, Inc.s Registration Statement on
    Form S-4/A filed on July 14, 2005).*
|       
|        | 21 | .1                     |  | List of Subsidiaries (incorporated by reference to
    Exhibit 21.1 of Standard Aero Holdings, Inc.s
    Registration Statement on Form S-4 filed on April 28,
    2005).                                                                                                     
|       
|        | 31 | .1                     |  | Certification of Chief Executive Officer pursuant to
    Rule 15d-14(a) (17 CFR 240.15d-14(a)).                                                                                                                                                                                
|       
|        | 31 | .2                     |  | Certification of Chief Financial Officer pursuant to
    Rule 15d-14(a) (17 CFR 240.15d-14(a)).                                                                                                                                                                                
|       
|        | 32 | .1                     |  | Certification of Chief Executive Officer pursuant to
    Rule 15d-14(b) (17 CFR 240.15d-14(b)) and
    18 U.S.C. Section 1350.                                                                                                                                                 
|       
|        | 32 | .2                     |  | Certification of Chief Financial Officer pursuant to
    Rule 15d-14(b) (17 CFR 240.15d-14(b)) and
    18 U.S.C. Section 1350.                                                                                                                                                 






|  |                                                                                 
|- | --------------------------------------------------------------------------------
|* | Portions have been omitted pursuant to a request for
    confidential treatment.

120



---



##### 



Schedule II


Valuation and Qualifying Accounts


|                                |  |                   |        |   |                  |   |         |                  |  |            |   |                   |              |   |        |  |  |   |        |  
|------------------------------- |  | ----------------- | ------ | - | ---------------- | - | ------- | ---------------- |  | ---------- | - | ----------------- | ------------ | - | ------ |  |  | - | ------ | -
|                                |  | Beginning Balance |        |   | Charges to Costs |   |         | Charges to Other |  |            |   | Ending Balance at |             
|Description                     |  | at Jan 1, 2003    |        |   | and Expense      |   |         | Accounts         |  | Deductions |   |                   | Dec 31, 2003 |  
|                                |  |                   |        |   |                  |   |         |                  |  |            |   |                   |              |  
|                                |  | (Predecessor)     |       
|Allowance for Doubtful accounts |  | $                 | (3,095 | ) |                  | $ | (851    | )                |  | $          |  |                   |              | $ | 167    |  |  | $ | (3,779 | )
|Inventory Valuations            |  |                   | (8,080 | ) |                  |   | (10,941 | )                |  |            |  |                   |              |   | 10,351 |  |  |   | (8,670 | )
|Deferred Tax Valuation          |  |                   | (641   | ) |                  |   | (217    | )                |  |            |  |                   |              |   |       |  |  |   | (858   | )

|                                |  |                   |        |   |                  |   |        |                  |  |            |   |                   |              |   |       |  |  |   |        |  
|------------------------------- |  | ----------------- | ------ | - | ---------------- | - | ------ | ---------------- |  | ---------- | - | ----------------- | ------------ | - | ----- |  |  | - | ------ | -
|                                |  | Beginning Balance |        |   | Charges to Costs |   |        | Charges to Other |  |            |   | Ending Balance at |             
|Description                     |  | at Jan 1, 2004    |        |   | and Expense      |   |        | Accounts         |  | Deductions |   |                   | Aug 24, 2004 |  
|                                |  |                   |        |   |                  |   |        |                  |  |            |   |                   |              |  
|                                |  | (Predecessor)     |       
|Allowance for Doubtful accounts |  | $                 | (3,779 | ) |                  | $ | (1,020 | )                |  | $          |  |                   |              | $ | 1,305 |  |  | $ | (3,494 | )
|Inventory Valuations            |  |                   | (8,670 | ) |                  |   | (7,453 | )                |  |            |  |                   |              |   | 7,436 |  |  |   | (8,687 | )
|Provision for Loss contract     |  |                   |       |   |                  |   | (2,700 | )                |  |            |  |                   |              |   |      |  |  |   | (2,700 | )
|Deferred Tax Valuation          |  |                   | (858   | ) |                  |   | (42    | )                |  |            |  |                   |              |   |      |  |  |   | (900   | )

|                                |  |              |        |   |                  |   |        |                  |  |   |            |   |                   |              |       |  |  |   |        |  
|------------------------------- |  | ------------ | ------ | - | ---------------- | - | ------ | ---------------- |  | - | ---------- | - | ----------------- | ------------ | ----- |  |  | - | ------ | -
|                                |  | Acquired at  |        |   | Charges to Costs |   |        | Charges to Other |  |   |            |   | Ending Balance at |             
|Description                     |  | Aug 25, 2004 |        |   | and Expense      |   |        | Accounts         |  |   | Deductions |   |                   | Dec 31, 2004 |      
|                                |  |              |        |   |                  |   |        |                  |  |   |            |   |                   |              |      
|                                |  | (Successor)  |       
|Allowance for Doubtful accounts |  | $            |       |   |                  | $ | (510   | )                |  | $ | (3,494     | ) |                   | $            | 72    |  |  | $ | (3,932 | )
|Inventory Valuations            |  |              |       |   |                  |   | (2,336 | )                |  |   |           |   |                   |              | 2,304 |  |  |   | (32    | )
|Provision for Loss contract     |  |              | (5,950 | ) |                  |   | (299   | )                |  |   | 472        |   |                   |              | 1,294 |  |  |   | (4,483 | )
|Deferred Tax Valuation          |  |              | (900   | ) |                  |   | (687   | )                |  |   |           |   |                   |              |      |  |  |   | (1,587 | )

|                                |  |                   |        |   |                  |   |        |                  |  |   |            |  |                   |              |       |  |  |   |        |  
|------------------------------- |  | ----------------- | ------ | - | ---------------- | - | ------ | ---------------- |  | - | ---------- |  | ----------------- | ------------ | ----- |  |  | - | ------ | -
|                                |  | Beginning Balance |        |   | Charges to Costs |   |        | Charges to Other |  |   |            |  | Ending Balance at |             
|Description                     |  | at Jan 1, 2005    |        |   | and Expense      |   |        | Accounts         |  |   | Deductions |  |                   | Dec 31, 2005 |      
|                                |  |                   |        |   |                  |   |        |                  |  |   |            |  |                   |              |      
|                                |  | (Successor)       |       
|Allowance for Doubtful accounts |  | $                 | (3,932 | ) |                  | $ | (612   | )                |  | $ |           |  |                   | $            | 1,557 |  |  | $ | (2,987 | )
|Inventory Valuations            |  |                   | (32    | ) |                  |   | (9,276 | )                |  |   |           |  |                   |              | 2,517 |  |  |   | (6,791 | )
|Provision for Loss contract     |  |                   | (4,483 | ) |                  |   | (560   | )                |  |   | 77         |  |                   |              | 4,270 |  |  |   | (696   | )
|Deferred Tax Valuation          |  |                   | (1,587 | ) |                  |   | (340   | )                |  |   |           |  |                   |              |      |  |  |   | (1,927 | )

121



---



##### 



SIGNATURES




|                      |  |                                                                                                                   
|--------------------- |  | ------------------------------------------------------------------------------------------------------------------
|                      |  | STANDARD AERO HOLDINGS, INC.                                                                                      
|                     
|Dated: April 14, 2006 |  | /s/ David ShawName: David Shaw
    Title:  Chief Executive
    Officer           (principal
    executive officer)



|                                         |  |                                                                        |  |                |  | 
|---------------------------------------- |  | ---------------------------------------------------------------------- |  | -------------- |  | 
|                                        
|/s/ David ShawDavid Shaw                 |  | Chief Executive Officer and Director (Principal Executive
    Officer) |  | April 14, 2006
|                                        
|/s/ Peter J. ClarePeter J. Clare         |  | Director                                                               |  | April 14, 2006
|                                        
|/s/ Thomas CorcoranThomas Corcoran       |  | Director                                                               |  | April 14, 2006
|                                        
|/s/ Ralph EberhartRalph Eberhart         |  | Director                                                               |  | April 14, 2006
|                                        
|/s/ Allan HoltAllan Holt                 |  | Director                                                               |  | April 14, 2006
|                                        
|/s/ Adam PalmerAdam Palmer               |  | Director                                                               |  | April 14, 2006
|                                        
|/s/ Andrew ShinnAndrew Shinn             |  | Director                                                               |  | April 14, 2006
|                                        
|/s/ David SquierDavid Squier             |  | Director                                                               |  | April 14, 2006
|                                        
|/s/ Bradley BertouilleBradley Bertouille |  | Chief Financial Officer
    (Principal Financial Officer)              |  | April 14, 2006
|                                        
|/s/ Brent FawkesBrent Fawkes             |  | Chief Accounting Officer
    (Principal Accounting Officer)            |  | April 14, 2006

122